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France Is Favorite for Femto First

France looks set to be the first European market to launch 3G femtocell services, thanks to the aggressive plans of mobile operator SFR , according to Unstrung sources.

Those sources say SFR's initial deployments of 3G femtocells could be only a few months away.

The French market is certainly primed for femtocells: It has fast broadband; a broad uptake of home gateways; and experience of fixed/mobile convergence, thanks to the popularity of Orange (NYSE: FTE)’s Unik service. (See Unik 3G.)

Add to those market conditions the bold plans of mobile player SFR , and it looks like femtocells could make their way into French homes before the end of 2008.

According to Unstrung's sources, SFR is aiming to be the first European operator with a 3G femtocell service and has been testing equipment from Ubiquisys Ltd. (See UbiquiSys Gets Google Boost and T-Mobile Invests in Femto Firm.)

A soft launch could even be on the cards for September, Unstrung understands.

“SFR is really pushing hard on femtos,” says Stuart Carlaw, vice president and research director at ABI Research . “I wouldn’t be surprised if they’re first, or one of the first to market.”

Neuf key to SFR's plans
According to one source, who requested anonymity, SFR’s femtocell push includes heavy involvement from Neuf Cegetel Group (Euronext: NEUF), the fixed line carrier in which SFR owns a 40.5 percent stake.

SFR, which is 43.9 percent owned by Vodafone Group plc (NYSE: VOD), is in the process of buying the near 60 percent of Neuf Cegetel it doesn't yet own. (See SFR to Swallow Neuf in $6.4B Deal and Neuf Makes Acquisitions Count.)

An SFR spokesman said he could not comment on the operator’s femtocell plans.

SFR’s femtocell service will be a direct challenge to the dual-mode cellular/WiFi service provided by France Telecom's Orange, which has sold more than 900,000 handsets as of the end of March. (See Orange Builds on FMC Base, Orange Doubles FMC Customers, and Carrier Scorecard: Orange.)

And it seems Neuf Cegetel's strong position in the French broadband market will play an important part in SFR's plans. Neuf, with 3.3 million DSL customers, is the second-largest broadband provider in France behind Orange (7.6 million DSL customers), though that No. 2 spot might soon be swiped by Iliad (Euronext: ILD) if it can execute its acquisition plans. (See Iliad Closes In on $1.3B Acquisition .)

Neuf's DSL customer base is important for SFR’s femtocell project because the fixed line operator has experience of providing and managing broadband connections, which are used to backhaul traffic from the femtocell access point to the mobile network, and experience with deploying consumer devices in people's homes.

SFR, meanwhile, is the second-largest mobile operator in the country, boasting 18.8 million customers at the end of 2007, compared to Orange’s 24.2 million (end of March 2008).

Orange also has plans for femtocells and has issued a request for proposal that is more focused on the enterprise rather than consumers, according to ABI’s Carlaw. Unstrung has reported that Orange is conflicted on its plans for femtocells, because the home base station devices could cannibalize its growing Unik service. (See FT Preps Femtocell RFP.)

Bouygues opts for simple life
France's third mobile operator, Bouygues Telecom , does not have firm plans for femtocells.

“We are still investigating the [femtocell] opportunity,” says Renaud Trnka, business development director at Bouygues. “We’re making an economic calculation and looking at the products to see if they fit with the customer demand.”

But the operator is clear it will not pursue a dual-mode cellular/WiFi service similar to Orange’s Unik or home zone services. Instead, the operator offers unlimited calls to fixed and mobile networks during evening hours when customers are most likely to be at home.

“[Our service] is without the technical difficulties of Unik because it does not require a dedicated handset,” says Trnka. “We don’t believe in home zones.”

— Michelle Donegan, European Editor, Unstrung

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