Iliad adds low-cost 4G in French mobile telecoms battle

PARIS Tue Dec 3, 2013 12:33pm EST

The logo of French internet service provider and mobile phone operator Free is seen at the company headquarters in Paris December 3, 2013. Iliad has added a 4G high-speed broadband service to its Free Mobile offers without raising the price. REUTERS/Jacky Naegelen

The logo of French internet service provider and mobile phone operator Free is seen at the company headquarters in Paris December 3, 2013. Iliad has added a 4G high-speed broadband service to its Free Mobile offers without raising the price.

Credit: Reuters/Jacky Naegelen

PARIS (Reuters) - French low-cost telecoms operator Iliad (ILD.PA) has added a 4G high-speed broadband service to its Free Mobile offers without raising the price, firing a fresh broadside at its bigger rivals.

The move increases the pressure on France's leading telecoms operators, Orange (ORAN.PA), Vivendi's SFR (VIV.PA) and Bouygues Telecom (BOUY.PA), who had hoped their newly built 4G networks would command higher prices and help to restore profits hit by the emergence of Iliad.

Since its arrival in January 2012, Free Mobile has sparked a price war that drove down French mobile prices by 11 percent in 2012 and a further 8 to 10 percent this year, taking a 10 percent market share in the process.

Iliad said on Tuesday that its monthly mobile plan, a non-contract package without subsidized handsets, would remain unchanged at 19.99 euros ($27.10) a month and will include 4G speeds for up to 20 gigabytes of data.

Bouygues's comparable and cheapest 4G plan costs 29.99 euros a month and SFR charges 42.99 euros a month, both for three gigabytes of data.

"The whole pricing structure put forth by Orange, SFR and Bouygues for 4G now looks very optimistic," Nomura analyst Frederic Boulan said.

Orange shares were down 3.4 percent at 0803 ET, Vivendi's 2.1 percent and Bouygues 3.1 percent, against a broader 1.7 percent decline for the French blue-chip index .FCHI. Iliad shares were down 0.7 percent at 172 euros.

QUALITY

Iliad is still in the process of building its mobile network across France, but it chose equipment made by Nokia's NSN that runs both 3G and 4G simultaneously. It said on Tuesday that, as of December 1, it had 700 mobile antennas capable of handling 4G speeds.

Data provided by French regulators show that Orange had 3,439 activated 4G antennas at November 1, SFR 718 and Bouygues 4,655.

As the Christmas holiday season nears, Orange, SFR and Bouygues have ramped up advertising and discounts for high-end Apple and Samsung phones to attract customers to 4G offers.

Bouygues and Orange, in particular, are promoting their 4G as featuring wide national coverage with better quality.

But it remains to be seen whether the shift to 4G will pay off for the trio given Iliad's aggressive approach.

Delphine Ernotte, who runs the France business for Orange, said the company would not overreact after Iliad's 4G announcement because its own network is larger and faster than its smaller rival's.

"We are not afraid of an offer that is backed with no network. Coverage and quality are fundamental," Ernotte said.

"We will revamp our tariffs in February, as planned, and the prices on 4G will increase.

Nevertheless, Orange has backed away from its previous bullish stance on the benefits 4G would bring to the bottom line.

It once said 4G would claw back 5-10 euros on its average revenue per user. More recently, however, Chief Executive Stephane Richard said only that 4G would be at "a premium". ($1 = 0.7377 euros)

(Additional reporting by James Regan; Editing by Greg Mahlich and David Goodman)