Market observatory: The telecommunications services market in France

Introduction

At the third quarter 2004, the telecommunications market represented €9.3 billion in income, with 5.4% growth over the third quarter 2003.

Fixed telephony

Income from fixed telephony was down 5.4% over the third quarter 2003. The number of fixed lines is slowly declining and now numbers some 33.7 million. Unbundling is growing strongly, with 1 million unbundled lines at the end of the third quarter compared with 141 000 a year earlier. Close to 8 million fixed telephony subscribers use the services of an operator other than the incumbent.

Internet

Registered operators generated €561 million in income on the Internet market. The growth observed on this market (72% more than a year ago) is due in part to the integration and inclusion of Internet access providers (IAP) in the results of registered operators. When estimated at a constant perimeter with previous quarters, growth in income generated by Internet remains high (close to 40% according to the Market Observatory estimate). The number of high-speed accesses (registered and non-registered operators) reached 5.5 million at the end of the quarter, representing close to half of all Internet accesses.

Mobile

Mobile telephony generates the highest sales (€3.8 billion, a 10.2% increase for the period). The volume of traffic originating with mobile phones is very similar to that of fixed phones. Voice represents over 90% of the income from mobile telephony but data transport and personal messaging is rising (+22.5% over the third quarter 2003). The number of customers of mobile operators also continues to grow and reached 42.9 million at the end of the third quarter, representing a 71% penetration rate. Close to 20% of customers (8 million) use the mobile multimedia services proposed by operators.

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.

Market observatory: The telecommunications services market in France1 The telecommunications market as a whole

1.1 The end user market

At the third quarter 2004, the telecommunications market had grown 5.4% over the third quarter 2003, with global income of €9.334 billion. The development of Internet, and high-speed in particular, is the most dynamic component of this growth. The strong increase in the third quarter 2004 over the third quarter 2003 (+72.1%) is due in part to an extension of the perimeter, following the integration of a previously unregistered IAP. Still, growth in income estimated on a constant perimeter, would still be very strong (about 40% according to the Market Observatory estimate). Mobile telephony continues to be the top contributor to the market with €3.786 billion in income. Fixed telephony was down 5.4% with €3.146 billion.

* 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., 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 global volume of telephone traffic (fixed and mobile telephony) is up 7.2% over the third quarter 2003. The strong growth in mobile telephony volumes more than offsets the decline in fixed telephony volumes. The volume of Internet traffic (dial-up access) shrank 22.6% because of the equivalent decline in the number of dial-up accesses.

Market observatory: The telecommunications services market in France1.2 The intermediate market between declared operators (telephony interconnection services)

Market observatory: The telecommunications services market in France1.2.1 The market as a whole

The drop in income and volume for Internet interconnection services at the third quarter 2004 is due in part to a reduction in the number of players present on the market. Following regroupings, buyouts and mergers, some of the interconnection services have become internal flows and are no longer included in the intermediate market results.

Notes :- 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). - 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 two quarters.- 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.

Market observatory: The telecommunications services market in France1.2.3 Roaming in (mobile operators) 6

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.

Market observatory: The telecommunications services market in France2 Market segments

Market observatory: The telecommunications services market in France2.1 Fixed telephony

Market observatory: The telecommunications services market in France2.1.1 Access, subscriptions and fixed lines

Income from fixed telephony access fees, subscriptions and additional services are down 1.2% over the third quarter 2003. The number of fixed lines continues to decline at an annual rate of -0.4%.

The number of fixed lines remains stable, the number of telephone accesses via cable networks grew 12.4% in one year.

The number of lines using automatic carrier pre-selection is up 19.1% over the third quarter 2003, while call-by-call selection tends to decline. If we consider that the number of people using both types of carrier selection is negligible, we estimate that 7.8 million lines use the services of operators other than the incumbent.

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
* Adjusted figures.

The number of unbundled lines topped the one million mark at the end of the third quarter 2004. A further 260 000 new lines were unbundled in the third quarter 2004. The total number of unbundled lines increased strongly in the third quarter, almost quadrupling over the previous quarter (53 516 lines compared with 13 731).

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

The volume of calls to mobile phones is up 7.5% over the third quarter 2003. This increase is assisted by both the increase in the number of mobile phones and the decrease in the cost of call termination on mobile. Passed on to prices, these decreases explain the significant declines in sales generated by fixed-mobile calls (-11.6%). The volume of national calls declined 1

** 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

While all indicators for public telephones show a regular decline on this market segment, the market for telephone cards is coming back, with 22.8% growth in volume in one ye

Market observatory: The telecommunications services market in France2.2 Internet

Market observatory: The telecommunications services market in France2.2.1 Sales and volumes (declared operators)

The major increase in Internet income at the third quarter 2004 is due in part to the extension of the perimeter of the survey following the inclusion of a previously unregistered IAP. The Market Observatory estimates that this modification to the perimeter explains about €110 million in additional sales for the total Internet activity at the third quarter 2004.

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)

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).

* adjusted figures

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

Since the fourth quarter 2003, the number of subscriptions shown is taken from the result of ART’s specific quarterly survey of IAPs. ART published the results of this survey for the third quarter 2004 on 15 December 2004. The figures for previous quarters have been updated since the previous issue in order to take into account new information received on

(1) Source : AFA data (1) up to 3^rd quarter 2003, ART’s Internet Observatory from the 4^th quarter 2003. Data of quarters 1, 2 and 3 have been adjusted since the last publication.

(2) Source : ART’s Market Observatory up to the 3^rd quarter 2003, ART’s Internet Observatory from the 4^th quarter 2003. Data of quarters 1, 2 and 3 have been adjusted since the last publication. ) AFORM: Association Française des Opérateurs de Réseaux Multiservices (http://www.aform.org)

The number of high-speed Internet accesses reached 5.5 million and now represents half of all Internet accesses. ADSL takes the lion’s share with 92% of all accesses, ahead of cable (8% of all accesses) and other technologies (wireless local loop, fibre optics, satellite).

Note: In order to correctly interpret the figures for high-speed Internet access by access technology, one must take into account the differences in geographic coverage by telephone and cable networks. Aform estimates the number of cable connections suitable for Internet at 6.3 million while xDSL has a technical potential of over 25 million lines.

2.3 Mobile telephony

The entire mobile telephony market grew during the third quarter 2003. This growth concerns both voice (+9.2% in income) and data transport on mobile networks (+22.5% of income). Personal messaging (SMS) represents over 80% of the data transport income. Over the same period, telephone traffic volumes rose (+19.1% of the total), especially mobile-mobile call volumes.

* adjusted figures
** 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.

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.

The number of mobile telephones reached 42.9 million at the end of the third quarter 2004, for a 71% penetration rate. The share of pre-paid cards continues to decrease to the benefit of monthly packages, which were the choice of 61% of mobile telephony customers at the end of the third quarter.

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, UMTS…) 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 the volume of mobile operators’ advanced services observed starting in the first quarter 2004 is the result of a more precise definition of what is meant by "advanced services" in the instructions to operators for the survey. In particular, this precision modifies the way in which calls to voice mail and mobile operators’ short numbers are reported. Part of these calls has been moved from "advanced services" to the "calls to mobiles on the same network" line. We estimate that this reclassification concerns a volume if 120 million minutes for first qu

* adjusted figures

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

2.4.2 Leased lines and data transport (fixed line operators only)

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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 fourth quarter 2003, the "directory assistance, directory and advertising" income of fixed operators partially covered certain call centre activities which should not have appeared there. We corrected the perimeter in the first quarter of 2004, and another adjustment was made in the third quarter. The Observatory will try to correct these results in future issues.

Terminals and equipment

* adjusted figures

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

2.4.4 Hosting and call centre management

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Market observatory: The telecommunications services market in France2.5 Indicators per users

The average monthly invoice of mobile telephony customers reached €29.70 at the third quarter, equivalent to that of fixed subscribers. The volume of average monthly traffic per customer remains significantly higher from fixed phones (3 hr. 58 min.), but is stagnating, whereas the average monthly volume per customer from mobile phones is increasing on a regular basis (2 hr. 26 min.).

* adjusted figures