France Telecom SA Chief Executive Officer Stephane Richard said the rollout of a faster wireless Internet network is vital to charge clients more money as the country’s biggest phone company tries to stem a decline in profitability amid competition from discounters.
Richard, who is spending 1 billion euros ($1.3 billion) over the next six to seven years to upgrade his network for faster fourth-generation services, said that while the pricing hasn’t been set, France Telecom has had success charging extra for speed.
“There will be a premium. The model with HSPA plus has made it clear that customers will pay,” he said in an interview at an industry conference in Brussels yesterday, referring to a faster version of current third-generation services based on so-called high-speed packet access technology. “We want to accelerate the 4G rollout in France in order to get ahead of the competition.”
Richard is under pressure since new market entrant Iliad SA, France’s fourth mobile carrier, gained 3.6 million mobile subscribers, or 5.4 percent of the market, in the first six months of business with its Free brand, thanks to plans starting at 2 euros a month. Revenue at Paris-based France Telecom, which generates about half its sales in its home market, declined 3.2 percent in the same period while its operating profit margin dropped 1.6 percentage points.
France Telecom rose 0.2 percent to 9.50 euros at 10:04 a.m. in Paris. The stock has lost 22 percent this year through yesterday compared with a 3.6 percent decline for the 23-company Bloomberg Europe Telecommunication Services Index.
Richard said he won’t offer Free, which has a roaming agreement for France Telecom’s 3G network, a similar deal on 4G.
“It is not currently a matter of discussion, and it will not be in the short term,” the France Telecom CEO said yesterday.
France Telecom has started deploying 4G antennas after local regulator Arcep auctioned off licences at the end of last year. France’s former phone monopoly plans to cover four cities by the end of 2012 and ten more a year later.
The company has said it will start offering French consumers 4G early next year. The technology has so far only been opened to testing as part of a pilot trial in Marseilles. Richard yesterday didn’t specify how the company will accelerate the rollout.
France Telecom’s British EE operator, a joint venture with Deutsche Telekom AG, will become the first local carrier to offer faster data services as it starts a 4G network in London, Birmingham, Cardiff and Bristol.
To cut costs, France Telecom is also working on further network-sharing agreements following a deal in Poland with Deutsche Telekom and one with Vodafone Group Plc in Spain, Richard said.
Executives of European carriers including Vodafone, the world’s second-largest wireless company, and Spain’s Telefonica SA said yesterday in Brussels that European regulators need to ease restrictions on consolidation to free up resources for investments into faster networks.
“There are hundreds of telecom operators in Europe while there are three or four in major markets like the U.S. and China,” said Jose Maria Alvarez-Pallete, who was named as Telefonica’s chief operating officer last month. “This is just unsustainable because this business is very scalable.”
Deutsche Telekom yesterday said it’s in talks with MetroPCS Communications Inc. to combine their U.S. wireless businesses, giving its T-Mobile USA unit the greater scale it needs to compete with Verizon Wireless and AT&T Inc.
Vodafone CEO Vittorio Colao said that the number of European operators competing for a shrinking revenue base has delayed a rollout of 4G technology and is forcing companies such as his to invest outside of Europe in order to expand. Vodafone in February decided to abandon an attempt to merge its Greek unit with rival Wind Hellas after facing European Union regulatory opposition. The European Commission told operator Hutchison Whampoa Ltd. last month that its plan to buy France Telecom’s Austrian unit may diminish competition.