Telecommunication Sector in France

History: The telecom market in France existed in nascent stage during the 1960s when it was characterized by one of the lowest penetration among all the OECD countries in the region. The penetration rate at that time was about 8 lines per 100 inhabitants. In 1974 by the advent of the new administration more emphasis was laid to develop the telecommunication infrastructure in the country. By 1980s due to significant development in infrastructure the penetration rate increased fourfold and France became the 8th highest penetrated OECD country. But the technological lead developed in the network was short lived and other OECD countries soon matched up to it as they opened their telecom markets to competition. France responded by investing in high technology projects supported by state funds. During 1987, the European commission put forward a proposal to liberalize the telecom market in EU but the French administration was not in favor of the proposal as they didnt wanted to introduce additional competition in the market. This slowed down the initiatives which were taken by those who supported the reform as they believed that bringing in competition would be beneficial for the industry. As a result the process of liberalization was met by strong opposition by the labor union. But owing to the membership to the European Community the French government tried to introduce proposals which ultimately made a little progress. The result was that France did not take up the initiatives of liberalization like many other European countries despite the deadline given by EU to open up the sector by 1st Jan 1998. Similarly on many occasions EC has taken France to court for not respecting its directives. The sector is dominated by state owned enterprises like the French Telecom where government holds a healthy 27% share deals with various debt problems. Since 2003 by the directive of the EC the member states four directives in the existing legal framework and France also in process of enactment. These are simplified market entry procedures notably by eliminating individual licensing; the elimination of a number of restrictions which have constrained the development of the cable television sector; increased consumer protection measures, moving to use dominance and joint-dominance rather than significant market power to assess market power, and more efficient management of spectrum.

The major responsibilities expected from the telecom department of French government are: Allow unimpeded market access in the telecommunications sector. Maintain and develop public service in telecommunications and in particular universal service. Have a regulator independent from telecommunication networks and service operations. The provision and financing of the public service in telecommunications. Develop employment, innovation and competitiveness in the telecommunications sector.

 Defining the conditions of access to public networks, interconnection to these networks. Ensuring operators respect the secrecy of messages and the principle of neutrality with respect to the content of messages transmitted. Ensuring that operators and services providers respect their obligations to national defense and public security. There are over 91 operators competing in the French Telecommunications market but new markets have a market share of less than 0.5% in the fixed line market. Only by 2002 after the implementation of carrier preselection, competition emerged in local markets where new entrants had 20% of market share by the end of 2002. Still today insufficient competition exists in France from alternative infrastructures mainly due to the weak cable TV sector where the incumbent telecommunication operator has market power. Further competition is necessary in the cellular mobile market as well.

Major Regulatory Changes Year Policy change 1988 competition; EC Terminal Equipment Directive opens the terminal equipment market to

1990 The ECs ONP Directive liberalizes value-added services and data services for business and closed-user groups; 1991 France Telecom becomes an independent operator under public law;

1995 Direction Gnral des Postes et Tlcommunications (DGPT) issues a public consultation document on competition in telecommunications ; March 1996 July 1996 July 1996 Parliament passes the Experimental Licensing Bill for immediate implementation Liberalization of alternative infrastructures Implementation of the Telecommunications Regulation Law

July 1996 France Telecom incorporated 1996 Regulatory provisions implementing the new law (licensing, establishment of interconnection charges, sharing the net cost of universal service); France Telecoms reference interconnection offer approved by DGPT and published January 1997 The Autorit de Regulation des Telecommunications (ART) created as an independent sector specific regulatory body;

Spring 1997 Licenses issued to competing public network and voice telephony operators, effective from 1 January 1998 1 January 1998 January 1998 calls introduced; The telecommunications market opened to full competition in France; Call-by-call carrier selection for international and domestic long-distance

January 2000 Carrier preselection for long distance introduced; 2000 54 Wireless in the local loop (WLL) licenses attributed in Metropolitan France and its overseas territories) 2000 2001 2001 January 2002 2002 2003 Unbundling decree published Two UMTS licenses attributed Flat rate interconnection offer for Internet access calls introduced; Carrier preselection for local calls introduced; Third UMTS licenses attributed New telecommunications law under discussion.

Telecom Market
Key Statistics France is the third largest market in Europe. France Telecom is the major telecom company having global presence across Europe and francophone Africa. It dominates all sectors through increasing competition from a small number of major players majorly SFR and lliad. It is also investing in a national fibre network, largely in response to the activities of smaller players in this market. Fixed line business was the largest business in the sector in the past followed by mobile telephony services. Distribution of Revenues in French Telecom Market(2002) Fixed telephony services 43% Mobile telephony services 36% Leased lines 7% Advanced services 6% Internet 3%
Competition in Fixed Services

The number of public telecommunication companies in the fixed line business was about 91 in 2002. Out of it France Telecom (FT) had a market share as measured by revenue in June 2003 of 77.8% of local calling services and 63% of long distance services. The other major service providers are Cegetel and LDcom.

France Telecom France Telecom was created on 1 January 1991. In 1996 France Telecom became a corporation and the following year issued public shares and was traded on the Paris and New York stock exchange. France Telecom has repeatedly suffered with debt problems in the past. The debt in 2002 was equivalent to nearly two times the size of the total telecommunication services market in France. Large amount of debt was the result of large amount of foreign acquisitions and also rapid fall in the value of telecommunication share prices worldwide and the fact that as a partially state owned company FT had to use debt rather than shares to finance acquisitions. In 2002 the state decided to reduce the indebtness of the company by implementing a plan of action. According to the plan the state will increase its share of capital through the form of shareholder loan. Finally it did not take place but the other players complained the government was favoring France Telecom more than other players who are selling their assets to meet the debt. Cellular Mobile Sector The mobile telecommunication market was first opened in 1987 when SFR obtained an analogue license allowing it to compete with the incumbent mobile operator, France Telecom Mobiles. Both SFR and France Telecom obtained a GSM license in 1991. Because of the initial duopoly the development of mobile markets in France was relatively slow. Despite the high rate of growth of penetration rates in France for cellular mobile services still remain below the EU average in 2002. There has been insufficient action taken by the regulator in recent years to increase the competition in the mobile market. Today the mobile phone market in France worth around 18.5 billion Euros in 2008 which is one of the largest in Europe. Three network operators offer the full range of telephony and data services, while a growing number of MVNOs provide competition in the low-cost sector. France Telecoms Orange and the Vodafone-Vivendi-owned SFR dominate the market, while the third player Bouygues Telecom has won an increasing share of new subscribers since 2005, and has recently signed a number of prominent MVNO deals. All three network operators offer 3G services, which have become popular following the introduction of unlimited data offerings Their investment in HSPA upgrades has also spurred the development of the mobile broadband sector. A fourth 3G licensee, Free Mobile, is expected to launch commercial services in 2012. Digital TV Market France is Europes largest IPTV Market sector where consumer adopts bundled offers. There is fierce competition in the market which has brought down the cost of the bundles to less than 30 Euros per month. France Telecom is deploying a wide-reaching hybrid ADSL/fiber network providing high bandwidth services to meet consumer needs. The IPTV subscriber base has increased by 21% in 2010. Broadband Market France is the third largest broadband subscriber base in Europe. In recent years there has been growth in demand for high bandwidth applications which has led to increased investment in the fiber infrastructure. Recent legislation has secured similar access for fiber infrastructure. DSL dominates broadband access, while fiber deployment has become a substantial proposition,

particularly in the Paris region. The broadband subscriber grows at a healthy rate of 7%. The cable sector accounts for 5% of total broadband.

Major Developments in French Market

Vivendi to Buy Out Vodafone Stake in SFR Vivendi SA will buy out Vodafone Group PLCs stake in SFR, giving Vivendi full control of its biggest cash generator and helping Vodafone to clean up its sprawling portfolio. Paris-based Vivendi agreed to pay 7.95 billion ($11.31 billion) for the 44% stake in SFR that it doesn't already own. The deal values Vodafone's stake at 7.75 billion and the U.K. Company will receive an additional 200 million as a final dividend after the deal is completed. Read More
http://online.wsj.com/article/SB10001424052748703806304576241171942708468.html

FT initiates Conquest 2015 strategy FT's revised four-year financial strategy, Conquests 2015, focuses on investing in networks and markets and identifying new sources of growth. The company is concentrating in markets where it is a dominant player while consolidating its position in African and Middle Eastern markets. This strategy has led to a withdrawal from the Austria, Portugal and Switzerland markets. Read More
http://www.techzone360.com/news/2011/08/25/5731372.htm

Iliad secures roaming deal with Orange for 2012 Free Mobile launch Iliad recently signed a major 2G/3G roaming deal with Orange for its Free Mobile service, set to launch at the start of 2012. Free Mobile aims to cover 27 percent of the French population with its own network before launch, giving it immediate access to Orange's national base stations for 3G. Iliad aims to have around 100,000 FTTH subscribers by the end of 2011 and a 24-25 percent broadband market share in the long-term. Read More
http://www.telecompaper.com/news/iliad-revenue-breaks-eur-2-billion-in-2010

Iliad and France Telecom sign 3G roaming deal French operator Iliad has signed a deal with France Telecom to allow its customers roam on its 3G mobile networks. The national deal will bring about $1.4 billion in revenue over six years to France Telecom. The deal, which is an extension of an agreement on roaming over lower-speed 2G networks, will allow Iliad to provide fast data service on devices, including Apples iPhone, when it starts the mobile network in 2012. The deal will take effect once Iliads Free Mobile brand covers 25% of the countrys population. Under its mobile license granted in 2009, Iliad is committed to cover 90% of France by 2018. Read More
http://www.globaltelecomsbusiness.com/Article/2780468/Sectors/25204/Iliad-and-France-Telecom-sign-3G-roamingdeal.html

France Telecom plans African expansion France Telecom is looking at acquisitions in the Middle East and Africa, and looks to establish partnerships to share expenses and acquire market shares. The company says it is in exclusive talks over the acquisition of an operator in Congo. It is offloading European assets as it looks to expand in the Middle East and Africa, where sales are growing nearly ten-fold compared to the pace in certain

European markets. Read More

http://www.globaltelecomsbusiness.com/Article/2894247/France-Telecom-plans-African-expansion.html

Iliad challenges French 4G auction terms French telecoms company Iliads free brand has objected to the conditions over the countrys upcoming 4G mobile spectrum auction. The company has filed a complaint with the highest French legal body to challenge the terms of the auction. The complaints have followed the declaration by large companies, including Vivendi-owned SFR and France Telecom, that they will take part in the auction. Iliad wants to introduce mobile service in 2012 and would be heavily impacted if the auctions favor the bigger rivals, including Bouygues Telecom, along with unions including the CFECGC, have already previously complained about the auction requirements. France looks to raise a minimum of 2.5 billion from the license auction. Read More
http://www.globaltelecomsbusiness.com/Article/2889702/Iliad-challenges-French-4G-auction-terms.html

France Telecom to withdraw from several European markets France Telecom (FT) has put up for sale its Austrian, Swiss and Portuguese assets. As a result of slow growth in European markets, FT is attempting to maximize profitability by pulling out of countries where it is not one of the top two operators and where it does not have a controlling stake in the company. By consolidating into countries where it is strongest, FT is mirroring the actions of its competitors: UK-based Vodafone has been selling its minority interests overseas, most recently with the sale of its Polish mobile arm, Polkomtel of which it had a 24% share. The sales are expected to raise up to EUR2 billion (USD2.9 billion) for the French Group. Read More
http://www.telegeography.com/products/commsupdate/articles/2011/07/29/france-telecom-to-withdraw-fromseveral-european-markets/

France Telecom closer to Congo acquisition The government of the Democratic Republic of Congo (DRC) has confirmed that France Telecom (FT) is the only bidder for its 49% stake in Congo Chine Telecom (CCT). Already in talks with Chinese vendor ZTE for its 51% share of the company, FT is expected to pay around EUR300 million (USD) in total for the operator, a reflection of its level of debt, rather than its value. Read More
http://www.telegeography.com/products/commsupdate/articles/2011/09/02/france-telecom-closer-to-congoacquisition/

Sources:
France - Key Statistics, Telecom Market and Regulatory Overviews http://www.budde.com.au/Research/France-Key-Statistics-Telecom-Market-and-RegulatoryOverviews.html Regulatory Reform in the Telecommunication Sector http://www.oecd.org/dataoecd/36/35/32482712.pdf France Telecommunications Market Reports http://www.internetworldstats.com/eu/fr.htm