Free Mobile sticks it to the French incumbents yet again as it moves into cheap leasing of top-of-the-range smartphones.
Dec 19, 2013
Free Mobile's assault on the Bastille-like walls that used to surround the French mobile sector was as comprehensive as it was unexpected. The incumbent operators, Bouygues Telecom and Orange France, used to sit in their finery in their powdered wigs atop their high castles taunting away, Monty Python style, at the hoi-polloi in general and condescending to their choiceless subscribers in particular. Not any more.
They are still reeling from Free's attacks on their expectation of the ongoing and God-given aristocratic right to rule the roost in perpetuam but their efforts to counter-attack have been feeble and petulant. Rather than accepting that times have changed for ever and adapting accordingly, they have preferred to snipe ineffectually from the sidelines whilst wheedling away at the regulator, and even the French government, in an effort to have their privileges and market dominance restored to them.
French subscribers are happy though. Now there is some real rather than ersatz competition and prices are falling. Look at Free's onslaught on the French LTE market. After much blustering and tut-tutting both Bouygues Telecom and Orange France have been forced to add LTE to their own low-cost tariffs while they had been expecting to cream it in by claiming '4G' to be premium services that cost so much more to provide. No they don't - and their bluff has been well and truly called.
Now, to really rub salt in already festering wounds, Iliad-owned Free Mobile has come up with an iconoclastic smartphone leasing scheme that, in essence, will permit individuals and enterprises to rent a smartphone for 24 months - and then hand it back. It costs a mere €12 a month - with an upfront initial payment of €49. Now that is really going to hit the incumbents where it hurts - in the purse that dangles so fetchingly alongside silken hose and the cord-du-roi codpiece.
Free's lease-a-smartphone deal will cut some 40 per cent off the cost of purchasing an iPhone (or equivalent) and signing-up to a monthly services package. Hitherto, the likes of Bouygues and Orange have made big bucks (and relied heavily upon) the application of subsidies to sell top-of-the-range handsets.
To say that the incumbents are livid at Free's "antics" (as they have been described) is one hell of an understatement. Via its own spin doctors and friends in the French media and other high places, Orange France has been vituperative in its attacks on "upstart" Free, and has also made direct personal media attacks on Free's founder, Xavier Niel. Those attacks have also rebounded with M. Neil reveling in the attention and giving back better than he has been given in terms of telling the establishment where to stick their criticisms.
However, the incumbents won't accept reality or play nicely just yet (if ever). The days of making huge revenues through overpriced uncompetitive services are over for them but they'll fight, and fight dirty, to prevent any further market losses to a company that won't play the game of "nous sommes tous amis des grandes écoles".
Hence the ominous mutterings from the Olympian heights of Orange's senior management that Free Mobile should consider its future in light of the fact that the legal 2G/3G roaming agreement in place between the two combatants "is not a perpetual right".
Stéphane Richard, the Orange CEO, murmurs that his company would get by very well without any such agreement being in place but wonders if Free Mobile could say the same. Well, obviously it won't (in the short/medium term at least), that's why the network piggy-back deal exists in the first place.
Lack of its own infrastructure is Free's very obvious Heel of Achilles. It is making much of its cheap LTE offerings but the fact is that Free has a mere 700 '4G' antennae in operation currently. That is a matter it will have to address as a matter of extreme urgency. Orange is on record as saying that "under no circumstances" would it allow Free to share its LTE infrastructure.
Nonetheless, the French incumbents have been forced onto the defensive over the course of 2013 and 2014 looks like being more of the same. Once a nose is out of joint it can seldom be returned to its forner pristine acquiline glory. Just look at Jean-Paul Belmondo. And Gérard Depardieu. Oh, I forgot. He's a Russian now, isn't he?