TMCnet Feature

In competitive markets, high prices are simply inducements for new competitors to enter the market. So it is that Iliad, which operates under the brand name Free, is challenging other wireless service providers in France on price.

Modeled after Free’s broadband package, which offers Internet access, fixed-line telephone calls and television for a flat monthly rate of 29.99 euros, or about $38 a month, the new mobile service is built around a 19.99 euro plan that includes unlimited domestic and international calls, text messages and mobile data.

France has some of the highest rates for mobile service in all of Europe.

Currently, average revenue per mobile phone user in France comes to around 37 euros a month, according to French communications regulator ARCEP.

Iliad hopes to succeed by keeping its operating costs extremely low. For example, Free will open just three retail stores and will do the majority of its business online.

By doing so, Iliad expects to break even with just a four to five percent share of the French mobile market, lliad Chief Financial Officer Thomas Reynaud has said.

Free uses what is called a “SIM-only” product, meaning it does not actually subsidize handsets but “sells” the subscriber information module and recurring subscriptions.

Free also offers just two service plans; the first, costing 19.99 euros, provides unlimited minutes and text messages. The second plan, available to Free’s broadband customers, costs 15.99 euros.

By providing no handset subsidies and sticking to online distribution, Free hopes to reduce operating costs enough to sustain its low prices.

What will happen? If Free survives, mobile prices will tend to fall, mobile traffic will increase, mobile dealer commissions will shrink and mobile handset subsidies will fall.

Incumbent mobile service providers will find they must undertake serious cost-cutting programs of their own.

Ultimately, that also will lead to consolidation of the French mobile market.