Impact of Iliad's purchase of T-Mobile

Last month, I was musing about a world where wireless voice and messaging ARPU would be 0$.

While many are discovering the bid by Iliad to take over T-Mobile US, I have been following the company for nearly two years in its successful market introduction in France.

I thought it would be interesting to have a look at what has been the impact to date of Iliad on the French mobile market as a reference point.


Iliad launched a mobile service in France in January 2012 under the brand free Mobile. The offer was simple and a perfect disruption to the highly-regulated market. Building on their broadband payTV set top box offer, Iliad secured 3G and 4G licenses from the french regulator and started offering for free mobile services to their payTV customers.

The offering

Shortly thereafter, the company launched a disruptive offer: 19.99 euros per month for unlimited national (all) and international (fixed line) voice calls , unlimited text and picture messages in europe, 3GB of data in 3G and 20GB in 4G.
To accelerate their customer acquisition for the moderate users, the group launched in 2013 a no contract 2 euro per month deal for 2 hours national and international voice calls, unlimited text and picture messages in europe, and 50MB of data.

The results

This disruption was a commercial and popular success for the company but a disaster for the incumbents. 
Dominated by Orange, followed by SFR and Bouygues, the market was deeply disturbed by this introduction.

In two years, here is the impact of Iliad on the french market:

• Iliad as of March 2014 counted 8.6 million subscribers representing 13% market share and generating 1.2 billion euros of revenue.
• Iliad in 2014 covers 50% of the french population in 4G and 75% in 3G.
• Iliad's network quality has been rated worse of all French operators but the company ranks first in customer satisfaction.
• Average turnover by mobile operators decreased by 11% in 2012 and 13% in 2013 and net income by 20%
• Average Revenue Per User (ARPU) has decreased by 22% 
• Collectively, operators increased their CAPEX investments to 7.3 billion euros in 2013 (excluding licenses).
• Collective free cash flow has decreased by 40%

Conclusions

Of course, it would be difficult to draw a direct parallel between the successful introduction strategy of Iliad in France and what would happen if they purchased T-Mobile in the US. Nonetheless, Iliad is probably the company that has acquired the most customers in the shortest amount of time of all wireless operators globally, while focusing on what matters most: customer satisfaction. Of course a disruptive pricing strategy was the main vehicle for introduction, but ease of use, with no-contract offers, unlocked phones packaged or not with subscription were a large part of the company success as well. 

The lessons to draw here are that network operators need to prepare for a world where ARPU can drastically reduce while structural investments increase. Flexibility, elasticity but more importantly a customer centric approach will make the difference.

The themes are further addressed and analysed in my latest report to be released in September: SDN / NFV in wireless networks.