Telcos & Digital Services Strategies


Vincent Bonneau
TV Head of IDATE’s Innovation Business Unit, IDATE


Key IoT and OTT markets are expected to represent close to 245 billion EUR in 2014 and could reach 440 billion EUR in 2018.

 Telcos are being challenged on their traditional markets, with just 2.5% of CAGR for the upcoming years. Competitive pressure is coming from OTT players but also from within the telecom industry itself, with strong price pressure on connectivity products. At the same time, the development of OTT and, to a lesser extent, of IoT, itself often seen as a major threat for telcos, is increasingly perceived as an opportunity.

Within IoT and OTT markets, a few key markets are driving growth. The biggest markets are by far cloud and advertising (respectively 64 and 93 billion EUR in 2014), with more than 15% of CAGR in the next four years for both markets, thanks to RTB, SaaS and IaaS solutions. Video is the smallest digital market with 18 billion EUR but it is also the fastest growing, thanks to advertising-based formats and SVOD. Financial services are already well developed thanks to carrier billing and e-commerce, while NFC payments remain very marginal. Finally, hopes remain high around cellular M2M markets and the numerous associated markets (notably smart metering, connected health and smart cities), but the overall revenue growth remains moderate despite a huge expansion in volume.

In total, key IoT and OTT markets are expected to represent close to 245 billion EUR in 2014 and could reach 440 billion EUR in 2018, close to one third of telecom markets. Telcos can potentially benefit from a rich number of opportunities around these new markets. They can position themselves as service providers, competing head to head with OTT providers. There are countless other opportunities as technology enablers providing some of the building blocks.

Key digital markets 2014-2018, by sector




Cellular M2M








Financial (intermediation only)




Video (excluding CDN)












Other digital content (intermediation only)




Source : IDATE, La mondialisation de l’industrie audiovisuelle, Avril 2015

Find out more on telco initiatives in digital services and the opportunities levered thereby

 in our dedicated market report

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WiFi-First: the new market disrupter


Carole Manero
Senior Consultant

“Wifi is a cost-effective solution. Additionally, WiFi-first services benefit from a wide-scale coverage indoors where cellular coverage is not always satisfactory.
For many MNOs, Wifi was perceived as disruptive. Logically, pure players embraced the Wifi market, launching hotspots and Internet access.

A considerable number of Wifi hotspots have been deployed around the world by pure Wifi players. This is set to soar dramatically, both in commercial venues and in homes. According to a 2014 iPass study, France is leading the pack with more than 13 million hotspots deployed, whilst the USA registered almost 10 million hotspots and the UK stands at almost six million hotspots. Growth is expected to be driven by more hotspots in homes, also known as ‘homespots’.”

WiFi Players’ Strategies

Wifi is a cost-effective solution, because it enables the reduction of the amount of mobile data consumed and consequently lower service costs.

Today, several distinct types of Wifi players can be identified:

Pure Wifi players appeared a few years ago. While Wifi could not provide true mobility, it was quite cheap and at the time where 3G technologies were not mature enough, throughputs offered were relatively better. Wifi is often used to offload in-excess data traffic by MNOs. Not surprisingly, several initiatives have emerged toward facilitating smarter and more efficient offload. They continue to develop their access point bases and implement agreements with MNOs. They specialise in facilitating domestic and international roaming between hotspot operators.

Wifi roaming has been a major focus since 2013. There is a huge demand from travellers for Wifi, to save money. But data roaming is still in its infancy. Cablecos, fixed and integrated players have all deployed Wifi hotspots and homespots. The rationale is to be able to monetise their Wifi network to non-subscribers and roamers.

The first WiFi-first players appeared in 2011 in the USA. Their rationale is to disrupt telecom markets with low-cost offers based on reduced up-front investments (no spectrum fees; unlicensed spectrum).

Cellular players or mobile network operators (MNOs) and integrated players have invested for years in Wifi, especially in Wifi data offloading to cope with mobile data surge. For many MNOs, Wifi was perceived as disruptive, as it provided some mobility or nomadism to the user without having to rely on their data plan.
OTTs are also considering Wifi.

Cable operators seem to gain the most from the WiFi-first concept. Mobile is increasingly a part of their proposition.
Wifi First
Source: IDATE in WiFi-first, June 2015


Find out more about changes in WiFi technologies, its resulting challenges, the WiFi market as a whole and players involved in our dedicated market report


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Audiovisual Industry Going Global: what options for European service publishers


Alexandre Jolin
TV expert at IDATE

The audiovisual market has always been a traditionally multinational industry. Within the industry, content production, publishing and distribution activities have highly varying levels of internationalisation. There has been a marked escalation of transnational mergers over the recent period, indicating a new phase in globalisation of the industry.

There is now pressure coming from two main angles: producers are faced with constantly increasing production costs, and distributors are faced with continually high CAPEX levels and new competition from OTT players. European service publishers have to reinvent their strategies in this new globalised context, which is dominated by North American players.

European video service publishers are under pressure

The audiovisual market has always been a traditionally multinational industry. Within the industry, content production, publishing and distribution activities have highly varying levels of internationalisation. However, there has been a marked escalation of transnational mergers over the recent period, indicating a new phase in globalisation of the industry.

There is now pressure coming from two main angles: producers are faced with constantly increasing production costs, and distributors are faced with continually high CAPEX levels and new competition from OTT players. European service publishers have to reinvent their strategies in this new globalised context, which is dominated by North American players.

Threats and opportunities from globalisation for the main player categories in the value chain
Source: IDATE, Audiovisual industry going global, April 2015

Americanisation of the European audiovisual sector


Several markers point to a trend of increased Americanisation of the European audiovisual industry:

Increased number of US acquisitions of European players:

- in the content production segment, including the acquisition of Endemol by the private equity firm Apollo Global Management in 2012 and the takeover of All3Media by Liberty Global and Discovery Communications
- in the TV channel broadcaster segment, including Liberty Global's purchase of a 6.4% stake in ITV and the acquisition of Channel 5 by the Viacom Group in 2014
- in the distribution segment, including Liberty Global's acquisition of Virgin Media and Ziggo, and the takeovers of Ono and Kabel Deutschland by Vodafone

The emergence of oligopolistic situations in new market segments:

- iTunes dominates the global transactional VOD market
- Amazon Prime Instant Video and Netflix in particular dominate the global and European SVOD markets

Consumption focused around North American programming

Focused strategies vs. market conquering strategies

Faced with globalisation of the audiovisual industry led mainly by North American players, European players are adopting two types of generic strategy:

strategies focusing on their core business and domestic market, characterised by:

- moderate investment in native language productions
- acquisition of North American and international fictional programming to ensure high viewing numbers during prime time
- OTT strategies based on reusing content rights already acquired as part of own brand or joint-venture services

strategies aimed at conquering markets via business diversification and international development, including:

- increased investment in original content productions that can be exploited abroad, particularly via international co-productions
- acquisition of exclusive first-run premium content
- OTT strategies based around new services that exploit broader rights catalogues than what is available via broadcast networks

Find out more about the reasons behind globalization, its models and impacts for the audiovisual industry in our dedicated market report



Future TV 2025: Internet TV & entertainment operators: disruptions ahead


Jacques Bajon
Head of Media & Digital Content Business Unit, IDATE

Linear TV is still the main source of revenues for the video industry – however, traditional players in mature markets see their business shrinking and have to adapt to an increasingly dense ecosystem, notably regarding competition from internet players. One of our estimates is that linear TV revenues will drop from EUR 368bn in 2015 to 344bn in 2025, against skyrocketing On-Demand TV revenues jumping from EUR 25bn to EUR126bn in 2025. In our disruptive scenario we assume the complete disappearing of home video up from 2022. Nonetheless, the total videomarket will grow with an annual average rate of 1.4% worldwide.

Disruptive scenario: Global TV market, 2015-2025 (billion EUR)
Future TV 2025
Source: IDATE, Future TV 2025, May 2015

In developed countries, the TV sector has been suffering from what is expected to be a lasting state of stagnation, brought on by a growing number of channels; the relative saturation of pay-TV markets, and increasing competition from the Internet for viewers and advertising money.

Keeping in line with current market trends, a snapshot of the market 10 years from now includes on-demand services having a relatively small impact on revenue (accounting for around 10% of the total market in 2025) and a global market that will continue to grow by around 3.5% a year, on average – a large percentage of which will come from emerging countries. Asia/Pacific will become the world’s biggest market, while growth in the main European markets will be weak, and possibly even negative.

But another, far more disruptive picture is also possible. One where on-demand becomes the viewing method of choice amongst consumers, and live viewing confined largely to special events. Under this alternative scenario, on-demand services account for close to 30% of the sector’s revenue in 2025.

Two phenomena are at work here:

on-demand services replace linear TV but generate less revenue per customer for an equal number of subscribers;
on-demand services undermine the revenue earned by linear services by lowering both ad rates and subscription prices.

As a result, the market grows much more slowly than under the “business as usual” scenario, and even enters into a lasting state of recession in developed countries.

In this declining market, veteran market players – i.e. channels and distributors – lose a share of their income to the leading entertainment operators. Only content producers, which earn a growing share of the revenue being generated, are not affected by market deflation.

Veteran players are thus having to contend with two big issues:

shrinking TV retail markets;
decreasing share of the margin earned on these markets.

Find out more details regarding disruptions in TV content distribution and user behavior in our dedicated market report

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From DigiWorld Future to the DigiWorld Summit


Yves Gassot
CEO, IDATE DigiWorld


For some of us here at IDATE DigiWorld, the month of June was devoted to launching the 2015 edition of our DigiWorld Yearbook in London, Paris and Brussels, in that order.

It was not without some modicum of pride that our chairman, François Barrault, was able to rally top-flight special guests for the occasion. In the photos below, you will no doubt recognise the CEOs of BT (London), of Publicis, Orange, Bouygues Telecom and BlaBlaCar (Paris), and the CEO of Proximus (Brussels). I should also like to extend my warmest thanks to the other speakers from Ericsson, Google, IBM, and Verizon, and to the many people in attendance, including a fabulous turnout by DigiWorld Institute members.


Of course, IDATE teams had their role to play at what has become the “DigiWorld Future” series of conferences. This was the inaugural year for these forward-looking events whose purpose was to deliver our snapshots of the Internet, telecoms and TV markets in 2025, and to debate the core trends for the coming decade.

For the sake of brevity, I will confine myself here to just a few words about five major trends.

The great digital shake-up

The DigiWorld is no longer restricted to the few sectors that our Institute has been tracking from the outset (IT, Internet, telecoms, medias). Over recent months, digital innovation has taken hold as vital for company heads in all sectors – insurance, health, automotive, travel, tourism, etc. – which naturally has an impact on ICT sectors as well. We discussed the “softwarisation” of telecoms to underscore the growing influence of network virtualisation, through SDN and NFV.

Acceleration of telecom industry M&A deals

It is no surprise that Europe’s ailing economy has resulted in most markets going from four to three mobile operators. Less expected everywhere and by everyone has been the acceleration in the fixed-mobile convergence trend which is expected to go a long way in shaping the future of continental markets, and now the UK as well. Also noteworthy in recent times are the more or less direct links between mergers and acquisitions on either side of the Atlantic. What remains to be seen in Europe is whether the current spate of mostly in-market deals will led to more complex cross-border deals which seem inevitable, but whose potential synergies are less overt.


The GAFA quartet, i.e. Google, Apple, Facebook and Amazon, have increased their market power in recent months by combining their first-mover assets with a strategy platform that enjoys a cyclical effect: as customer numbers grow so does ad revenue, which in turn makes it possible to attract more content and applications, which attracts more customers, and so on. But does this mean that special rules need to be devised for platforms, or should they be covered by existing telecom regulation? Whenever possible, it would make the most sense to apply existing (competition, contract, consumer, privacy, tax, etc.) laws to ensure fair and equal treatment for players along the chain. We also need to factor in innovation and, for instance, the emergence of new disrupters in vertical markets (Uber, Airbnb and the like) who are also not short on ambition, not to mention veteran heavyweights, such as automotive industry leaders that have no intention of allowing their products – to quote one of our speakers – to become a “smartphone on wheels”.

China’s new digital ambitions

When we talk of disruptions we also need to talk about the new Internet giants who grew up in China. We have seen Tencent and later Alibaba launch their IPOs on the New York exchange, and invest in a growing stable of promising start-ups in the US and Europe. So only a fool would think that China is just the place where iPhones are made.

Content is king, still

The combination of ubiquitous high-speed Internet and a proliferation of screens is fuelling two major upheavals in the TV industry. Today, it is not hard to imagine global distribution strategies that largely by-pass traditional home network operators. Access to premium content will be based more and more on the size of the programme and the ability to pay for itself. Second, viewing is becoming an increasingly individual pastime with users making more personal choices. This marks a break with mass media structures and the traditional models offered to advertisers. As a result, European broadcasters, which are even more fragmented than telcos, need help in accelerating their digital transformation.

I’ll stop there, and let you discover for yourself a more detailed look at current trends and future scenarios in DigiWorld Yearbook 2015, along with datasets and analyses of the digital economy’s main markets.

It only remains for me to say that we look forward to seeing you at the upcoming DigiWorld Summit (17 to 19 November 2015): Digital First, with a great many surprises in store.

More informations about IDATE's expertise and events :

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Interview with Steve UNGER, ‎Group Director and Board Member at Ofcom







‎Group Director and Board Member at Ofcom;
UK Regulator, London

C&S:  Is the SMP regulatory framework fit for purpose given the competition among telecom providers and between telecom operators and online service providers?
Dr UNGER: The SMP framework has served us well over the years. It is a good starting point for the Framework review that is about to start. However, there are areas where we need to build on it.
For example, we need to ensure that when analysing the market power of traditional network operators, we take into account the presence of new communications providers, delivering services such as voice and messaging over the top of the internet. This is something we can do within the current Framework, but it is also part of a broader debate about the need for a level playing field between network operators and internet-based providers. It may be that expanding the scope of the SMP analysis in the manner results in a reduction of market power, and it’s clearly important that we consider this possblity. There is a separate question about whether or not there are new bottlenecks created by internet-based providers and whether we have the right tools to deal with this .
A more difficult issue is that whilst the SMP framework is an effective means of addressing concerns arising from single firm dominance, it does not deal effectively with oligopolies. This is a problem because a key market trend for both fixed and mobile is towards a limited number of end-to-end competitors – more than one, but not many. In some circumstances this is fine, in that a limited number of competitors is sufficient to deliver a good consumer outcome, and there is no need to intervene. In other circumstances however the outcome might be poor. We need the right tools within the framework to distinguish these cases, and intervene where appropriate. At present the only tool available is the concept of joint dominance, and I don’t think this is sufficient.

What are the most important skills sets for those who need to make sense of results of big data analytics?
Statistics and machine learning are most obvious.  But in order to put analysis to work, communication skills are critically important.  To be effective, a data analyst needs to turn data into information, information into knowledge, and knowledge into action.  You can't do this without communication.

What are the biggest opportunities for business and are businesses able to make effective use of big data to improve their margins?
As in every business, it is imperative to understand your customer.  When you can draw on computer mediated transactional data, it is possible to gain a deeper understanding of the customers' needs than was previously the case.

Are there already some ideas for developing appropriate tools for dealing with oligopolies?
BEREC has recently published a report on this matter, and I think this provides a good starting point for the debate we need to have. The report distinguishes two questions: whether there is joint dominance, associated with tacit collusion, and what is the threshold to prove it; and whether we have situations where there is no tacit collusion, but uncoordinated behavior within a tight oligopoly still results in a poor outcome. The report then focusses on the second of these questions, which is the one that is not currently addressed by the European Framework
It is important to emphasise that tight oligopolies may still result in a good outcome. For example, you may have a small number of networks but we still observe effective competition, including for example the provision of wholesale access on a commercial basis. However, it is not difficult to imagine circumstances where there is more limited retail competition, either between a single incumbent telco and a cable operator, or between a small number of vertically integrated MNOs.
The BEREC report sets out a number of criteria which one might use to distinguish between ‘good’ and ‘bad’ tight oligopolies. It also draws an interesting parallel between these criteria and the SIEC test applied in merges, which serves a similar purpose. What we now need to do is consider in more detail how this thinking might be applied in practice, and what evidence would be required to do so.

Could symmetrical regulation replace or complement asymmetrical regulation in these matters?
I’m afraid I don’t even like the term ‘symmetric regulation’. It sounds benign, since it implies consistency of approach, but that is often not what it means in practice. What it means in practice is that regulation is applied to all service providers in the market, regardless of whether a particular provider has market power.
Such a blanket approach to regulation might be appropriate in circumstances where there is a market-wide market failure. For example, high barriers to switching might necessitate a market-wide intervention to improve switching processes. But where there is not a market-wide market failure, I believe very strongly in the principle that any regulatory intervention should be proportionate, and targeted at the problem you’re trying to solve
I therefore find it odd that, within the current framework we are able to address concerns arising from single firm dominance, or a rather narrowly defined joint dominance, but that where these fail our backstop position is to regulate everyone in the market. We need to find a more sensible middle ground.

Some observers have argued that symmetric regulation has already proven its value for dealing with access problems (e.g. interconnection). Can we apply this comparison to issues dealing with access networks?
I’m not sure the comparison is valid. Remedies which mandate interconnection (or other forms of interoperability) are I think usually imposed because there is a risk that network effects will result in the market tipping to a single provider. In those circumstances it may well be appropriate to impose a market-wide remedy, since the problem you’re trying to address is one that arises from the way that the market as a whole operates
To put it another way, I think we need to distinguish between those forms of network access which are designed to address market failures associated with network effects, and those forms of network access designed to address market power. The former may have to be market-wide, the latter should be targeted at the source of market power.

Steve UNGER is Ofcom's Chief Technology Officer, and is also the Group Director responsible for Ofcom's strategic approach to communications regulation. His group is responsible for critically evaluating external market and regulatory developments, and leading the process of setting Ofcom's strategic priorities. He is also responsible for several specific policy areas, including Ofcom's work on Communications Infrastructure. Steve previously worked in industry – for two technology startups, both of whom designed and operated their own communications networks, and as a consultant advising a variety of other companies on the commercial application of new wireless technologies. He has a Physics MA and a Ph.D. in Astrophysics.

The Communications & Strategies No. 98 "A review of SMP regulation : Options for the future" is now available !

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Digital First: ICT players vs. the new disrupters


The place to be in Europe, to understand upcoming disruptions and their impact on telecom, IT, Internet and media markets

From 17 to 19 November 2015, the 37th annual DigiWorld Summit will bring together 150 top-tier speakers to Montpellier to share their views with the more than 1,200 participants from over 30 countries. French Tech will also be in the spotlight during the 2nd annual DigiWorld Week and at the inaugural DigiWorld Awards.

Under the banner of “Digital First” IDATE will host debates on the core trends shaping telecom, IT, Internet and media markets, with the knowledge that digital technology is entering a new stage in its ubiquity, becoming the vehicle of a major overhaul in many sectors: energy, insurance, finance, health, automotive, travel and tourism… “But,” says IDATE CEO, Yves Gassot, “this digital verticalisation also represents a new challenge for IT, telecoms, Internet and media industry stakeholders. They may see new growth opportunities, but also challenges as innovation cycles are accelerating, as they consider the shifting outlines of their business and contend with new digital intermediaries.”

This new stage in the digital transformation is being spurred by ubiquitous wireline and wireless connectivity, the economies of scale of cloud computing, and the power of real time data processing algorithms. But it is being amplified by the rise of connected objects, and the promises of 3D printing, of artificial intelligence and the collaborative economy. A profound transformation of the economy that is already materialising in changes to production and distribution infrastructures, in the accelerated shift from product to service and the profusion of channels for interaction with end users.

• What do vertical companies (media groups and TV networks, insurance, automotive, travel, retail, etc.) want from digital industry players (telcos, OTT, IT)?

• How should digital industry players position themselves with respect to the digital transformation in vertical markets?

• How can the Web’s top destination platforms cohabitate with the vertical markets’ new digital champions?

• This year’s Guest Country: China. Can China combine the power of its recently acquired positions in Internet and telecom markets with its manufacturing ambitions?

2015 DigiWorld Summit Programme


Plenary sessions

Analysis and debates between veteran industry players and disruptive start-ups, with insights from IDATE’s finest economists and analysts:

Digital channels
A new chapter in the platform wars?

Digital Infrastructure
From ultra smart networks to predictive analytics?

Digital Product
From goods to services

Digital Regulation
OTT rules?

Digital Europe, Digital World
Closing session

Specialty forums

In-depth seminars with the industry’s top expertsConnected Things Forum

Smart City Forum

Future Networks

TV & Video Distribution Forum

Future Digital Economy Forum

Game Summit

DigiWorld Week (14 – 22 November 2015): IDATE expands on the two days of the DigiWorld Summit, and plays host to an exciting event-filled week. Delving deeper into the issues and shaking up ideas: symposiums, workshops, hackathons, exhibitions, festivals, master classes, …

DigiWorld Awards: in partnership with Business France and French Tech, IDATE will be hosting the first annual DigiWorld Awards, recognising French digital start-ups (Equipment and devices, Networks and telecoms, Internet services and application, M2M and IoT…), created abroad. Awards will be in four categories: Africa and the Middle East – The Americas – Asia – Europe

The DigiWorld Summit, is organised under the patronage of the French Ministry of the Economy, Industry and Digital Affairs, the Région Languedoc Roussillon and Montpellier Métropole, with the support of DigiWorld Institute member companies.

More informations about IDATE's expertise and events :

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Bouygues Telecom rejects the Numericable-SFR offer

To many, the deal seemed like a foregone conclusion, and we had been looking forward mostly to the negotiations that would steer it to completion (see the attached press release). It is hard to know exactly what motivated the Bouygues Board’s decision.

We ourselves had underscored the tremendous complexity of such a deal that involved the acquisition of the number three operators’ customer base and the sale of its network and a portion of its frequency holdings to the country’s number four operator, Iliad/Free. This dual negotiation was nevertheless necessary, for both financial reasons and to get a jump on the Competition authority’s expected reservations about the merger. Here, we understand that Bouygues was very reluctant to endure the uncertainties of a long period of anti-trust investigation, with no guarantee of substantial compensation should the deal fail to win approval.

To this can be added the federal government’s very strong reservations, and the difficulties in negotiating credible guarantees for the future of the company’s teams and jobs.

Lastly, without underestimating the ability of the Bouygues Telecom team, its 4G network and its frequency holdings to achieve pre-Free EBITDA (25%) by 2017, we cannot discount the possibility of further merger and acquisition deals in the French telecom market.

See the previous post

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Numericable-SFR has confirmed its bid to acquire Bouygues Telecom…

Yves Gassot

Yves Gassot
CEO, IDATE DigiWorld


It is a surprise?

No, everyone was expecting it. First, because Altice/Numericable-SFR spokespeople had underscored the appeal of such a deal and, second, because in most European countries we are seeing national market structures going from four to three mobile operators. Such is the already the case in Germany and the UK, and very likely in Italy and Spain.

If we look at the situation outside the European Union, we see that in the United States there are four national operators for as many people as there are in Europe’s five biggest markets combined.

Would this means an increase in retail market prices?

Let’s not forget that, in France and in most other countries in Europe, the sector is in a state of deflation, and has been suffering a steady decline in revenue since 2008. Another outstanding feature of the French market is particularly low prices. While this is of course a positive thing for consumers, it can also be at the expense of investment (which decreased in France in 2014) and innovation: in a healthy competitive environment, price alone must not be the sole element of distinction between vendors.

Second, predicting what the landscape will look like after this merger occurs, Free will no doubt remain very aggressive on the pricing front for mobile products as it works to close the gap with its rivals: it would represent only just over 7% of the sector’s revenue, well behind Orange (43%) and the new SFR with just under 50%. In the fixed line market, the breakdown of market share would be less dramatic (23.5% –41.5% – 35% respectively) but competition should remain quite lively.

Would this mean a decrease in investment?

Theoretically, it is possible that we will see a decrease in telcos’ combined CAPEX. But this remains theoretical if we take into account the situation of a sector that is struggling to get back on its feet, and to invest at a rate that keeps pace with the ongoing increase in superfast fixed and mobile network traffic. Remember that telcos’ spending in France was down in 2014. Here again, it is interesting to compare with the situation in the United States: over the past two years, telcos’ combined per capita spending on mobile networks in the United States was roughly double what is was in Europe’s main markets.

The goal for public authorities and consumer associations examining the deal should include an expectation that it would accelerate the pace of superfast fibre and 4G+ network coverage nationwide.

What have we seen, in terms of prices and investment, in other European countries that have experienced a similar consolidation?

In Germany, it is still too early to draw any conclusions. In the UK, in a market once populated by five operators, the merger of T-Mobile UK and Orange UK in 2009 – which were the country’s third and fourth largest operators, respectively, at the time, with a close to 20% market share each – resulted in the creation of a new leader, EE, with a 37% market share at the outset, but which fell to 32% in 2014. Calling prices in particular decreased steadily: the average price of a mobile calling minute dropped by 17% between 2009 and 2012. The company’s spending decreased in 2010 but rose again in subsequent years: T-Mobile UK and Orange invested an average 9% of their network revenue in 2008, compared to close to 10% for EE in 2014 – although it is also true that the company’s combined revenue decreased by 22% during that time.

In Austria, Hutchison’s takeover of the local Orange subsidiary, which took the market from four operators to three, had the opposite effect: putting an end to ongoing price decreases, and even resulting in a significant increase in 2013 of around 20% on the previous year. Although it should be said that prices in Austria had been very low for a long time. The consolidated entity’s capital expenditures (as part of the 3 conglomerate) dipped slightly, but relative CAPEX rose from 16.5% of the company’s revenue in 2012 to close to 20% in 2014.

What can we expect from the players if the deal goes through?

Numericable-SFR should take in around €2 billion in cash from the sale of the Bouygues Telecom network to Iliad/Free. It should also be able to enjoy economies of scale in the revenue generated from Bouygues Telecom customers, thanks to the new entity’s improved OPEX and CAPEX ratios.

Bouygues is given an exit strategy under terms that are far better than what was on the table six months ago, even if the short-term outlook for free cash flow is not guaranteed.

Iliad can look forward to putting an end to its roaming agreements with Orange, and gaining a 4G network with one of the two best rates of national coverage, without having to have built it itself. The company is also likely to gain access to new frequencies, either directly under the terms of the deal or indirectly as the result of imposed “remedies”.

As to Orange, it will suffer from the lost roaming revenue from Free, earlier than planned, but could also benefit from more stable market prices.

How are antitrust authorities, and public policy-makers in general, likely to react?

The new SFR would become the mobile market leader, earning just under 50% of the sector’s revenue, ahead of Orange with 42% and Free with >7%. This market structure is not likely to curry favour with the competition authority. As concerns the deal itself, the competition authority should view the Bouygues Telecom-Iliad aspect as a guarantee of ongoing competition, as the smallest operator would enjoy a real gain in assets. Depending on the frequency-related options that are included in the terms of the deal, France’s anti-trust authorities could impose further spectrum sales and terms in support of MVNOs.

The biggest issue for public authorities is the destabilising impact on the rules for upcoming auctions being held by market regulator, ARCEP. The original rules had been designed to maximise bidding incentives for a four-player market. Now, they will need to consider how these rules will be affected by the likelihood of a three-player market, keeping in mind that, even if it does go through, the merger is not likely to close before the auctions are held later this year.

In the fixed access market, public authorities could see the deal as a way to strengthen guarantees from operators for superfast fibre network rollouts: chiefly Numericable-SFR and Orange, which are by far the heaviest investors in new gen systems.

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DigiWorld Yearbook 2015, the great digital shake-up

IDATE, Europe’s premier digital economy think tank, uncovers major disruptions in the telecom, Internet and TV markets

Over the past 15 years, IDATE’s DigiWorld Yearbook has become a vital source of information for industry players, delivering analysis of the developments that have shaped the telecoms, Internet and media markets during the year gone by, identifying core global trends and providing snapshots of what lies ahead. The purpose and scope of the Yearbook has expanded as digital technologies have become an increasingly central component in the different sectors’ transformation: connected cars, financial services, insurance, healthcare, retail sales, the collaborative economy…

IDATE Chairman, François Barrault, is delighted to be celebrating this 15th edition, noting that, “we have entered into a new stage in the digital transformation over the past few months. Today, new intermediaries are coming to shake up the status quo, many of them from outside the industry, taking advantage of new technologies and new consumer cultural behaviour to revolutionise the value chain. Everybody knows how Uber has disrupted the taxi business, and Airbnb the hotel market. But finance, insurance, health and automotive industry leaders have all had to sit up to the risk of digital innovations shaking up their ecosystem, and forcing them to depend on external, unavoidable platforms.” This echoes the central theme of the upcoming DigiWorld Summit (17 – 19 November 2015), as IDATE’s annual conference will be held this year under the banner of: “Digital First”.

“For we here at IDATE,” says CEO, Yves Gassot, “whose business it is to wade through the latest market developments on a daily basis, the process of looking back over the year’s events only confirmed the significance of certain game changers such as mobility, the cloud, the Internet of Things, big data and social media. Some would also add 3D printing and artificial intelligence to the list.”

Scorecard for the digital economy in 2015: back on a growth path, but Europe still lagging behind

After the recovery announced in 2013, DigiWorld markets confirmed a stronger rate of growth in 2014, generating 3,700 billion euros. All segments combined, growth increased to 4.4%, which is 0.5 points more than the year before. These figures are still below those being reported for the economy as a whole: global GDP rose by 5.9% in current value in 2014, compared to 5.3% in 2013. This global recovery will become stronger still in 2015, with DigiWorld markets generating 3,900 billion euros, and climbing to 4,400 billion in 2018.
• This improvement can of course be attributed to Internet services which continue to boast more than 20% annual growth and, despite still accounting for only a fraction of the market, are helping to sustain the whole (growing from 275 billion EUR in 2014 to 475 billion in 2018);
• But also to stronger performances from a large number of more traditional segments – which are typically bundled together as core DigiWorld markets, i.e. telecom and IT equipment and services, consumer electronics, TV services, etc. Growth in these markets, i.e. excluding Internet services, rose from 2.8% in 2013 to 3.2% in 2014.
• Europe as a whole continues to lag behind increasingly vigorous North American markets, and the powerhouse that is emerging Asian markets.

2025: snapshots of 10 key trends and three outlook scenarios for Internet, telecoms and TV markets

For the first time, this year’s edition includes outlook scenarios for Internet, telecom and TV markets and players, provided by IDATE’s teams:
• Internet 2025: Will the top platforms become even more powerful?
• Telecoms 2025: Can the top telcos strike a balance between becoming commodities and competing head on with the top OTT companies?
• TV 2025: How can distributors avoid being cut out of the loop?

About the DigiWorld Yearbook

The finest market insights from IDATE experts who track the changes at work in the globe’s telecom, Internet and media industries throughout the year.
The DigiWorld Yearbook is published in English and French and available in print and PDF format.

> The 2014 edition can be downloaded for free on www.idate.org

> The 2015 edition is available for purchase. Print: €100, incl. VAT; PDF: €69, incl. VAT on www.idate.org

For more information: www.idate.org/digiworldyearbook/

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