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Penetration in the French Mobile Market
Boosting Youth and Middle Class

DUBLIN, IRELAND (July 25, 2005) France has long lagged behind its Western European neighbors in mobile penetration because of lower usage of prepaid services, according to Research and Markets. As penetration in Italy and the UK continues to edge above 100 percent, mobile penetration in France as forecasted by Pyramid Research will reach just 78 percent in 2005. To increase penetration, the French regulatory body ART opened mobile operator networks to MVNOs (Mobile Virtual Network Operators) as an alternative to incumbent operators in France.

Recently, several MVNO launch plans were unveiled - NRJ and Coriolis plan to roll out services on SFR’s network, M6 intends to piggyback on Orange’s network whilst Tele2 has already launched services on Orange’s network. So far, the three MVNOs that launched in 2004 - Debitel, Breizh and Universal Music - have not massively threatened the incumbent network operators. We believe that apart from Tele2, the newly announced MVNOs will fuel price erosion but will only make a slight impact on the dominance of the three incumbents - Orange, SFR and Bouygues Telecom.

So far, the French operators have succeeded in preserving their dominance by signing up MVNOs on their own terms. Of the three MVNOs signed up in 2004 - Debitel, Breizh and Universal Music - none are capable of mounting a strong nationwide challenge to the incumbents. Largely, we do not expect MVNOs to capture more than 17 percent of the total French mobile market by 2010, which is small when compared to the 27 percent in Germany.

MVNOs face a difficult challenge in adding subscribers. The incumbents rely heavily on 24 month lock-in contracts, decreasing the incentive for subscribers to switch operator midway. Coupled with the difficulty in porting numbers, it could be construed as a strategic deterrent for MVNOs in the market. However, given that most MVNOs offer prepaid services, promoting prepaid as a complement rather than a substitute to post-paid services will boost the MVNOs. Getting the French youth and middle class to use two mobile phones or SIM cards, as is common in markets that have exceeded 100 percent penetration, will mark a key step in boosting penetration in the French mobile market.

Source: Research and Markets (researchandmarkets.com)