The French mobile market is a step closer to gaining a fourth 3G operator. In March 2007, the regulator ARCEP launched a tender for a 3G licence which was unsuccessful. The government decided on 12 January 2009 to split the 2 x 15MHz available in the 2.1GHz band into three lots of 2 x 5MHz, reserving one block for a new entrant. ARCEP should publish the Invitation to Tender for the licence during the first quarter of 2009.
The French mobile market is mature, but figures suggest that it still has room for a new entrant (see Figure 1 below). Penetration is the lowest in Western Europe, standing at 88.1% at the end of September 20081, and prices per outgoing minute are high in comparison with those in most other Western European countries.
Figure 1: Mobile penetration compared with revenue per outgoing minute in selected Western European countries, Q2 2008 [Source: Analysys Mason, 2009]
Recent regulatory changes may facilitate customer acquisition by a new entrant. P
ostpaid has been increasing since the end of 2007, and by the end of September 2008 accounted for 69% of subscriptions1. Operators have tried to lock in these subscribers by offering postpaid contracts with durations of 12 and 24 months. However, a law issued in June 2008 made it possible for subscribers to cancel 24-month contracts from the thirteenth month onwards, and only pay 25% of the remaining monthly fees.
A new entrant could fill its network capacity and increase its revenue by hosting MVNOs. So far, MVNOs have not been successful in France: their market share was only about 4.9% at the end of September 20081. This is largely the result of network operators’ high transfer prices. A new network operator could offer lower transfer rates, which would enable large established brands to launch attractive MVNO offers.
In order to offer inexpensive handsets, the new operator will need to make greater efforts to subsidise devices than established players because 3G handsets are more expensive than low-end 2G handsets. However, 3G handset prices are expected to continue to decrease, and eventually converge towards the price of 2G handsets.
2 x 5MHz is not sufficient to provide voice and data services in densely populated areas. To address this, a new entrant will be granted additional spectrum within the 900MHz band following the re-farming. Also, it will be able to bid for more spectrum within the 790–862MHz, 2.1GHz and 2.6GHz bands.
A new entrant would need to make large investments to achieve nationwide coverage, mainly because of the country’s size and low population density. However, the new entrant could spread its investments over a longer period if regulatory conditions make it possible to efficiently use national roaming. Site acquisitions will be difficult because of the scarcity of new sites in dense areas and the increasing awareness of environmental concerns. A new entrant may consider RAN sharing2 with established operators, which would alleviate these concerns and be advantageous to both players.
Entering the French mobile market will be challenging, but there is probably room for a fourth player if the issues identified here can be addressed by an appropriate market entry strategy. A careful evaluation of key business drivers and success factors is, therefore, instrumental to the investment decision.
Analysys Mason’s Paris office was established in 1996 and has undertaken over 50 projects in the last five years. Analysys Mason has a strong track record in helping operators to evaluate and quantify opportunities worldwide – particularly with regards to identifying and supporting licence bids, market entry strategies and wholesale service development.
1 Source: ARCEP
2 Sharing of the radio access network infrastructure