Did Free even pierce Orange’s peel?

Feb 23, 2012
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When Xavier Niel announced the launch of Free Mobile about six weeks ago, he invited not only comparisons to Steve Jobs but also the attention of the global tech world. Free’s approach to the French market — to build a mobile network on the back on its substantial consumer wifi network — is certainly unique, and their 20 EUR launch price signaled a revolution in the staid French mobile market.

Two days ago France Telecom (also known as Orange) made its first announcement since Free entered the market, and the results weren’t pretty. They slashed their dividend, cut their cash flow estimates, and revealed that they had lost a net of 200,000 customers in the past month. That number represents 0.7% of all of Orange’s customers in France.

Wait, just 0.7% Is that it?

The French mobile market is estimated at around 62 million paying subscribers, and Orange believes that Free already has around 2 million subscribers. Let’s be honest: any startup that gains 2 million PAYING subscribers in just over a month is doing something right.

Free has said that they can break even without even passing the 10% mark in market share. This means that they are already one third of the way to making money. It seems that the initial flood of users to Free has tapered a bit, but Orange is still losing 15,000 customers per day. Even if we say that, conservatively, only 5,000 of those are going to Free, then that would represent over 1.5 million more Free Mobile customers in a year. And assume the same trends are affecting SFR and Bouygues, and it’s not hard to imagine Free passing that magic 10% market share sometime next year — some two years ahead of schedule.

The revolution will be downloaded at sub-3g speeds

But for all these shiny numbers, Free Mobile hasn’t been spared from its own share of headaches. Customers have complained of slow data speeds — something that one “insider” at Orange attributes to Free underestimating the demand for its ultra-cheap plans. (By the way, you have to love the way the Financial Times goes out of its way to describe Xavier Niel as “a telecoms billionaire who started out selling online adult entertainment services but has become France’s most successful entrepreneur.”)

As my friend Arnaud Ferreri of OneFeat tweeted to me, “I am thrilled by the price, not so much by the dropping of 3G.” Furthermore, there were reports of delayed SIM cards at launch. And look at Free Mobile’s website. It looks like it won the Geocities design award 1998. The point is, this just isn’t the premium experience people were expecting from Free, the company that was cool enough to put “1337” in their advertising.

Sure, French mobile plans are expensive, and Free has already shaken up the market. But the complaints with the market go beyond price. Free Mobile is already ahead of schedule in signing up users. It now has the opportunity to become a brand people really love, and not just a brand that people can’t afford to leave.