Can France’s Free keep its wireless revolution going?
Originally posted on Gigaom:
The first official casualty reports emerged this week in Free Mobile’s price war against Frances’ mobile powers that be. France Telecom’s(s fte) Orange reported a 615,000 subscriber loss, or 2.3 percent of its total customers. People are flocking in droves to Free’s ultra cheap voice and data plans, but there are also signs that the upstart operator will have trouble keeping its wireless French Revolution raging.
FT reported another interesting metric in its first quarter earnings. While the flight to Free is pressuring its profits, revenues and margins, Free’s owner Iliad is also making a substantial contribution to Orange’s wholesale roaming business. Iliad has only built a limited 3G network of its own, so to fill in the gaps it relies on an MVNO agreement with Orange. Orange originally expected its roaming agreement with Iliad to bring €1 billion (U.S. $1.3 billion) over five years. Now Orange expects to see that first billion in just two years.
Apparently Free has resorted to buying a lot more capacity than it expected – or at least more than FT expected. Meanwhile, financial firm Jefferies believes that FT’s lower-than-expected decline in revenues for the quarter indicate that many of its subscriber losses were among budget customers lured by the Free’s lowest price €2 a month plans. If that’s the case, Free could find itself in a predicament: it may rake in new customers, but the costs it incurs from buying all of that 3G capacity may outstrip its revenues. We’ll know more when Iliad, reports its first-quarter numbers.