SFR plans to fight subscriber declines with low-cost offers

SFR is planning radical action to counter the success of Iliad's Free Mobile after losing 620,000 customers in its first-quarter. SFR, the second largest operator in France, is looking to regain market share by launching new low-cost services.

While Vivendi, SFR's parent company, reported better than expected first-quarter profits at €823 million--compared to a €765 million net profit estimated by a poll of analyst conducted by Bloomberg--the company said that the ongoing price war within the mobile sector will drag profits down in the coming quarters. This outlook has prompted SFR to rush out two new services aimed at regaining the initiative in the low-cost sector.

Frank Cadoret, SFR's marketing director, told Reuters that the company will launch its new low-cost "Buzz Mobile" service in early June targeted at people who want cheap international calls. The exec also confirmed that SFR willadd a budget mobile broadband offer to its existing cut-price "Red" offering to better compete with Free Mobile.

"Our low-cost Red offers have signed up 200,000 customers so far and today we think this low-cost segment accounts for some 16 per cent of customers overall," Cadoret told Reuters. "But it is only going to get bigger from here and could reach up to 30 per cent or more. So SFR will have to be very active in the low-cost market. We're going to take steps in terms of distribution and branding."

But these plans for new and revamped services have been overshadowed by reports that SFR is planning to slash operating expenses by €450 million this year through job loses--rumoured to be around 500--together with cuts to marketing budgets and call centres, according to Bloomberg.

The Financial Times reported that Vivendi would be making "drastic and structural changes" at SFR and implementing "significant cost-cutting programmes."

Cadoret also opened the door to Orange and Bouygues Telecom by suggesting SFR was willing to sign network sharing deals with its rivals to reduce the cost of deploying LTE. "We are open to anything that allows us to bring costs down," Cadoret told Reuters, adding that no specific talks had yet begun.

Separately, Thomas Reynaud, the CFO of Free Mobile parent Iliad, told the Wall Street Journal that its mobile customer base is still growing at a "sustainable rhythm," adding that Free Mobile has a medium-to-long-term goal of winning 15 per cent to 25 per cent of the mobile market. Free Mobile attracted 2.6 million customers in less than months, around 3.8 per cent of the total French mobile market.

"Don't believe this is the end of the story of Free Mobile," Reynaud said. "This is just the beginning."

For more:
- see this Bloomberg article
- see this Reuters article
- see this Financial Times article (reg. req.)
- see this Wall Street Journal article (sub.req.)

Related Articles:
Report: SFR faces cost cuts of €450M
Vivendi takes knife to SFR projects, plans new strategy
Vivendi chief Lévy takes control of SFR following CEO Esser's sudden exit
SFR may slash up to 500 jobs to compensate for Free Mobile's impact on earnings
Arcep: French operators could cut 10,000 jobs due to rising competition
Free Mobile's network suffers from overload at evening peak times

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