Market Insight

Heavy promotions drive France Telecom growth in Spain

July 29, 2012

Alzbeta Fellenbaum Alzbeta Fellenbaum Manager – Research and Analysis, Service Providers & Platforms

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France Telecom Group achieved a 4.7 per cent year-on-year (YoY) increase in fixed broadband subscribers in Q2 2012. In its latest results, the company reported 654,000 broadband net additions, including 378,000 in France, 194,000 in the other European countries (including Spain, Poland and Slovakia) and 82,000 in Africa and the Middle East (including Egypt and Jordan). In Europe, digital TV (IPTV and satellite) reportedly rose 19.7 per cent with 5.5 million subscribers at the end of Q2 2012 (908,000 net additions YoY), primarily in France and Poland, but also in Belgium and Slovakia.

In France, the fixed broadband customer base rose 4.0 per cent yoy to 9.749 million in Q2 2012. According to the results, the ARPU of fixed broadband increased 1.6 per cent, led by an improvement in the customer base mix, with a growing share of naked ADSL subscribers (53 per cent in Q2 2012, +8.4 percentage points YoY). Revenues from fixed broadband services rose 5.6 per cent. The digital TV customer base rose 20.7 per cent yoy reaching 4.703 million subscribers in Q2 2012.

In Spain, fixed services continued their steady rise; revenues were up 9.5 per cent in the second quarter after an 8.6 per cent increase in the first quarter, due to growth in ADSL. The number of ADSL subscribers increased 11.5 per cent yoy (1.323 million customers at the end of Q2 2012), while ARPU rose 3.3 per cent with a growing share of fully unbundled ADSL subscribers (64.2 per cent of the total base at the end of Q2 2012, an increase of 5.6 percentage points in one year) and the growth of Voice over IP.

In Poland, the number of broadband services customers rose 1.4 per cent yoy to 2.344 million customers at the end of Q2 2012. The number of digital TV customers (ADSL and satellite) continued to climb, with 677,000 customers at the end of Q2 2012, a YoY increase of 14.2 per cent.

France Telecom's investment in deploying fibre connections to residential buildings in France seems to be paying off, with fibre connections rising steadily from 73,000 FTTH connections in Q2 2011 to 123,000 connections in Q2 2012. In 2010, the incumbent telco announced its ambitious plan to bring FTTH-based services to 60 per cent of France's households by 2020. In order to reach its goal France Telecom is investing €2bn by end 2015 in the network. As part of the roll-out, France Telecom is enabling other ISPs, such as Free (Iliad), SFR and most recently Bouygues Telecom to gain wholesale shared access to the fibre network. While deals with SFR and Free cover mostly rural areas, under the agreement with Bouygues Telecom, France Telecom will share its fibre networks in densely populated areas. On top of the FTTH initiative, France Telecom's 2011 plans to increase its ADSL coverage from 98.6 per cent of residential homes to more than 99 per cent in 2013 also appear to be having some effect. Alongside this expansion of coverage, the number of naked DSL customers for the incumbent grew from 4.193m in Q2 2011 to 5.180m in Q2 2012.

In Poland, the telco has made strong progress with its triple-play packages, with 151,000 customers taking the bundled TV, broadband and telephony services from France Telecom at the end of Q2 2012, compared with 29,000 at the same time last year. However, it is in Spain where some of the biggest broadband gains have been made. With Telefonica controlling over half of the fixed broadband market in Spain, France Telecom has been forced to make an aggressive play for market share and has  started to offer a cheap alternative to Telefonica's pricey packages. France Telecom currently offers the cheapest ADSL package on the Spanish market, which is half the price of the Telefonica or Jazztel offerings (€15,95 vs €29,90 per month on a 12-month contract). The special deal appears to have driven customers to France Telecom and is one of the key reasons behind Q2's increase in ADSL subscribers. We will have to wait for all major ISPs to release their Q2 2012 figures to see how France Telecom's positioning in the Spanish fixed broadband market has been affected (it is currently number three ISP), but we expect a gain in market share as a consequence of the heavy promotions. 

Organization
France Telecom Telefonica
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