Vivendi's SFR and Bouygues hit by mobile price war as Iliad blossoms

The mobile price war in France continues to have its winners and losers, with both Vivendi and Bouygues Telecom reporting worsening profits in the first quarter as Iliad boasted that its mobile revenue tripled in the same period.

Vivendi posted a 17 per cent decline in first-quarter operating profits to €1.34 billion and said this was largely due to the fierce competition faced by its mobile unit SFR, which posted a 25 per cent drop in EBITDA in the first quarter.

Meanwhile, construction-to-telecoms group Bouygues said it dropped into the red in the first quarter of 2013, and also blamed this result on the difficult conditions for its telecoms business. The company said it posted a net loss of €42 million in the quarter compared with a profit of €35 million a year earlier.

As was also recently highlighted by France Telecom, both groups continue to be adversely impacted by a price war in the mobile market that was sparked by Iliad's Free Mobile unit in January 2012, when the new mobile operator launched a new €19.99 mobile tariff that created turmoil in the market.

For its part, Iliad continues to enjoy the impact of subscriber growth as more French consumers switch to its cheaper offerings. The group said it increased group revenue by 38.4 per cent in the first quarter to €907.2 million, while revenue from its mobile business tripled to €294.5 million. The group gained 870,000 mobile subscribers in the first three months of 2013. Iliad did not report its profit figures for the first quarter, although it has previously been reported that Iliad's profits in 2012 were hurt by its network deployment.

Vivendi and Bouygues undoubtedly face difficult times ahead as they fight to get their mobile business back on their feet. Both companies have already slashed their own mobile prices, and are also relying on multi-play bundles of fixed and mobile services to drive growth.

According to Reuters, Bouygues CFO Philippe Marien said is confident that the core profit at Bouygues Telecom will stabilise this year.

"We think that all the commercial and restructuring measures will allow us to stop the decline of the telecom unit's results," he said, according to Reuters. He added that measures taken last year to improve the situation at Bouygues Telecom would secure savings of €400 million this year.

Vivendi, meanwhile, has been battling to get SFR back on its feet before considering a possible IPO for the operator. The group is generally looking to dispose of its various telecoms businesses and is currently looking to sell its 53 per cent stake in Maroc Telecom, although Reuters reported that CFO Philippe Capron would not comment on the progress of any sale.

The mood of France's operators is unlikely to have been improved by news that French President Francois Hollande is mulling a smartphone "tax" to finance the country's "cultural exception." According to a report in the Guardian, the proposal is to impose a 1 per cent tax on all connected devices in order to raise an estimated €86 million, which would be used to support French music and film.

In a further blow, it was also reported this week that France has fallen back into recession after French GDP declined 0.2 per cent in the first quarter.

For more:
- see this Reuters article
- see this separate Reuters article
- see this FT article (sub. req.)
- see this Bloomberg article
- see this Guardian article

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