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To: Eric L who wrote (1779)	12/6/2001 1:12:19 PM
From: Eric L	Read Replies (1) \| Respond to of 9255

re: EMC on GPRS and UMTS in France Pretty upbeat ... which is nice to see. >> French Operators Prepare For 'Dynamic' 2002 With GPRS On The Horizon Dan Dickinson EMC Cellular December 5, 2001 If 2001 goes down in French telecoms history as a turbulent year typified by the uncertainty generated by UMTS, then 2002 may well turn out to be the crucial turning point. The confusion over UMTS with the sale of just two out of four licences at the beginning of 2001 dominated the year. The major rethink by the government on prices and revenue tax made the outlook for 2002 a lot more positive. The progress towards sorting out the UMTS issue as well as the forthcoming launch of GPRS by the three operators and increased GSM coverage will put the industry in a far more positive frame of mind for 2002. Umts The rescheduling in October 2001 of licence payments for the two licence holders, Orange and Cegetel's SFR, was an important step in boosting confidence in UMTS, but it was the announcement in December 2001 that licence holders would have to pay just a 1% tax of future 3G revenues (the lowest estimate) which will do most to bring operators interested in buying the two remaining licences back to the negotiating table (). The French regulator, ART said it would announce the terms for the sale of the second round of licences by 31 December 2001. Bouygues Telecom said it will announce its intentions early in 2002. Other previously interested groups include Suez the French utilities group that had set up a joint venture with Telefonica as well as Deutsche Telekom and Hutchison Whampoa. Bouygues Telecom is expected to bid, but there has been little evidence that another operator will step forward. Meanwhile, in the first half of 2002, Orange will continue to carry out UMTS voice and data tests as well as buying up base station sites. The operator in December 2001 had no base stations but said it would buy one thousand in 2002. Those base stations will be situated in ten conurbations giving 30% population coverage at launch. SFR has said it is due to carry out technical tests with commercial tests following in Paris and Lille later in the year. The operator said it will continue its network roll-out in 2002 to 12 city conurbations and will launch UMTS services 'during' 2003. GPRS France is unique in western Europe in that none of the incumbent GSM operators have launched commercial GPRS services, despite plans to do so. Orange has committed to a Q1 2002 commercial launch. SFR said in December 2001 it was testing its GPRS services with 2,000-3,000 professionals using Motorola handsets and was planning to launch 'next year'. Bouygues Telecom said it would launch a service aimed at the corporate sector at the beginning of January 2002, but that full commercialisation would not happen until summer 2002. 'Our GPRS network was ready in summer 2001 but will have yet to launch GPRS services because, we want to ensure there are sufficient high quality handsets.' GSM Coverage In November 2001 the French Industry Minister Christian Pierret said that 100% GSM coverage of French territory will be completed within two years instead of the three originally planned. The speeded up coverage resulted, according to Mr Pierret, from the overall reduction in UMTS licence costs announced by the government. Orange and SFR both pledged to devote EUR 100 million in extra funding for extending GSM coverage. Completing the GSM network implies the coverage of the 1,480 French towns currently not covered, for an amount estimated at EUR 210 million, of which EUR 61 million is to be paid by the operators. The cost of ensuring full coverage across France is greater, in proportion to the population, than other parts of Europe because of its rural geography and lower urban density. The Market in 2002 Penetration in France, according to EMC estimates, is one of the lowest in Western Europe at 56.4% at the end of September 2001, compared to 84.9% in Italy, 76.8% in the UK and 66.6% in Germany. The penetration rate is expected to pick up considerably in 2002 as a result of GPRS usage and the increased GSM coverage. SFR's Managing Director Pierre Bardon is upbeat about the prospects. 'We think the mobile penetration rate will grow six or seven percentage points next year to stand above 60%. It should reach 67% by the end of 2002.' He added: 'We expect the market to be every bit as dynamic in 2002 as it was in 2001.' Orange also believes there will be considerable growth. 'In December 2000, the three GSM operators together sold three million handsets. We expect a similar amount this year. This will boost penetration in the first quarter of 2002.' Orange will continue to lead the market in terms of market share in 2002 although it will carry on losing a small percentage of subscribers to Bouygues Telecom. Market Share (%) YE 1999 YE 2000 H1 2001 YE 2001 Orange 48.50 47.98 47.80 47.72 SFR 35.58 34.15 33.91 33.84 Bouygues 15.92 17.87 18.29 18.44 Source: Operator subscriber figures, EMC estimates The Year For Data? The roll-out of GPRS should boost the volume of data traffic on French networks. As in other western European markets, data is being seen as the major new revenue earner. SFR is aiming for non-voice revenues of 25% by 2004-2005, up from 8-9% in 2001. If GPRS is a success then SFR's data revenues should reach 10-15% by the end of 2002. Orange is also aiming for 25% of its revenues to be generated by data by 2005. The push for data revenue began in earnest in 2001 with all three operators heavily marketing SMS products and tariffs. France still lags behind many European markets in the popularity of SMS, which is still yet to catch on in the way it has done in Germany and the UK. New products are set to be marketed in 2002 which will further boost data usage. SFR has already announced a range of SMS services for 2002: * 'Texto List': enabling an SMS to be sent to a number of different destinations * Personnalised services: costing EUR 2/month including ring tone, voice mail message and handset screen * Photo services: enabling the taking and sending of photographs to an email address over the SFR network. Orange said it will continue to promote SMS with a number of new products including enhanced messaging services and real time text conversations. SFR is complementing new services with more retail outlets for its products. SFR aims to have 200 outlets by the end of December 2001 and 600 by the end of 2002. The new services will prepare subscribers for future 3G data services which Orange and SFR hope will generate the 25% of revenues they are predicting for 2005. SFR currently (Q4 2001) generates ARPU of EUR 44, and believes it will be able to make a profit from new 3G services due from 2003 with ARPU of around EUR 50. Both SFR and Orange have been buying up UMTS rights, most notably for football. More deals are expected in 2002, perhaps focusing on music downloads and games. Orange said: 'Content and quality of service are our main priorities. This will be one of our main focuses in 2002.' - Eric -