If you were to ask execs of France’s incumbent Telcos who they loathe publicly and admire secretly they will probably mumble FREE and Xavier Niel. Now how did Free and Niel freak out fat cat telco execs who were relaxing on their oligopolistic sofa ??
In April 1999, Free entered the Internet service provider (ISP) market with a simple, no-subscription service. This commercial strategy was at first based solely on providing “Pay-as-you-go” access and enabled Free to win a large share of the dial-up market with relatively small advertising outlay as compared to its competitors. After completing the rollout of its telecommunications network and interconnecting with the France Telecom network in April 2001, Free was in a position to control the cost structure of an offering based on Internet connection time.
The Illiad Groups’s network ( Free is the brand name ) enables it to design sustainable service offerings that are easy to understand, technically sophisticated and attractively priced. Free has capitalized on the different nuances of its brand name, transforming it from a name implying that the offering is free of charge into a name associated with high-quality paid services and the freedom offered to users of these services.
The high speed broadband Internet access offerings are among the most competitively priced on the market in their respective segments while providing a high quality of service. This positioning is a central factor in the Group’s strategy and is aimed at creating the right environment for lasting and profitable growth . Through the use of its network and by building on its experience in dial-up offerings, Free has developed a high-quality broadband access offering which is attractively priced and, where possible, makes the most of the opportunities afforded by the unbundling of the local loop. Today French broadband rates are among the lowest in the world.
One of Free’s most powerful offerings is the modem “Freebox”. Rejecting the offerings from established equipment manufacturers, the Iliad group( who own the FREE brand ) built its own set-top box running Linux to deliver Internet, voice, and TV services and designed its own DSLAMs to direct traffic into and out of subscribers’ homes. This router is lent to customer that provides every services offered by Free, wifi access point, telephone connection to use VoIP service, and television signal access point. Free has always offered its services as a complete package with only one price 29.99euro.
Last year, the company evaluated its network in anticipation of continued growth of subscribers and the planned service offering. Within the access network, FREE recognized the need to increase capacity, because IPTV and other high-bandwidth services were pushing the access network to its limits. Rolling out its own fiber local loop allows FREE to operate more independently from France Telecom, while improving margins and strengthening its service differentiation in the marketplace and is designed to accommodate multiple Service Providers, optimizing its return on investment (ROI).
The Illiad Group’s and FREE success is highly dependent on maintaining its relationship with Xavier Niel, Senior Vice-President of Iliad and the Group’s majority shareholder. Xavier Nel is sometimes called the “ Steve Jobs “ of France so you know the kind of mercurial character we are dealing with here. In 2001 the iconoclastic businessman—who got his start running an online sex-chat service—launched the country’s first triple-play Internet, television, and telephone service. He quickly grabbed one-fourth of the market by setting prices far below those charged by industry leaders, including France Télécom.
In many respects FREE has been extremely innovative and ‘digital’ in many respects:
In 2002 it was a triple-play pioneer and built its own set-top box because it could not find ready-mades that met its requirements. In 2014 it introduced its own SIM-card dispenser kiosks, which are sited within other stores. Operators controlled by Niel have embraced open-source technology in their IT departments and are developing their own platforms and technologies to reduce software licensing costs. Niel embraces simplicity. His operating companies only offer three to four pricing plans at most, and he is prepared to shut down 95 percent of plans when he acquires a business to reduce costs and complexity.
After thoroughly disrupting the ISP market by introducing super-cheap Internet access Xavier Niel pulled it off again with its mobile offering based on a 3 G license (2.1 GHz and 900 MHz bands.) With rates as low as €2 (about $2.60) a month, the Free Mobile phone service has lured an estimated 2 million subscribers away from competitors. Free upset the French mobile landscape by using very clever technology, marketing and financial tricks. As a company with a hacker open source culture, Free is a good example of how to execute against well-established competitors.
Free has created an offering that you cannot ignore. Imagine a mobile phone plan, with unlimited talk, unlimited SMS and MMS messages, tethering and, even more important, unlimited data with a speed reduction after 3 GB. Usually for that plan in the U.S., you would pay more than $100 for limited data with a two-year contract. In France, it costs $25 per month and there is no contract. Competitors had no choice but to lower their prices, even if it meant lower margins and lower infrastructure investments.
Before launching the mobile offering Free revamped its Internet offering by bundling unlimited calls to mobile phones. It allowed Free to increase the price to $45 per month (€35.99) and therefore greatly improve its margins for its millions of customers as well as invest in its mobile future thanks to its triple-play margins. Free signed a roaming deal with Orange so they could launch the mobile offering quickly and without doing immoderate infrastructure investments. Another unexpected advantage is that Free had the largest hotspot network in the world because according to them every triple-play modem ) FREE BOX ) was in fact a hotspot. Thanks to the EAP-SIM protocol, smartphones could connect seamlessly to those hotspots.
Xavier Nel’s business philosophy is really simple : “I work on a 50 percent margin, so that means 10 euros is my margin,”. He reckons that if it’s going to cost him 0.008 eurocents for a call, as long as he’s making a 50 percent gross margin a month on his data business, he’s sees no reason to charge his customers more. “Whatever I can give our customers for 20 euros, I will give them.” As long as he gets his 10 euros in gross profit.
Free.fr has points of presence in pretty much every part of France, and peering points in several cities around the world, including London, Amsterdam, and Washington, D.C., that allow it to exchange traffic with other carriers. Free.fr started off with a network backbone that was made up of 1 gigabit-per-second links; today those links have ballooned to 80 gigabits per second. As they run through the live network traffic during peak load hours, Free.fr accounts for nearly half the traffic on the Amsterdam Internet Exchange.
Free’s foray into mobile has already shaken the country’s top three operators—France Télécom’s Orange, Vivendi’s SFR, and Bouygues Télécom—which until now controlled 90 percent of the market and charged the highest rates in Europe. France’s national telecommunications regulator recently warned that competition from Free could force the incumbents to shed as many as 10,000 jobs. Orange and SFR have each reported losing about 200,000 subscribers to Free.
If French subcribers were polled by the incumbents ( Orange etc ) …Why did you defect en masse to FREE their response might be ” hey your products are great, but your competitor gives me precisely I’m looking for.” It don’t come down only to product price, quality, features, or sales capabilities. FREE speaks the language of the customer.
In Oct 2017 Nel was asked ” would you be interested in buying Orange? ” His response : ” It belongs to the French state so it will be necessary vagal discomfort, it will be complicated,” he said “This is not the role of the State to be private company shareholder who are in the competitive world. I think that the state should withdraw from Orange and you can ask the question of legitimacy may be the state to have as many public channels ” .
According to Forbes , Xavier Nel’s net worth is $9.3 B : Niel also owns Monaco Telecom and Orange Switzerland – for which he paid $2.9 billion in 2014. He also has a controlling interest in French newspaper Le Monde. Recently a consortium made up of companies owned by Xavier Niel, and other billionaires inked a deal to acquire the Senegal operations of Millicom.
Sadiq Malik ( Telco Strategist )
PS : FREE keeps on expanding