France steers steady ship as FTTH rollout slows

Jun 13, 2023

France's four telcos produced unremarkable but reasonably solid results for the first quarter of 2023, with Bouygues Telecom and Iliad-owned Free achieving the highest domestic revenue growth rates of 8% and 7.6%, respectively, owing to a rise in net new subscribers in the first three months of the year. Orange nevertheless reported a 1.8% decline in revenue in France, while Altice-owned SFR managed a fairly meager 0.2% rise.

Overall, it seems to be business as usual in one of Europe's largest telecoms markets, with investment still at a relatively high level, and revenue growth still rather modest. However, last year did see a slight slowdown in both revenue growth and spending, with France's lauded fiber-to-the-home (FTTH) deployment also more sluggish than in the previous year.

Arcep reports

According to French communications regulator Arcep, which has just produced its latest annual market report, total fixed and mobile network investments in 2022 amounted to �14.6 billion (US$15.58 billion) in 2022.

Although this was lower than the �14.9 billion ($15.89 billion) spent in 2021 (excluding spending on 5G spectrum), Arcep remarked that spending on networks remains above pre-2021 levels after factoring out spectrum investments. If 5G spectrum investments are factored in, spending peaked at �16.2 billion ($17.28 billion) in 2020 when the auction of frequencies in the 3.4-3.8 GHz band took place.

Notably, the regulator observed that spending was lower last year in part owing to a slower rate of growth for the number of new premises being passed by fiber networks. Indeed, while France is one of the leading European markets for FTTH deployments, ranked first in terms of homes passed as well as FTTH subscribers in the latest FTTH Council Europe report, the nation's operators connected 4.7 million homes in 2022 compared to 5.4 million a year earlier.

To be sure, France is doing pretty well on FTTH deployment compared to many of its neighbors, including Germany. According to Arcep, 34.5 million premises are now passed by a fiber network, with 18.1 million now having activated a fiber subscription. As of December 31, 2022, FTTH accounted for 57% of high-speed broadband accesses. However, as well as a slowdown in homes passed, annual growth in subscriptions also fell to 3.6 million last year compared to 4.1 million a year earlier.

While Arcep didn't proffer a reason for the decline, it seems likely that the cost-of-living crisis caused by rampant inflation and a hike in interest rates will have played a role in slowing down growth. Indeed, construction costs have risen generally, while fixed broadband and mobile retail prices have also increased, albeit only slightly in France in 2022.

The regulator also noted that 75% of all premises passed by fiber have a choice between at least four operators, owing to different co-investment schemes that it said "both foster investments and provide operators with guaranteed network access terms and conditions."

It's certainly still tough out there for operators. Although Arcep trumpeted the fact that total operator retail revenue increased by 1.8% last year to �36.7 billion ($39.2 billion), it is lower than the 2.5% increase in 2021 that came after ten years of decline. Growth clearly remains fragile in France.

Furthermore, the mobile market accounted for the totality of the revenue growth, rising by around 5% last year, but revenue from fixed services fell by 0.3% after two years of weak growth. Arcep observed that this trend is owing to more sluggish growth for broadband and superfast broadband service sales (+2.4% in 2022), which was not able to offset lower narrowband service revenue (-15.4% in 2022).

Meanwhile, 5G is slowly gaining ground. Arcep said that 8.2 million SIM cards were being used on 5G networks in the fourth quarter of 2022, representing 10% of the 82.7 million active SIM cards.

"The growth of 4G and 5G mobile network users goes hand in hand with a surge in data traffic on these networks. Of note, active customers on 4G networks generated an average 14GB of traffic a month in 2022, up 17% year-on-year," Arcep said.

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— Anne Morris, contributing editor, special to Light Reading