France Telecom Adds 354K IPTV Subscribers in 1Q09

France Telecom added 354,000 IPTV subscribers across all of its operations leaving it with a total of 2.463 million at the end of the quarter. In France it added 257,000 IPTV subscribers, leaving it with a total of 2.166 million. Its Pay TV subscriptions in France grew by 240,000 in France ending the quarter with 1.138 million.

France Telecom added 12,000 subscribers in Spain, giving it a total of 99,000. It added 85,000 in Poland ending the quarter with 198,000 subscribers.

France Telecom is continuing to do well. Its operation in Spain has even started to increase again.

Alice Brings Free up to 3.3M IPTV-Capable Subscribers

Free released an analysis of its 2008 results that stated that it has 423,868 unbundled subscribers as part of the business that it acquired from Alice, France. All of these subscribers can get free IPTV channels as part of their broadband service, assuming that they have an appropriate set-top box. Adding these Alice unbundled subscribers to Free's 2.900,000 unbundled subscribers give the company a total of 3,323,868 unbundled subscribers.

All of the Free unbundled subscribers have a set-top box that can receive its IPTV service. Free recently made a similar set-top box available to its Alice subscribers.

It is always interesting counting IPTV subscribers for Free. I think it is fair to count all of Free's 2.9M unbundled subscribers. How to handle the Alice unbundled subscribers is less clear. Today, I would split the difference. In another couple of years, I would count all of them.

Free Up to 2.9 IPTV Capable Subscrbers

Free in France now had 2.9 million unbundled subscribers at the end of 2008, nearly all of who are capable of receiving IPTV programming on their Freebox gateway/set-top box. This is an increase of 534,000 from the end of 2007.

The company did not report on IPTV viewing. I believe that there are about another 150,000 IPTV subscribers that are part of its Alice France Telecom Italia acquisition. In my mind Free has more IPTV viewers than any other provider globally.

IPTV Penetration in France Reaches 35%

The French telecom regulator ARCEP has posted a report (in French) that the penetration of IPTV services has reached 34.6% of the ADSL lines in the country. It stated that there were 5.643 million IPTV subscribers and 16.299 million ADSL subscribers at the end of the third quarter 2008.

The penetration of IPTV in France is one of the highest. Without rigorously checking, I think it is number two after Hong Kong.

Free at 4.1M Broadband Subscribers

Free in France ended 3Q08 with 4.125 million ADSL subscriber with 3.275 million under the Free brand and 850 thousand under the Alice brand. The number of Free broadband subscribers increased by 134,000 during the quarter.

Free did not give enough information to unravel the number of IPTV subscribers. Based on history, the number of IPTV subscribers appears to be more than 2.7 million.

France Telecom Adds 211K IPTV Subscribers

France Telecom added 211,000 IPTV subscribers across all of its operations in Europe giving it a total of 1.748 million at the end of the quarter. Its increases by operation are:

• Orange in France added 144,000 IPTV and satellite subscribers giving it a total of 1.533 million.
• France Telecom added 3,000 IPTV subscribers in Poland, giving it a total of 57,000.
• The company lost 6,000 subscribers in Spain, giving it a total of 86,000.

France added 70,000 subscribers to the satellite service that it introduced in July 2008 in addition to the numbers above.

In France, the company passed and additional 153,648 subscribers with its fiber network and added 2,689 subscribers in 3Q08. This gave the company 498,161 homes passed and 16,975 subscribers at the end of the quarter.

France Telecom is continuing to add subscribers at a steady rate in France. The rate of growth is declining in Poland and France Telecom lost customers in Spain during the quarter.

France Establishes Fiber Rules

ARCEP, the French electronic communication regulatory authority, has defined the main points necessary to guarantee an extensive, open and competitive fiber rollout:

• the deployment of additional fibers at the request of another operator and financed by the latter;
• the location of the shared access point on public land;
• the presence of a single operator for a building, providing all services from the shared access point to subscribers' plugs.

The competitive broadband carrier, Free, supports this approach and is calling for all operators come together and formalise an agreement to bring optic fiber to French households as quickly as possible.

France is leading the way in Europe to define a new regulatory regime for fiber that includes each operator laying its own fiber using shared ducts. It will be interesting to see if this approach spreads to Asia or North America.

France Telecom in WDM PON Trial

Light Reading published an article describing a presentation by France Telecom at ECOC about its participation in the Sardana WDM PON trial. The Sardana group is currently testing WDM PON technology in Tellabs facilities in Espoo, Finland, and plans to conduct a trial in the town of Lannion in France in 2010.

France Telecom is concerned that new services will exceed the capapcity of the GPON technology that it is currently deploying. It plans to offer 3D TV services to mobile users by the end of 2008 and to flat screen TV users by 2011. France Telecom expects that 3D TV to a flat screen TVs will require between 50 Mbps and 90 Mbps.

WDM PON, 10G PON, and Hybrid PON will provide important new capabilities to fiber access networks and cause many more carriers to adopt FTTH strategies. The comments about 3D TV are interesting. I saw an NHK 3D HD demo at NAB, and it was quite compelling.

Free's Has 2.9 million VOD Views in 1H08

Free released detailed information on its 1H08 results. There was no change to the information in my previous post. It did announce that it had 2.883 million video on demand and subscription video on demand views during the half compared to 1.874 million in the same period in 2007.

There were a few additional facts of interest:

• Its ARPU remained flat at 36.3 euros per month during the half.
• The percentage of its customers using Free as their only telecom provider increased to 71 percent at the end of June 2008 from 64 percent at the end of 2007.

Free's analysis is that Free, Alice, and France Telecom increased their broadband market share in 1H08 while Neuf Cegetel's share reduced. Free's broadband market share after its acquisition of Alice will be 25.5 percent. France Telecom had 49.6 percent and Neuf Cegetel had 23.8 percent.

Free is one of the most interesting broadband and IPTV companies around. It is worth taking a look at its presentation and report for the half.

Free Acquires Alice France

Iliad, the parent of the French broadband provider Free, has completed its acquisition of Alice France for 775 million euros. This price reflects:

• A portfolio of about 850 thousand active subscribers
• Loss carry forwards which will generate a tax savings of 350 million euros for Iliad
• Cash and equivalents of 15 million euros

Free stated that this acquisition would return it to the position of the leading competitive broadband provider in France with about 4 million subscribers and a 25.5 percent market share.

This acquisition puts Free ahead of Neuf Cegetel, which achieved the leading position through a series of acquisitions. Free has set the standard offering for broadband in France with a complete triple play offering of 29.99 euros per month.

Frees next challenge is how to enter the mobile market. Both France Telecom's Orange and Neuf Cegetel's parent company SFR are major mobile operators in France.

Free Adds 93K IPTV Subscribers in 2Q08 (Corrected)

Free, the competitive carrier in France, added 93 thousand new broadband subscribers in 2Q08, giving it 3.134 million at the end of 2Q08. It had 2.614 millionunbundled subscribers at the end of the quarter. Its penetration of unbundled subscribers increased to 83.4 percent at the end of 2Q08 compared to 81.5 percent at the end of 2007.

During the second quarter Free added the following to its service:

• 802.11n support to its Feebox HD set-top box
• Pre-release of Canal+'s catch up TV service
• M6 HD and France 2 HD
• Promotion that provided a one year subscription to the Canal+ Le Bouquet premium package for 1 euro per month

Free has closed its debt financing syndication that will enable it to acquire Telecom Italia's Alice France broadband operation. This acquisition should increase the number of its IPTV subscribers by another 80 thousand.

I estimated that virtually all of Free's unbundled subscribers are capable of receiving its IPTV service. This gives it a total of 2.6 million IPTV capable subscribers.

I found that I confunsed end of 2007 figures with 1Q08 figures in the original post.

France Telecom adds 107K IPTV Subscribers in 2Q08

France Telecom added 107 thousand IPTV subscribers in France, giving it a total of 1.389 million IPTV subscribers at the end of 2Q08. Its IPTV service is now available to 98 percent of the households in France.

It added 5 thousand IPTV subscribers in Poland, giving it a total of 54 thousand at the end of 2Q08. It added 17 thousand IPTV subscribers in other European countries, giving it a total of 92 thousand. Across all of its European operations, including France, it added 128 thousand IPTV subscribers ending 2Q08 with 1.535 million.

France Telecom continues with a very strong IPTV offering, especially in France. It should experience continuing growth at a similar rate.

Free to Acqure Alice France

Variety has reported that Free in France will acquire Telecom Italia's Alice broadband provider. It has arranged a loan for $1.6 billion for this deal. Alice new has 850 thousand broadband subscribers. This will be a merger of the number three and four broadband providers in France and will put the combination into the number two position. France Telecom is number one and Neuf Cegetel will be pushed from number two to number three.

This is a good move for Free in response to the series of mergers that Neuf put together over the last few years that added Cegetel and Deutesche Telekom's Club Internet.

Free Negotiating for Alice France

Free, the competitive carrier in France, is negotiating to buy Telecom Italia's Alice broadband service in France for about 800 million euros. Free stated that it expects to complete this transaction by the end of 3Q08 subject to consultation with the employee representatives and other necessary approvals.

Free also stated that this transaction would move it back into the position of the leading competitive broadband carrier in France. It lost that position last year when Neuf Cegetel acquired Deutsche Telekom's Club Internet broadband service in France.

Free makes it sound like a done deal. It appears to be a good move by Free as long as the subscriber turnover is low during the transition.

Free Adds 120K IPTV Subscribers

Free in France announced that it added 137 broadband subscribers in 1Q08 giving it a total of 3.014 million broadband subscribers at the end of the quarter. Its base service costs 29.99 euros per month. Its ARPU during the quarter was 36.20 euros per month.

Free enhanced its IPTV service in several ways during 1Q08:

• It introduced a subscription video on demand service that includes HD content for 9.99 euros per month.
• It introduced power line communications as a standard feature for its Freebox HD set-top box/home gateway.
• It introduced the ability for its subscribers to create websites that can be viewed on the TV
• A promotion for the Canalsat premium package at 10 euros per month for the first year rather than the standard price of 20.90 euros per month

Free did not announce its number of unbundled subscribers at the end of 1Q08, which translate directly to IPTV capable subscribers. I estimate based on its broadband numbers that it added about 120 thousand IPTV capable subscribers giving it a total of 2.4 million.

Deutsche Telekom has 154K IPTV Subscribers

Deutsche Telekom announced that it had 154 thousand subscribers at the end of 1Q08. It also announced that it had dropped the price of its starter package by 17 percent in March 2008.

Deutsche Telekom seems to be struggling with IPTV. It previously said that it had 150 thousand signed up at the end of 2007. Apparently, it did little more than install the unfulfilled orders during the first quarter.

I think that Deutsche Telekom must bundle a basic set of IPTV channels into its basic broadband service. This will be straightforward for ADSL-2+ customers but more tricky for VDSL users. It could use ADSL-2+ for the basic offering and VDSL for premium customers.

This approach has worked very well in France. Telia Sonera's IPTV service really took off only after it included IPTV channels in its basic offering. PCCW in Hong Kong has shown how this strategy can significantly increase ARPUs.

France Telecom at 1.4M IPTV Subscribers

France Telecom ended 1Q08 with 1.407 million IPTV subscribers across all of its European operations, an increase of 164 thousand in the quarter. These numbers break down as follows:

• 1.282 million IPTV subscribers in France with an increase of 133 thousand in 1Q08.
• 49 thousand IPTV subscribers in Poland with an increase of 9 thousand in 1Q08.
• 75 thousand IPTV subscribers in the rest of Europe with an increase of 21 thousand in 1Q08.

France Telecom also stated that it had 10,096 FTTH subscribers at the end of 1Q08 and that its service passed 187,322 homes.

France Telecom continues to make good progress with its IPTV service and is at or near the top of the list of IPTV service providers globally. I believe that France Telecom offers IPTV service in Spain, the Netherlands, and in Slovakia as well as in France and Poland. It plans to introduce IPTV service in the UK in 2008.

France Telecom to offer 3 Screen TV

France Telecom will begin offering a premium TV service to its Orange broadband TV, mobile, and PC users in the fourth quarter of 2008. This premium service will provide six channels of movies and TV series with all content to be available on all three screens on demand. It will also provide the ability to download films and programs to portable devices including mobile phones.

Orange will provide access to new films, series and catalogues from Warner Bros.
International Television and HBO, as well as exclusive access to all the new movies from Fidélité
Films, and a large selection of films from the Gaumont catalog.

Orange cinéma séries will be offered as an option on Orange TV, available on broadband Internet or by satellite. Orange broadband TV coverage will be supplemented by satellite access
following a deal signed with GlobeCast, an Orange subsidiary, and Eutelsat, to start. The service will also be available for PC and mobile viewing.

France Telecom's Orange has been a leader in offering 3 screen content. This is the first 3 screen offering that I have seen that goes beyond a novelty or special event offering.

Free at 2.3 Million IPTV Capable Subscribers

In its 2007 earnings presentation Free stated that 2.3 million of its 2.9 million broadband subscribers were capable of receiving pay TV services. This is an increase from 1.7 million at the end of 2006. (This is the best estimate that I can find of the number of its subscribers that are capable of receiving IPTV services.)

Free also stated that 50.4 percent of its subscribers have a Freebox HD, which is capable of receiving HD content. It also stated that 80 percent of its subscribers are accessing Pay TV services. (It is not clear what this is 80 percent of. I will try to find out.)

Free also had 1.3 video on demand purchase and subscriptions in 4Q07, which is up from 768 thousand in 4Q06.

I have believed for a long time that Free is the leading IPTV service provider globally for a long time. The way it offers its service and presents its numbers makes this a bit murky. It is not clear how many of its subscribes actually watch TV using its service. However, it is so far ahead of any other IPTV service provider that these issues seem like quibbles.

Free's FTTH Plans in France

Free has given an update on its FTTH plans. It stated that there are three rationales for FTTH:

• Improved consumer experience based on higher data speeds, better HD support and improved ability to support multiple TVs, and the high satisfaction level of Free's existing FTTH subscribers.
• Technology improvements that provide higher quality and higher satisfaction with the service.
• Spending on CapEx for deploying fiber rather than OpEx unbundled loop rentals to France Telecom, lower churn and increased ARPU, and future proofing the network.

Free pointed out that it has spend 1.06 billion euros of CapEx on unbundling that includes equipping 1,500 COs with DSLAMs and creating a 33 thousand km back haul network in order to support 2.3 million unbundled subscribers.

The company plans to spend 1 billion euros between now and 2012 to pass 4 million homes with fiber services by 2012. This will significantly reduce its dependence on France Telecom's network.

Free is also hoping for favorable regulatory rulings in France that will provide access to France Telecom's ducts along with a new law in 2008 that will regulate vertical deployment and building access.

Free expects to pass 70 percent of the homes in Paris by the end of 2009 using point-to-point active Ethernet technology. It also expects to pass 300 thousand additional homes in the rest of France including rollouts in Montpelier, Valenciennes, and the Paris suburbs.

Free has an aggressive FTTH plan in France and seems to be leading the market at this time. I believe that this investment will pay great dividends for the company. It is quite interesting to see that its FTTH investment is quite in line with its ADSL investment.