November 15, 2012 8:34 pm

Vivendi sees tide turning against Free

Vivendi, the French media and telecoms group, said political opinion in France has “turned against” Iliad’s low-cost mobile operator, Free Mobile, because of the threat to jobs from intense price competition in the market.

Philippe Capron, Vivendi’s chief financial officer, said there was a realisation that there were “too many players in the French market”, which could mean a more helpful regulatory environment in future.

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The decision to award a fourth mobile license to Free Mobile has caused a price war in the French mobile market that has undermined the businesses of the large incumbents: France Telecom’s Orange, Bouygues and SFR, which is owned by Vivendi.

“The good thing is that regulations that have been in favour of Iliad may be more balanced in coming years,” Mr Capron told a Morgan Stanley conference in Barcelona.

The French government has asked the competition authority in France to investigate mobile roaming agreements to ensure that they are fair. Iliad’s rivals have cried foul because the company was allowed to launch Free by piggybacking on Orange’s mobile network, which Vivendi and Bouygues say has let them introduce artificially low prices.

Thomas Reynaud, finance director at Iliad, agreed that there had been a “change in tone” in political debate, with “more accent on employment”, but said that the company had nothing to fear given it was a large investor and employer in France.

Iliad, owned by billionaire Xavier Niel, has also said it intends to build its own mobile network for Free.

Gervais Pellissier, deputy chief executive of France Telecom, said: “The challenge by the government is more about the conditions themselves not whether they are respected or not.”

Mr Capron said Vivendi had not made any decision in its wider strategic review, admitting that there were still a number of possible outcomes. The company has spoken to potential buyers about its telecoms businesses in France, Morocco and Brazil. Mr Capron said that the process was being run in an “orderly way”.

He said that the group was not under pressure but needed to come to a conclusion “in the coming quarters”.

Speculation is rife in Paris about possible consolidation or cost-sharing deals among the four big French mobile operators because of the price war. Many executives believe the market will eventually return to just three providers, while the companies acknowledge that “everybody is talking to everybody” about possible joint ventures, infrastructure deals or even mergers.

Additional reporting by James Boxell in Paris

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