France - Orange Aims for Ambitious Quad-play Growth By 2015

27 Apr 2011 • by Natalie Aster

Orange France CEO, Delphine Ernotte, said the operator estimates half of all its subscribers will be on quad-play packages by 2015. Quad-play packages providing TV, broadband, fixed-voice and mobile were launched by Orange France in Q310. BMI expects bundled services to become increasingly prevalent in France and across much of Western Europe, helping operators grow revenues.

Orange was the second operator to offer quad-play services in France, after the third-largest mobile operator, Bouygues Telecom launched services in 2009. Orange followed suit, offering services in August 2010. Soon after, France's second largest operator SFR, launched services in June 2010. Orange also plans to roll out quad-play services in the UK, Spain and Poland, as it expects strong growth in subscriptions for these services across much of Western Europe. However, we believe Orange's 50% estimate to be too high considering those customers who will opt for single-play, double-play or triple-play package based on their needs and affordability.

Pressure On Traditional Business Model
Subscriber and Mobile ARPU (EUR) Forecasts

Source: BMI

That said, the early figures are positive, with the quad-play service in France attracting 99,000 subscribers in the first 45 days after launch. Orange's pay TV, IPTV and satellite TV offers have all performed well and attracted additional subscribers. Total TV subscribers were 1.93mn in Q108, but this figure increased to 5.47mn in Q410. BMI found the highest number of net additions for TV services was during Q410, with 534,000 subscriptions. We believe this was derived from the popularity of quad-play services in France. However, we do not expect this rate to be maintained in the medium term in the absence of continued price cuts.

The move towards quad-play services benefits the operator by raising the number of revenue generating units for each subscriber, therefore increasing revenue without a correlating rise in costs. Virgin Media, which will compete with Orange's quad-play services in the UK and France, reported that in the UK quad-play sector, ARPU was more than GBP80 whereas standalone cable was GBP47.51 in Q410. PricewaterhouseCoopers estimated that increasing quad-play penetration by 5% can represent 20% of revenues in terms of ARPU. These revenue boosting opportunities are particularly attractive for operators because of the downward pressure on mobile ARPUs, and slowing or negative subscriber growth in mobile and fixed-voice respectively. BMI forecasts the market average monthly blended ARPU in France is likely to decline from EUR34.54 in 2010 to EUR30.38 in 2015.

However, BMI does not consider quad-play to an easy opportunity for operators. Competition is already intensifying and in France this is sure to increase dramatically with the move of Virgin into quad-play during H211. More importantly the launch of Free Mobile, will make Iliad a quad-play provider from H112. Free Mobile said it will launch services that will halve the cost of mobile services, which BMI would welcome, but is highly sceptical this price comparison is on a like-for-like basis. We expect Free to put downward pressure on mobile ARPUs. However, we believe 50% is an unrealistic figure.

BMI’s telecommunications reports feature independent 5-year forecasts on the future strength of each country's ICT market, covering fixed-line, mobile and internet segments, and analyses latest regulatory developments and corporate news, including investment activity, mergers and acquisitions, joint ventures and partnerships. All leading operators and manufacturers are fully profiled, highlighting their quarterly financial performance, capital expenditure plans and latest contracts.

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