>>> Bouygues Telecom set to fight back on fixed
* Bouygues Telecom announces price war in fixed* The end of the fixed broadband oasis
* A move against Iliad
* That reinforces our Reduce rating
*Bouygues to initiate a price war in fixed
In a very aggressive interview with Le Figaro, Martin Bouygues said he's going to start a price war in fixed and will offer a discount of EUR12.5 (per month) from 2014 (annual savings of EUR150 for consumers). He says he has been working for a year on the launch of a new offer to be announced in 2014, which will provide new innovations and services. He ends with a very defiant remark, saying "I want to see if Xavier Niel can do it too". Martin Bouygues also criticises Arcep for remaining silent in the ongoing 4G debate.
* The end of the stable fixed market
Over the last years, the fixed broadband segment had been pretty stable as operators have tried to ring fence their fixed broadband cash flow in light of the price competition in the mobile segment, but ARPU´s have been stable or have even shown some growth (Iliad and Numericable around +1%). However, this announcement could imply a spill-over into the fixed segment
*A move against Iliad
Iliad is using its fixed broadband cash flow to be quite disruptive in mobile. Bouygues and the other players had hoped 4G could provide them with a lever, but Free Mobile’s decision not to charge extra for 4G (and raise the data allowance) might have been a big blow to Bouygues (the one that made the strongest push on 4G). Now, Bouygues may have decided that it needs to inflict some damage on Iliad´s cash cow (we also note the animosity between Xavier Niel and Martin Bouygues).
*Our negative view is reinforced
To some extent, Bouygues (and SFR) as a mainly mobile player has less to lose. On fixed Bouygues has 1.941m customers vs 5.6m for Iliad. Bouygues can also gain from the volume effect. But today Iliad generates 100% of its cash flow from fixed broadband (that uses to fund mobile). We estimate every EUR1 ARPU decline would have a 6% impact on EBITDA.