French Mobile Price War Expands to 4G Service

PARIS — Low-cost French telecom operator Iliad SA ILD.FR +0.29% plans to offer the latest high-speed wireless technology to its customers at no additional cost, a signal that stiff competition could thwart European operators’ hopes to make extra money from faster data service.

Iliad said Tuesday that it will add fourth-generation, or 4G, wireless service to its existing mobile-phone plan priced at €20 ($27) per month—giving it some of the lowest prices in Europe for technology that allows faster downloads and higher-quality video streaming on mobile phones

The move is a new headache for French telecom firms Orange SA, ORA.FR -3.08% Vivendi SA VIV.FR -2.63% ‘s SFR and Bouygues SA EN.FR -3.07% ‘s Bouygues Telecom, whose bottom lines have been hurting since Iliad launched its mobile services almost two years ago, setting off a brutal price war.

Iliad’s pricing is also a difficult signal for telecom operators across Europe, which have been hoping to use the new 4G service to turn around shrinking revenue, but have been at pains to do so.

OrangeMobile revenue in Europe has fallen 12% between 2008 and 2012 to $215.8 billion, and it is expected to drop another 3.8% this year, according to a report commissioned by mobile-industry trade group GSMA.

In France, operators have invested heavily in 4G networks, and hoped to charge as much as €10 per month extra for 4G plans to help boost revenue. Now they may be under pressure to offer lower prices, analysts say.

“The pressure on prices is not over,” said Tangi Le Liboux, an analyst at brokerage Aurel BGC, commenting on Iliad’s 4G offer. Orange shares fell over 3% in early trade while Vivendi fell 2.2% and Bouygues 2.5%. Iliad shares fell 1% in an overall lower market.

Only last month, Orange Chief Executive Stéphane Richard told an investor conference that, despite “fears” otherwise, all French operators had so far chosen to offer 4G at a premium, calling the technology “a way to increase the average revenue per user.”

Orange said Tuesday that it is sticking with its plans to charge more for 4G services, though declined to confirm previous statements that it would charge €5 to €10 more. “I can confirm that 4G will be more expensive,” said Delphine Ernotte, head of Orange’s French business. “We are still working out the details.”

One rival argued that they have better coverage, which justifies their higher prices. “Other operators will undoubtedly point to the limited existing coverage of Iliad and explain that their service is superior, which is a fair point so far, but Iliad’s coverage will grow over time,” said Nomura analyst Frederic Boulan in a note to investors.

Iliad said Tuesday that it has deployed 700 4G transmitters in France, and will quickly roll out several hundred more in the coming weeks. By contrast, Orange said it would have around 3,800 4G transmitters installed at the end of the year.

“It takes time to build a network, we have been working on this for a year and a half,” Orange’s Ms. Ernotte said.

A spokeswoman for Bouygues Telecom wasn’t immediately available for comment.

 

– WALL STREET JOURNAL

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