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Bouygues Bucks French Trend

Bouygues Telecom, the rebel of the French telecom market, is subverting the trend again. Having failed to follow the crowd when 3G mobile licenses became available in 2001, France's third mobile operator is taking an alternative approach to the explosive broadband market.

As France Telecom SA (NYSE: FTE), Iliad (Euronext: ILD), Neuf Telecom, Tiscali, and Groupe Cegetel battle to sign up broadband customers, Bouygues is keeping its distance.

That's not to say it hasn't shown an interest. Bouygues considered making a bid for Tiscali's French business, but ultimately decided against the move (see Telecom Italia Lines Up Tiscali Buys and Tiscali Examines French Offers). "There are too many players in the French Internet access market, so we’ve chosen not to take part in the consolidation of the ADSL market. It's not worth it, economically," CEO Martin Bouygues told a results conference call late last week (see Bouygues Reports 2004 Results).

Instead, Bouygues, which has more than 7 million mobile subscribers, may strike a partnership with a fixed line player, with ambitious triple-play service provider Neuf the favorite to hook up with Bouygues (see Neuf: Time Is Right for IPTV). Neuf is in talks to become a mobile virtual network operator on Bouygues's network, and such a deal could see the latter resell Neuf's broadband services to its customers.

Bouygues says it is talking to a number of broadband service providers about offering a fixed/mobile service combination, but won't confirm any names.

There is a feeling, though, that Bouygues does need some sort of presence in the broadband sector. "One of the big advantages of having a DSL offering for Bouygues would be to reduce subscriber churn," says Frederic Pujol, an industry analyst at French consultancy Idate.

"Bouygues' two competitors in the mobile market, [France Telecom's] Orange SA and [Cegetel's] SFR understand that," and both are offering combined mobile and broadband services, adds Pujol.

This isn't the first time Bouygues has differed in strategy from its mobile rivals. In 2001 both Orange and SFR bid for 3G licenses that had a minimum price of more than €4 billion ($5.3 billion), but Bouygues pulled out of the process. Only once the price of the 3G licenses had been reduced to about €700 million ($927 million) in 2002 did Bouygues apply to the French regulator.

And while Orange and SFR forge ahead with their 3G strategies, having launched services in 2004, Bouygues is still holding back. It is waiting for the widespread availability of HSDPA (High-Speed Downlink Packet Access) technology before it takes the plunge, and in the meantime is happy to offer high-speed mobile data access using EDGE (Enhanced Data for GSM Environment) technology, due to be launched this year, and wireless LAN access (see Alcatel Wins Bouygues Deal, France Relaxes on 3G, and Bouygues Mulls EDGE Rollout).

Martin Bouygues has been criticized for his alternative approach to the telecom market, but has often been vindicated. The company did not indulge in a spending spree during the Internet bubble years and consequently did not build up heavy debts. It also has a history of service innovation: It was the first to introduce per-second billing, launched a brand (Nomad) aimed specifically at young people, and was the first to import the i-mode business model into France (see I-Mode Set For France).

Now the market is waiting to see if betting on EDGE and holding fire on the DSL market will prove to be another visionary decision by Bouygues's CEO.

— Alain Coffre, special to Light Reading

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