Digital Footprint of French telecom operators

Updated: Apr 27, 2020

Telecom industry trends

French telecom market is dominated by 4 key operators, which together hold about 90% of the market share. While struggle of MVNO-s to keep market share continues, will the disruptors like Facebook, Google or WhatsApp pose a long-term threat to the revenues of today’s leaders?

Telecom market in France is strongly consolidated, with revenues in decline.

The telecom market in France is consolidated in the hands of Orange (35% market share), SFR (21,4%), Free (17,3%) and Bouygues (16,2%)[1]. The rest of the market is occupied mostly by MVNOs. Last 6 years have been challenging for the French telecom market, with revenues in steady decline from 2010: 43,4 billion in 2010 and 35,7 billion in 2016[2]. This translates into a loss of about 18% of their revenues in 6 years.

Calls from fixed telephone services is being substituted by mobile (fixed line decline is -33% while mobile growth is +34%). SMS consumption levels stayed stable from 2012 to 2016[2] and both calls and SMS seem to have reached the ceiling. In the same time, the data consumption and broadband subscriptions are growing. Data usage has grown by 86% in Q3 2016 (3300% from 2010). The subscriptions to high speed and very high-speed internet have grown at a slower pace: 0,8% in Q3 2016[2].

However, the average prices of the services have a downward trend. In case of broadband, prices have declined by 2,1% YoY in Q3 2016[2]. The average mobile phone bills have reduced from 26,4€ to 16,1€ in 7 years[3].

Together with shrinking revenues, telecoms in France have limited opportunities for growth, because of high saturation levels of the main telecom services. The SIM card penetration is 109,1% in mid-2016 (growth of SIM cards: Q3 2016 was 1% YoY, previous 4 quarters: 0,6%), out of which 97% are active.[4] The broadband access is available in 80% of households[5].

With proliferation of low cost offers by large operators, the future of MVNOs is uncertain. Since the decrease in 2014, the market share of the MVNOs remained stable.

MVNOs, which were traditionally competing via their low-cost offers, have been challenged by Free (proposed to the market in 2012) and the low cost offers of telecom key actors, like Red by SFR and Sosh (2011). As a result, certain MVNOs, like M6 Mobile, Virgin Mobile and Joe Mobile closed doors.

The below table is comparing the brands’ lowest offers and puts a question mark on the competitiveness of the MVNOs.For instance, Prixtel is offering less data for the same price as Free. Meanwhile for 1€ paid to RED the customer gets 1 hour of calls and 10MB data, whereas Auchan telecom offers 0,5 hours of calls and 5 MB data. La Poste Mobile holds a competitive position against RED for the customers who prefer more data than calls. Although Lyca mobile seems to offer attractive price for 6 times more data than RED, Sosh and Free, another package offered by RED (not included in the table), challenges the offer by providing unlimited calls and SMS and 5 GB data for only 10 €.

Telecom industry under pressure

The global telecom market shows a small 1.5% increase[7], mainly due to a slow growth in markets outside Europe. The situation is graver in European market, where the decrease was 0,3% in 2016.

The return on invested capital in the industry has a descending trend, due to a number of factors among which is the capture of legacy revenues by Over-The-Top (OTT) voice, video and messaging apps, which are growing their share of industry value chain revenues and are reaching the 10% mark in just a few years.[8] As a result, global operators have already lost 8% of their voice minutes to OTTs in 2015.[9]

Moreover, the telecom industry executives believe the threat for their revenues from these disruptors continues. During Interviews with 43 telecom executives, an astounding 91%[10] of the respondents mentioned OTTs as 1 of 2 most likely players to alter customer demand scenarios. Google, Amazon and Facebook also have been mentioned as potential threats to the telecom industry.

Whereas the pressure from OTT side can be a big threat to the revenues from both international and local calls and SMS, one could argue that these OTTs will need internet connection to operate, and they need to rely on telecom operators to provide this service. This would otherwise look like a good prospective for the telecoms, however recent moves by Facebook and Google are potentially posing a question for the future position of the traditional telecom industry.

While Facebook has signed up almost half the countries in Africa to its free internet service[11], Google is set to cover 75% of the earth with its satellite constellation, which is expected to include around 1000 satellites and the exchange of information will be done through a number of ground stations. Google has acquired a company called WebPass, which specializes in providing point-to-point wireless high-speed Internet to customers. This means that ground stations can directly provide Internet to the users using WebPass. Moreover, Google is currently offering the Project Fi in the US. This is an MVNO which works with 3 telecom providers and connects at any given time to the one which provides best service in the particular area. Project Fi offers calls, text and data services[12]. Although Facebook is currently offering a limited access to the web, its main competitive advantage is the fact that it is free. Google on the other hand is challenging telecoms with the breadth of their activity.

With revenue losses and higher risk from disruptors, it is important for the telecoms to focus on new revenue generating sources. Several telecoms have already realized the long-term threats and have made strategical decisions to diversify their offer. For example, Orange is starting Orange bank during 2017 and SFR has confirmed their intention to launch Altice bank next year. This could be both a source of potential increased revenue as well as improved customer churn rate, as banking clients are generally less prone to change the service provider. Both Orange and SFR have also been active in offering media services, focusing their websites on media proposals. This additionally helps them generate more visits and increased interest by the visitors. They are offering news, TV channels, games and Video on demand.

An interesting transformation has been completed by former Vimpelcom, headquartered in Amsterdam and serving around 235 million customers worldwide. The company rebranded itself as Veon, by the name of its digital messaging app. The app operates like WhatsApp, Skype or Viber, but with a crucial difference: Veon app users (limited to only Veon clients) are not charged against their mobile data plan, while other Over-The-Top operators count against their monthly data allowances[13]. They have also announced partnerships with some of the world’s most popular brands such as Deezer, STUDIO+ (Vivendi) and Mastercard to transform the personal internet experience and increase earning via differentiated offers.

Digital footprint of telecom sector

Objectives and scope of analyses

As digital transformation is heavily impacting the telecom industry, D-rating analyses is focusing on one of the main pillars of digital transformation: the digital footprint. This is comprised of Web and new digital territories (Mobile apps and Social media). The telecom market in France generates more than 370 million web visits per month. A majority of telecoms have mobile applications (9 in average) and are present in at least 1 social media platform (except Auchan telecom).

The study focuses on 19 French telecom brands (4 telecom operators, 13 MVNO[14] and 2 brands created by telecom operators: Red by SFR and Sosh), 2 European telecoms (O2 and Telia) and 2 OTT (Whatsapp and Skype). O2, which is a Telefonica brand, has been analyzed for their UK activities and Telia, for its Swedish business. Whatsapp and Skype have been analyzed globally. All data has been weighted according to the internet penetration by country as well as the number of clients for each brand to achieve comparable results.

The study evaluates the digital footprint of the sector based on over 15 000 data points which are consolidated into 3 Indexes (Web, Mobile applications and Social media) with the help of a proprietary algorithm.

Telecom operators are very strong on Web performance

The digital performance Web Index by D-Rating is calculated by taking into account 5 main areas: traffic, website stickiness, traffic source, technical qualities and website functionalities.

Index shows that web performance of the big 4 telecom operators is far superior to the MVNO-s and even to the OTT-s. 3 MVNO-s: La Poste Mobile, CIC Mobile and Credit Mutuel mobile are holding stronger in the Web Index, mainly due to the notoriety from their parent companies: CIC Bank, Credit Mutuel Bank and La Poste

The four key operators stand for 98% of the entire website traffic of the telecom brands in France, leaving the MVNOs with only 2%, which is 5 times less than their market share.

In terms of traffic source, web advertising tools are used by both MVNOs and telecom operators, with 95% of the entire ads generated traffic going to telecom operators and 5% to MVNO.

It is also interesting that OTT-s generate only very few of their website visits by using ads (0,1%), while 1,3% of all visits into telecom operators’ websites and 3,3% of MVNO website visits are generated by ads. Majority of Whatsapp visits are direct and SEO generated, while for Skype it is a mix of referrals, direct traffic and SEO. Their customer acquisition strategy is driven by free access and word of mouth, resulting in strong brand awareness.

WhatsApp is dominant in mobile apps area, while Orange is leading the social media territory.

Telecom operator ratings in France

(Mobile Apps area)

Whatsapp is the absolute leader in mobile apps Index, leaving far behind the operator with the closest result (gap in Index is 27%). Whatsapp and Skype are very strong at client engagement for mobile apps. Meanwhile in regards to satisfaction levels, which is measured by the ratings in the «stores» within the last 12 months, O2 (average rating 4,5) leaves the French telecoms (average rating 3,1) far behind.

From the main 4 French telecom operators, Bouygues has the highest rating (3,3), directly followed by Orange (3,2). The ratings are the weighted average for all the apps of the operators analyzed by D-rating.

In the Social media area, Orange has an impressive result, leaving both the competitors and OTT far behind. The brand is good both at generated traffic from social media and the engagement level of the clients. It is notable that Red by SFR is the strongest in terms of engagement levels.

Final study results and conclusions

International telecom market, as well as French telecom industry are challenged by OTTs and digital giants like Facebook and Google. With reducing figures of traditional revenue generating channels, low opportunities for growth in the saturated market, French telecoms are facing high risk of disruption. Following the example of Veon, the telecoms could enter the tech market, instead of competing against it. While digital transformation and new markets development will be a long and painful process, having a strong digital footprint can be vital in allowing the companies to easily and smoothly enter new industries and markets when launching new products.

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[1] Selectra: Which are the biggest mobile phone providers in France in 2016

[2] Arcep, Les chiffres du marché 2016 – conférence de presse du 19 ma

i 2017

[3] ZDNet France, Chiffres clés : les clients de la téléphonie mobile en France, May 2017

[4] Arcep, Observatoire des marchés des communications électroniques en France, January 2017

[5] Eurostat, Households with broadband access, 2016

[6] All options offer unlimited SMS, except Lyca Mobile: 300SMS

[7] Silicon: Le marché mondial des télécoms se stabilise… à la baisse

[8] EY: Global telecommunications study: Navigating the road to 2020 , 2015

[9] EY: Global telecommunications study: Navigating the road to 2020 , 2015

[10] EY: Global telecommunications study: Navigating the road to 2020 , 2015

[11] The Guardian: Facebook lures Africa with free internet - but what is the hidden cost?

[12] [2] Vimpelcom set for radical overhaul from telco to internet player - CEO

[13] Vimpelcom set for radical overhaul from telco to internet player - CEO

[14] All brands, except 4 large operators and their low cost brands (Sosh and RED), have been considered as MVNO.



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