February 1, 2012 / 11:57 AM / 8 years ago

UPDATE 1-France Telecom to step up spending on fibre networks

* To spend 300-350 mln euros on fibre in 2012-CEO

* Won’t cut fibre spend despite tougher mobile competition (Adds details)

PARIS, Feb 1 (Reuters) - France Telecom will double its investment in fibre networks in 2012 to 300-350 million euros and won’t scale back its broadband ambitions because of intensifying competition in its home market, its chief executive said on Wednesday.

In testimony before the French National Assembly, Stephane Richard said fibre investments were key for the former state-owned monopoly to modernise its broadband network and offer high-speed Internet to customers.

France’s telecoms market has been in turmoil in recent weeks since Iliad launched an aggressive low-cost mobile service, touching off a price war. Analysts expect the new market conditions to erode profits at other mobile operators, France Telecom, Vivendi, and Bouygues Telecom , and could lead some to trim network investments.

“The arrival of a new competitor in the mobile market a few weeks ago will not call into question our dedication to invest in fibre,” said Richard. “I will protect fibre in our budget because it’s crucial to our future competitiveness.”

France Telecom has pledged to spend 2 billion euros by 2015 on rolling out a national fibre network. It has also signed accords with its three competitors to collaborate on fibre projects in rural areas and some mid-sized cities so as to speed up deployment and share the cost.

Nevertheless, France Telecom and its rivals have been slow to get fibre investments off the ground because of their high costs and long payback times of 30-40 years.

For example, Richard said France Telecom spent 150 million euros on fibre last year, while Iliad has said it spent 215 million in 2010. These levels are far short of the roughly 25 billion euros that France’s telecoms regulator has estimated it will take to cover the country with fibre broadband.

The French government has been trying to spur its four telecoms operators to build national high speed fibre broadband networks, and in 2010 pledged several billion euros to that end.

The issue of Europe’s slow pace of fibre broadband buildouts is also on the radar of policymakers elsewhere. In October, the European Union floated the idea of cutting the rates that large telecoms operators charge smaller players to rent copper-based networks as a way to spur them to invest in faster fibre optics networks.

The proposal by Digital Agenda Commissioner Neelie Kroes was immediately slammed by Telefonica and Telecom Italia , among others, who argued such a move would actually weaken the companies ability to invest in fibre.

Richard echoed that stance and urged French lawmakers not to keep changing the rules on telecoms operators. “It’s not by cutting off the lifeblood of operators that you will encourage them to invest,” he said.

Kroes’ proposal on fibre “is counterproductive to say the least,” he added.

France Telecom shares were up 0.5 percent to 11.53 euros at 1150 GMT, while France’s blue-chip index was up 1.6 percent.

$1 = 0.7639 euros Reporting by Leila Abboud, Gwenaelle Barzic; Editing by Elena Berton and Mark Potter

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