Recently, Ovum spoke to the network and product innovation management team at French operator SFR. Our discussion focused on the increased requirement for network and service innovation in light of the shift to data and IP networks. A major theme from this discussion was that operators need to better utilize wireless technologies, and acknowledge the important supporting role of fiber.

 

Stronger and more effective links between 3G, Wi-Fi, and femtocells could reap rewards for operators in terms of better customer experience and reduced opex. Using FTTH rollouts for backhaul will also be crucial. SFR’s initiatives in this area highlight that integrated operators must take a more strategic approach to managing mobile data across their businesses.

 

SFR has evolved into an aggressive, fully-integrated operator. It has a mobile market share of approximately 30% and a DSL market share of 25%, and it is maintaining its position as the second-largest player in France behind the incumbent Orange. However, SFR faces significant competition from Free, Bouygues, and cable operator Numericable, all of which are pursuing aggressive multi-play strategies.

 

France’s fixed access market is unusual in Europe in that triple-play (voice, broadband, and TV) bundles are locked into a price of €30 per month. This bundle has become the norm for French consumers, and no operator has been willing to break the mould by offering an alternative. This places considerable pressure on mobile broadband services to deliver the pricing premiums and package differentiation required to drive revenue growth.

 

Smartphone and mobile data usage growth has been strong in France following the rapid adoption of the iPhone from 2009. In the first nine months of 2011, 70% of SFR’s mobile postpaid gross additions were smartphone users, and mobile data revenues increased by 23% year-on-year.

 

SFR plans to invest an average of €200m per year on FTTH deployments over the next ten years. If the direct retail opportunity provided by FTTH services proves to be limited, FTTH can still play a key role from a wider network and cost perspective. FTTH will eliminate the €11 per month line rental cost that SFR currently pays to Orange for every fixed broadband connection. The use of fiber to provide mobile backhaul will also fulfill an important secondary role for SFR.