Neuf Cegetel is targeting the technophobes. The internet service provider, which is preparing for a stock market flotation in October, says approximately half of all French households do not own a computer. The question for Neuf is: how can we get these people online?
Its answer is a white cube it calls an Easy Gate. It looks like a yaourtière, a contraption for making individual pots of yoghurt at home, but it is in fact the guts of a basic computer, loaded with freely-available “open source” software rather than the usual Microsoft Windows.
For just under €40 a month, late adopters get a rented cube plus broadband internet access and unlimited phone calls to French land lines. A screen, keyboard and webcam are sold in bundles starting at €99. A novel feature allows Neuf’s helpline staff to take control of the computer remotely if the user is overwhelmed.
In the run-up to the planned flotation, the Easy Gate is a statement of Neuf’s belief that there is still plenty of growth left in the residential broadband market, even though more than 11m French households already have high-speed internet connections.
Neuf’s stripped-down PC is in contrast with the latest preoccupation of Iliad, owner of Free, a rival internet service provider. Earlier this month, Iliad said it would spend up to €1bn on a new fibre-optic cable network capable of dealing with a big increase in demand for advanced services such as high definition TV.
However, Jacques Veyrat, Neuf’s chairman and chief executive, believes there are still plenty of tentative computer users or cyber-virgins whose needs remain simple and largely unserved. “It is necessary to have things in perspective,” he says.
In its bid to reach 2m broadband subscribers by the end of 2007, Neuf will get a boost from last week’s agreement to purchase the French arm of AOL, the US internet service provider, for €288m.
Residential customers do not dominate Neuf, however. The sales of its two other divisions - one serving business customers and the other wholesaling network capacity to other operators - are bigger.
Mr Veyrat says Neuf aims to raise about €250m of fresh funds from its IPO “to conserve our financial flexibility” after the AOL deal. Financial investors are also expected to sell shares; in total, about 20 per cent of the company is expected to be sold.
Louis Dreyfus - the family-controlled conglomerate that set up Neuf nine years ago - will keep its 35 per cent share but after deciding not to exercise a pre-emption right it is now only the second-largest shareholder after SFR, the mobile telephone operator that owns 41 per cent.
In a nod to a previous role in the conglomerate’s shipping arm, Mr Veyrat keeps a large model of a Louis Dreyfus vessel in his office. Neuf actually grew out of Louis Dreyfus’s cable-laying expertise rather than any Steve Jobs-style vision for consumer technology.
The conglomerate was in danger of losing a deal to lay cable under the river Seine for WorldCom, says Mr Veyrat. To prune its quote, it offered to lay a second cable that it would keep for itself. Neuf Cegetel now owns a network with almost 45,000km of fibre-optic cable.
“In 2000, we had envisaged a flotation but Robert Louis-Dreyfus [Neuf’s former chairman] thought that it wasn’t quite ready to be quoted, that it was too small,” says Mr Veyrat.
While he believes that remaining private helped it reorganise after the technology and telecommunications bubble burst, Mr Veyrat says Neuf deserves a higher profile now. “We have suffered a little bit from being under-exposed because we haven’t been quoted.”