Xavier Niel is a French business anomaly. He is a self-made man who never attended one of those fancy grandes écoles that have traditionally groomed the country’s corporate and political elite.
That has not prevented him becoming one of France’s richest individuals by displaying a remarkable entrepreneurial flair. He first made a name for himself by offering adult entertainment services on the Minitel, a crude French forerunner of the internet. He then pioneered the idea of offering innovative packages of high speed internet, fixed-line phone and television services for less than €30 ($44) a month.
Thanks to him, France can boast some of the lowest prices for broadband internet access of any leading industrialised country. That is certainly not the case in mobile telephones where France remains one of the most expensive markets.
This could now change. Mr Niel’s Iliad group, which markets its services under the brand name Free, on Thursday emerged as the sole bidder for the fourth mobile telephone licence that the government – after months of controversy and hesitation – has decided to sell. The other potential candidates felt the costs and challenges of taking on the three big incumbents in the French mobile market – France Telecom’s Orange, Vivendi’s SFR, and Bouygues Telecom – were simply not worth the risk.
Not so for Mr Niel, who says he is confident of being able to apply the same successful strategy he deployed for broadband internet access to the mobile telephone business. But challenging the likes of Orange, SFR and Bouygues is going to be no picnic. The three incumbents consider Mr Niel as their bête noire and have attempted to throw all sorts of obstacles across his path.
They have filed complaints in Brussels and in France’s highest administrative court over what they consider is an unfair decision to offer the fourth licence at a cut-price cost of €240m when they all had to pay €619m each. They have warned of the damage a price war could have on future telecom investments in France. In short, they claim that the competition for the fourth licence has been tailor-made to allow Iliad and Free to enter the market.
Yet if anybody can try to shake up the mobile market and loosen the stranglehold of the three big incumbents, it is Mr Niel. At the same time, the unorthodox entrepreneur had little alternative. His own broadband internet “triple play” business is coming under greater pressure from his big rivals, which have all been obliged to match his low-cost packages.
Worse, they are beginning to offer so-called “quadruple play” low-cost packages combining high-speed internet, fixed phone and television services on mobile phones as well. Bouygues Telecom has recently launched such a package and the trend is likely to spread with the risk of eroding further Iliad’s market share.
So to keep up the growth momentum of his start-up, Mr Niel simply has to keep expanding into complementary businesses. Entering the mobile telephone market is the most obvious avenue. He can hardly afford to sit back. After all, his big rivals regard him as a shark, and like any shark if he stops moving he is unlikely to survive.
Benetton’s bad call
As leading representatives of Italian family capitalism, the Agnellis and the Benettons have at least one thing in common. But when it comes to deploying their assets, these two industrial dynasties have adopted a radically different approach.
The irony is that the Agnellis in the past had always been regarded as being intricately linked with the government, while the Benettons preferred to stick, literally, to their knitting, remaining very private and running their clothing business.
But in recent years, the Agnellis have been busily disconnecting themselves from everything involving the government, concentrating their investments in financial services, stakes in foreign ventures and their Fiat automotive group, whose chief executive spends more time in the US and at Chrysler than in Turin.
The Benettons have gone the other way, diversifying heavily in concessionary and utility businesses that inevitably are closely connected to government. The strategy has seen the clothing family taking control of all sorts of concessions including the country’s toll motorways, the former state-owned Autogrill group that has been expanded internationally, duty free concessions and airports.
All in all, these investments have proved very successful with one notable exception – a stake in Telecom Italia’s controlling holding company. The Benettons have finally decided to cut their losses and walk away from what has proved a most disappointing investment. As for the Agnellis, they long ago decided to get out of the Italian telecom business.
Get alerts on Companies when a new story is published