Market observatory: The telecommunications services market in France at the second quarter 2004 (declared operators) / November 2004

Introduction

In the second quarter 2004, the telecommunications market saw sales grow 3.1% over the second quarter 2003, with €8.8 billion in revenue. As in previous quarters, the sectors of activity at the origin of this growth were Internet, with an increase of 25.8% in revenue just for registered operators, and mobile telephony, with an increase of 14.5%.

Fixed telephony

The fixed telephony market declined 5.7% in revenue, and now represents just 36.1% of the entire market compared with 39.5% a year ago. The decline in fixed telephony can also be seen in terms of volume (-3.0% over one year) and in the number of fixed lines (-0.6%). The number of unbundled lines continues to grow quickly, close to 750 000 at the end of the second quarter. Partially unbundled lines represent 98% of all unbundled lines but the number of fully unbundled lines is growing (13 731 lines compared with 5 489 at the end of the previous quarter).

Internet

With €418 million in revenue, the Internet market rose 25.8% over one year with just registered operators. It continues move towards high speed, which in the second quarter 2004, represented 68.4% of Internet revenue against less than one-half a year ago. There were 11.1 million Internet subscriptions at the end of the quarter (scope includes Internet access providers). The number of high-speed subscriptions doubled in one year from 2.5 million to 5 million, whereas at the same time, the number of dial-up subscriptions fell from 7.3 million to 6.1 million.

Mobile

The mobile sector continues to be the primary engine of growth for the telecommunications market. Mobile telephony revenue is up 14.6% over one year and represents 41.8% of the entire market, compared with 37.5% a year ago. The number of customers reached 42.2 million at the end of the second quarter 2004, representing a penetration rate of 70%. Close to 18% of mobile telephony customers (7.5 million) are active users of mobile multimedia services.

Note - Data for one quarter may be revised in the subsequent observatory following corrections made by operators in their reports, Any discrepancies are due to rounding.

1. The telecommunications market as a whole

1.1 The end user market

In the 2^nd quarter 2004, global revenue for the telecommunications market rose to €8.84 billion for an increase of 3.1% over the 2^nd quarter 2003. With €3.685 billion, mobile telephony alone generates 41.7% of the global market and grew 14.5%. At the same time, fixed telephony shrunk 5.7% with €3.194 billion in revenue for the quarter. Growth in the Internet sector is strong, reaching 25.8% over one year.

* adjusted figures

¹ This indicator includes sales of access fees and subscriptions, calls from fixed lines excluding calls to Internet, of public phones and cards.
² Not including the added value of not declared ISPs (e.g., Wanadoo, AOL and Club Internet).
³ This item includes data transport on mobile networks, and sales of radio-paging operators until the 4th quarter 2003.
⁴ The indicator includes only sales of data transport from fixed lines, since data transport from mobile lines is included in global mobile telephony figures.
⁵ This market is not covered by the telecommunications services market per se. Since the contribution of declared operators on this market is low, this indicator gives only a partial view of actual figures.

* adjusted figures

The total volume of traffic (telephony + Internet) is down (-2.4%) over the traffic recorded in the second quarter 2003. As for telephone service, the significant increase in mobile telephony traffic volumes (+17.8% over one year) more than compensated for the decline in fixed telephony volumes (-3.4%) and overall, the volume of "voice" calls grew 4.3% over one year. The decrease in dial-up Internet volume (-18.1%) is linked to the decline in dial-up Internet subscriptions (-16.5% over one year).

1.2 The intermediate market between declared operators (telephony interconnection services)

1.2.1 The market as a whole

Revenue from interconnection services was up 4.4% in the 2^nd quarter 2004 over the 2^nd quarter 2003. The increase in Internet interconnection can be attributed to the development of sales of access in ATM mode (option 3) for the needs of the high-speed Internet market. Sales of ATM access now represent over half of the revenue of Internet interconnection. The decrease in the volume of Internet interconnection observed beginning in the 1^st quarter 2004 was the result of a reduction in the number of players on the intermediate market following concentrations among operators.

Notes :

- Interconnection includes all those services offered by declared operators under interconnection agreements. Following the mergers and integrations of certain operators early in the year, part of the intra-group flows is no more included in interconnection, which explains the decline between the 1^st and 2^nd quarters
- Interconnection sales and volumes are not based on the same perimeters, making it difficult to use these two indicators to calculate average prices (interconnection revenues include fixed income such as payments for connection links and services between operators).
- We draw the reader’s attention to the fact that a part of the interconnection figures above may be counted twice, in particular for fixed operators..

1.2.2 Incoming international traffic (6)

Note: As of the first quarter 2003, incoming roaming-in is no longer included in incoming international traffic. Beginning the first quarter 2004, roaming-in values for mobile operators are monitored in the table below.

1.2.3 Roaming in(6) (mobile operators)

Note: Roaming-in corresponds to calls made and received in France by customers of foreign mobile operators, which are carried by a French mobile operator.

(6) This market segment is a subset of the total market (cf. 1.2.1)

2 Market segments

2.1 Fixed telephony

2.1.1 Access, subscriptions and fixed lines

The revenue generated by access fees, subscriptions and additional services for fixed telephony, while stable over the past quarter, were down 1.3% over one year.

* adjusted figures

At the end of the 2^nd quarter 2004, over 5 million customers opted for operator pre-selection (850 000 additional customers over the end of the 2^nd quarter 2003). Call-by-call selection concerned 2.8 million customers at the end of the second quarter compared with 2.9 million in the previous quarter.

Note The call-by-call selection numbers take into account only active subscriptions, and pre-selection numbers include only subscriptions in service, net of cancellations.

The very strong growth in the number of unbundled lines continued in the second quarter 2004 for both partial and full unbundling. At the end of the quarter, close to 750 000 lines were unbundled, 57% more than at the end of the previous quarter. Partial unbundling represents over 98% of unbundled lines, but full unbundling almost tripled in the past quarter, reaching 13 731 lines.

2.1.2 Calls from fixed lines (excluding public payphones, cards and Internet)

Call revenue and volumes from fixed lines were down in the second quarter 2004 over the second quarter 2003 (-8.0% and -3.2%, respectively). The volume of fixed-mobile calls continues to grow, under the effect of the increase in the number of mobile phones, whereas the volume of fixed-fixed calls declined noticeably, especially for local calls (-7.3%).

* adjusted figures
** excluding Internet access calls. The breakdown between local calls and long-distance calls is an ART estimate

* adjusted figures
** excluding Internet access calls

2.1.3 Fixed phone cards and public payphones

2.2 Internet

2.2.1 Sales and volumes (declared operators)

Note: It is important to remember that sales are for services billed by declared operators directly to the end user or to access providers when these are not declared operators. Therefore, the figures do not include total financial consumption; they ignore the added value of access providers who are not declared operators.

* adjusted figures.

2.2.2 Dialup Internet (declared operators)

* adjusted figures.

Note: This publication distinguishes between two types of subscription for Internet access calls for end users:
1. (a) Users pay their ISP for a flat number of minutes for calls to Internet. In this case, the local loop operator collects Internet traffic for the ISPs (AFA definition: paying accounts on the basis of a flat monthly rate).
(b) If the local loop operator is an access provider, it enters its flat-rate revenues on the "Dialup Internet flat-rate revenues" line.
2. Clients have free access accounts (with no monthly subscription) with access providers and pay only for what they consume ("pay as you go") directly to the local loop operator (AFA definition: free access accounts or billed according to use).

2.2.3 Internet subscriptions (declared operators and non declared ISPs operators)

Since the 4^th quarter 2003, the numbers of subscriptions in the tables below are taken from the results of the specific quarterly survey conducted by ART of all Internet access providers. The results for the second quarter 2004 were published by ART on 15 October 2004. The figures covering the 4^th quarter 2003 and 1^st quarter 2004 have been revised with respect to the previous Observatory to take account of new data collected from certain operators in this survey.

(*) Source : AFA data (1) up to 3^rd quarter 2003, ART’s Internet Observatory from the 4^th quarter 2003.
(**) Source : ART’s Market Observatory up to the 3^rd quarter 2003, ART’s Internet Observatory from the 4^th quarter 2003.

The number of Internet subscriptions reached 11.1 million at the end of the quarter. The decline in the number of dial-up subscriptions continues with the loss of 423 000 subscriptions in the second quarter. Conversely, 528 000 new subscriptions were recorded in the second quarter for high speed (or 11.8% in quarterly growth), which reached the 5 million subscription mark. With over 91% of high-speed Internet subscriptions, DSL technologies are largely predominate.

Note: For high-speed Internet access broken down by access technology, a correct interpretation of the figures requires that the differing coverage of the territory by the telephone and cable networks be taken into account. Thus, Aform estimates the number of cable connections suitable for Internet to be 6.3 million, compared to technical growth potential for xDSL of over 25 million lines.

1) AFA: Association des Fournisseurs d’Accès et de Services Internet (http://www.afa-france.com/). According to the AFA definition, the following are included: free access accounts or accounts billed based on use which have had at least one connection in the past 40 days, and all paying flat-rate monthly accounts (may include consumer and professional telephone flat-rate packages). AFA collects data from the following operators: AOL France, 9 Online, Aricia, Cario, Club Internet, Free (dial-up only), Inter PC, NC, Numéricâble, Noos, Tiscali France, UPC France and Wanadoo.
2) AFORM: Association Française des Opérateurs de Réseaux Multiservices (http://www.aform.org)

2.3 Mobile telephony

The growth in mobile telephony activity continues at a regular rate (+14.6% per year in revenue, and +17.8% in call volumes). It is supported almost entirely by the development of mobile-mobile calls (voice and text messages). Text messaging on mobile networks continues to grow (+25.5% over one year in volume and +20.6% in sales).

* Call volumes include calls to check voice mail. At the 1^st quarter 2004, the increase in volume is explained in part by the reclassification of certain text messaging calls and to the short numbers of mobile operators which are no longer included in "advanced services" but in "calls to mobiles on the same network". We can estimate that this reclassification concerns some 120 million minutes of 1^st quarter 2004 figures.

(7) Roaming out covers calls made in a foreign country by subscribers of French mobile operators.

Note: Beginning the 1^st quarter 2004, the Observatory no longer collects messaging operator or satellite mobile network data, as they represent only a very small volume of activity. These data are, however, available in the Mobile Observatory.

With 42.2 million customers, mobile telephony is up 7.3% over one year. The mobile telephony penetration rate reached 70% at the end of the quarter. The share of flat-rate packages continues to grow and now represents over 60% of mobile telephony customers.

Notes :
- The active numbers of multimedia users is defined as the number of customers (contract subscribers or prepaid cards users) who have used a multimedia service such as Wap, i-Mode, MMS or e-mail (SMS are not included) at least once in the past month, regardless of the support technology (CSD, GPRS, etc.)
- The number of ported mobile telephone numbers is the number of effective porting (numbers activated by the recipient operator) done during the quarter.

2.4 Other market segments

2.4.1 Advanced services

The decline in volume of advanced services offered by mobile operators observed in the 1^st quarter 2004 results from a more precise definition of what is understood by "advanced services" in the instructions given to the operators when answering the survey. This more precise definition modifies the way in which calls to voice mail and to operators’ short numbers are reported. These elements are no longer included on the "advanced services" line but on the "calls to mobiles on the same network" line. We estimate that this reclassification concerns a volume of 120 million minutes for 1^st quarter 2004 figures.

(**) This includes all amounts billed by operators to customers who call "special numbers", including sums paid by the operators to service providers.

* adjusted figures

.4.2 Leased lines and data transport (fixed line operators only)

Note : Leased line sales may include double accounts in that they cover sales from operators to other operators.These sales may represent up to 35% of total leased line sales. Licensed operators represent only a part of the total data transport market (about one-quarter in 2002).

2.4.3 Other telephony-related services

Directory services

Until the 4^th quarter 2003, the series of "directory services, directories and advertising" revenues for fixed operators covered in part some call centre activities—which they should not have. The rectification of the scope done in the 1^st quarter 2004 halves the estimated revenue for this item for fixed operators.

Terminals and equipment

Note: As in previous editions, revenue from packs and terminals includes commissions to distributors

2.4.4 Hosting and call centre management

2.5 Indicators per users

The average monthly invoice per fixed subscription has been falling regularly for several years, reaching €30.30 in mid 2004. The average invoice per mobile telephony customer is growing regularly and is now approaching the average invoice of fixed telephony.

Notes :

Average number of clients of quarter N : [(total number of clients at the end of quarter N + total number of clients at the end of quarter N-1) / 2]

(1) This indicator is calculated by dividing the revenues of fixed telephony access and calls of the quarter N by an estimate of the average number of clients of quarter N.

(1’) This indicator is calculated by dividing the mobile telephony sales of quarter N by an estimate of the average number of clients of quarter N. This indicator, which does not include interconnection revenues, nor those from advanced services, is different from the traditional average revenue per user indicator (ARPU).

(2) This indicator is calculated by dividing the traffic volume of quarter N by an estimate of the average number of clients of quarter N

(3) This indicator is calculated by dividing the number of SMS of trimestre of quarter N by an estimate of the average number of users.