Move over, iPhone. At France Telecom SA’s flagship store facing Paris’s Madeleine church, fancy handsets have been shoved aside by the TV remote control, once an unlikely candidate for star product.
With a bet that a high-tech remote and set-top box will pull in new subscribers, France Telecom’s Orange brand is the latest European carrier to shift its focus back to fixed-line services such as high-speed Internet as mobile revenue fades.
“Broadband is back,” said Rafael Achaerandio, a research director at IDC in Madrid. “It’s going to be crucial over the next few years for operators that want the most valuable customers.”
Struggling to stem a decade-long decline in European wireless tariffs, operators from Telefonica SA (TEF) to TeliaSonera AB (TLSN) are trying to win new customers and hang on to existing ones with faster Internet and bundles of TV, voice and services such as gaming, movies, music and alarm systems. Vodafone Group Plc (VOD), the world’s second-biggest wireless company, has expressed interest in acquiring German cable operator Kabel Deutschland Holding AG (KD8), a transaction worth at least $9.5 billion.
Western European telecommunications companies will invest $9.3 billion in high-speed broadband this year, up 43 percent from 2012, researcher IDC estimates. By 2016, their investment will more than double, to $19 billion.
Increasing competition has dragged mobile phone bills in Europe down from an average of $51 per month in 2000 to $38 at the end of last year, according to the GSMA, a wireless industry group. European carriers haven’t done as well as their U.S. counterparts in upgrading networks and switching customers to faster, more expensive mobile packages. The average U.S. mobile subscriber pays $69 per month, the GSMA says.
With mobile revenue falling, Europe’s operators have a better chance at boosting profits in their fixed-line operations, according to Yves Gassot, general director of technology researcher Idate Digiworld.
“In a bad economy, consumers tend to look for savings in mobile, because there’s more than one line per household,” Gassot said. “Carriers want out of the mobile price war, but they’re finding it’s tough to escape.”
The increasing emphasis on fixed line operations will lead to increased consolidation in the industry as companies that only offer mobile service seek to broaden their customer base, according to Alexandre Iatrides, analyst at Oddo Securities.
“Mobile pure-players will be more and more inclined to want to go into fixed,” Iatrides said at a conference in Paris on June 12. “We’ll see more and more takeovers of cable companies and challengers in the fixed space in Europe.”
European telecommunications companies could be interesting targets for carriers such as AT&T Inc. (T), the largest U.S. phone carrier. Telefonica, Spain’s biggest phone company, rose the most in three months in Madrid trading today after newspaper El Mundo reported that AT&T made a takeover approach that was rejected by the Spanish government.
Sweden’s largest carrier, TeliaSonera, is spending billions of krona to bring speedy fiber connections to homes throughout the country. Telefonica introduced “Movistar Fusion,” a bundle of voice, broadband and pay TV in Spain in October. Since then Telefonica has added subscribers every month through March, reversing earlier losses, even as it has continued to shed mobile subscribers, according to CMT, the national telecommunications regulator.
France Telecom, the former state-owned phone monopoly, started selling its premium remote and set-top box in February. The remote, designed in-house, features an iPod-like scroll-wheel and an integrated keyboard. Flip it sideways and it becomes a game controller, and the on-demand video option is more prominent -- making more expensive extras easier to order.
The box and service cost 42.90 euros ($57) a month, 6 euros more than France Telecom’s standard set-top offering. Orange expects most subscribers to the new service will spend more every month on extras such as games and on-demand movies. A gaming subscription costs 5 to 10 euros, while renting a film 1 to 5 euros. In the first two months of sale, 300,000 people have signed up for the enhanced service.
Bundling mobile along with various fixed-line services into a single bill has helped Orange fend off Iliad SA (ILD), according to Delphine Ernotte, who heads the domestic business at France Telecom, which is taking the Orange name next month. Iliad has signed up more than 6 million subscribers -- 9 percent of the market -- in the 14 months since it got the country’s fourth mobile license and introduced calling plans that cost as little as 2 euros per month.
She also expects the new box to pay off by attracting customers to mobile or keep them from leaving for cheaper competitors.
“The number of customers who say they want to have everything under one roof is increasing,” Ernotte said. “It helps us with mobile recruitment.”
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