Mobile Phones in France

MOBILE PHONES IN FRANCE
Euromonitor International January 2012
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LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1 Trends .......................................................................................................................................... 1 Competitive Landscape ................................................................................................................ 3 Prospects ..................................................................................................................................... 4 Category Data .............................................................................................................................. 5 Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Sales of Smartphones by Operating System 2008-2010.............................. 5 Sales of Mobile Phones by Type of Contract 2005-2010 ............................. 5 Sales of Mobile Phones: Volume 2005-2010 ............................................... 6 Sales of Mobile Phones: Value 2005-2010 .................................................. 6 Sales of Mobile Phones: % Volume Growth 2005-2010 ............................... 6 Sales of Mobile Phones: % Value Growth 2005-2010 .................................. 6 Mobile Phones Company Shares 2006-2010 ............................................... 6 Mobile Phones Brand Shares 2007-2010..................................................... 7 Sales of Mobile Phones by Distribution Format 2005-2010.......................... 7 Forecast Sales of Mobile Phones: Volume 2010-2015................................. 8 Forecast Sales of Mobile Phones: Value 2010-2015.................................... 8 Forecast Sales of Mobile Phones: % Volume Growth 2010-2015 ................ 8 Forecast Sales of Mobile Phones: % Value Growth 2010-2015 ................... 8
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HEADLINES
Mobile phones increases in value and volume to reach 27.6 million units in 2010, a 21% increase The market for smartphones continues to grow The French continue to buy feature phones in 2010, but twice as many smartphones as in 2009 Average unit price increases to 120 compared to 110 in 2009 Samsung Electronics France leads mobile phones with a 40% volume share Constant value sales of mobile phones are expected to grow by a CAGR of 3% over the forecast period
TRENDS
The French were more willing to use a mobile service such as video telephony, mobile TV or data transfer through the 3G network in 2010. The number of SIM cards (PCMCIA cards, keys 3G internet or 3G +) dedicated to internet connections continued to increase at a rate of one million additional cards per year, an increase of 64% in one year. Increasing sales of smartphones helped mobile phones to grow by 82% to 8.5 million units in 2010. The success of smartphones in France is exponential. France is the second country where smartphones had the greatest success, behind the UK (28.9% of total sales), but ahead of Germany (19.6%), Italy (17.6%) and Spain (14.8%). The market is driven by the proliferation of terminals, the rise of mobile broadband networks and the emergence of subscriptions. Mobile phone makers and operators are making smartphones affordable to a wider variety of people, which helped increase sales. There are two reasons for the success of smartphones in France. Prices declined due to grants awarded by mobile operators resulting in accessibility to every socio-demographic group. The advent of the touch screen was also popular. Many find it easier and quicker to navigate the increasing number of functionalities available on these devices than with previous mobile phones. The smartphone with tactile screen represented 40% of sales in 2010 and France remained ahead of its European neighbours. In 2010, the average price of a smartphone, before any grant by an operator, fell to 220. Consumers who bought a smartphone spent an average of 154 with operator funding, or about 70 less than in summer 2009. In addition, there were offers that made smartphones available for less than 50. The market share of Android multiplied by more than six in 2010 in France. The mobile operating system from Google started in 2010 with less than 3% of market share to finish at 20%. Android is present on a growing number of smartphones at affordable prices. French operators promoted Android phones more strongly in 2010, which helped to reduce dependence on the iPhone. Now with over 100,000 applications available, the operating system from Google is mature and benefited from the release of new affordable terminals capable of competing with Apple's smartphone. Android is used by Samsung, LG, HTC, Motorola and Sony Ericsson where Apple has only two references. By 2013, the growth of the Google operating system will reach 40% each year, the highest growth in the market. The main advantage of Android is the fact that it is open source, ie free. The other advantage of
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Android is the Android Market which includes thousands of applications, approximately 60% of which are free. According to ARCEP, 64.4 million SIM cards were activated in 2010, representing a growth of 4.9% compared to 2009. The data SIM cards (M2M and 3G) amounted to 5.4 million units in 2010 (2.6 million for M2M and 2.7 million for 3G). The mobile plans continued to be preferred by 46.4 million mobile users in France, an increase of 8.9%, versus 17.9 million for pre-paid cards, a decrease of -4.5%. In 2010, the number of mobile subscriptions continued to grow strongly in France, while the number of prepaid cards continued to decline. Among French users of smartphones, nearly 4.7 million subscribe to cheap plans versus 2.28 million subscribers who pay for more expensive plans ie more than 50 per month. Smartphones are generally perceived as equipment associated with premium prices and very expensive subscription plans. Three network operators, France Tlcom, SFR and Bouygues, offer the full range of telephony and data services, while a growing number of Mobile Virtual Network Operators provide competition in the low-cost area. The market share of mobile virtual network operators (MVNO) in France was 6.52% in 2010, with four million mobile customers and 241,000 new customers. Virgin Mobile, 47.5% of which is owned by the British group Carphone Warehouse, is the number one MVNO in France. The mobile penetration rate reached 99.7% in 2010, versus 96% in 2009. In 2010, 19 million feature phones were sold in France versus 8.4 million smartphones. Despite some discrepancies, the market for mobile phones in France is homogeneous in terms of region. Despite the growing success of smartphones, feature phones continue to provide important volumes. In particular the terminals which embed a full physical keyboard and are equipped with various services eg SMS/MMS, email, instant messaging, social networks, remain very popular in France. They are also less expensive than smartphones which remain a strong attraction to the public. 3G network recorded considerable growth in 2010 as 2.74 million units are now operational. Following input by ARCEP, Orange and SFR significantly improved their 3G wireless coverage. The two operators reached 91% and 88% respectively of the population in late 2010. Bouygues Telecom clearly exceeded the minimum required at 75%. The French telecoms regulator ARCEP concluded the formal handover of the countrys fourth 3G licence to Iliads Free Mobile. The Iliad Group committed to launching its network within two years of being awarded the licence, which took place at the end of 2009. The newcomer pledged to cover at least 90% of the population with its 3G network within eight years of launch, and its promise to deliver competitive prices should spur growth in mobile internet access. France is behind regarding 4G network. According to Orange, the country will take advantage of the 4G technology only at the beginning of 2013. The French industry minister, Eric Besson, announced that the nations auction of 4G frequencies should be completed by the summer of 2011. One issue that the French regulators are concerned about is that rural areas of the country also get coverage. The French government is hoping to have 99% of the population covered by fourth-generation mobile phone technology by 2025. One barrier, however, is the cost: operators will have to pay significant sums of money to enter 4G, which could cause problems, given the economic climate. Electronics and appliance specialist retailers remained the most important retail channel for mobile phones in France in 2010 with a 58% volume share. Mobile network operators Bouygues Telecom, Orange and SFR run their own outlets where customers can get a contract and/or a mobile phone. The hypermarkets channel is important as well, holding an 18% volume share as it offers pay-as-you-go phones. These shares remained stable in 2010, as the retail channels are well established and there was no change in the selling process of a
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mobile phone, or the type of contract. Internet retailing saw strong growth over the review period and had a 10% share of volume sales by 2010. This retail channel became increasingly appealing to consumers who can make comparisons on features and prices and very often can get competitive prices.
COMPETITIVE LANDSCAPE
Samsung remains the leader in mobile phones and strengthened its lead in 2010 with 40% volume share versus 34% in 2009. It is followed by Nokia with 25% share, Apple with 9%, Sony Ericsson with 8% and LG with 7%. Apple continues to lead smartphones in France in 2010 with 31% share, although its share declined compared to 2009. The decline was due to the wait for the iPhone 4 and the aggressiveness of stronger competitors. Nokia was in second place with 22% volume share, Samsung with 16%, HTC with 8% and Research in Motion with 8%. In 2010, Android was the third system used by the French, behind Nokias Symbian and Apples iPhone. Nokia was preferred by 30% of users. iPhone sales stabilised and the Apple smartphone is used by 30% of consumers. Nokia and LG saw a decline in share due to the decrease of feature phones while Sony Ericsson and Apple showed progress due to the increase in smartphones. There were several trends in smartphones in France in 2010. iPhone sales were stable throughout the year, while Nokia saw its sales drop by 12 percentage point in 2010. French mobile phones is dominated by multinational companies. The arrival of a fourth mobile phone operator, Free Mobile, which plans to launch its services in early 2012, should ensure that competition remains strong. In 2010, the operator Free holds the fourth mobile licence which could decrease prices by 7% and will enable a better penetration rate in France. Among MVNOs, one new player is scheduled for launch during Q111, La Poste. The operator will join a crowded bottom end of the market, where more than a dozen MVNOs are active. The market of seniors, long ignored by mobile manufacturers, began to develop. Operators are more willing to reach this market. After SFR and its Amplicom, or the Doro Orange, Bouygues Telecom launched the EasyPhone, a terminal suitable for seniors. Mobile manufacturers are also beginning to focus on this market. French telecoms operator SFR launched a new ultra-high speed triple-play service in a bid to secure market share and compete in an intensely competitive market. SFRs new Neufbox Evolution set-top box (STB) is equipped to deliver 3D TV shows and films, as well as delivering content to a users smartphone or PC. Priced at 34.99 per month, SFRs new service compares favourably with the standard market price of 29.99 per month in France. Bouygues Telecom, Orange and SFR formed a new joint venture in 2010 that will use mobile phones to help make online payments in France safer. The launch is planned for the middle of 2011. There are no plans for a launch outside France. Several brands including Carrefour, Franprix and SNCF already tested mobile payment solutions but none decided to deploy on a large scale in 2010. To promote Windows Phone 7 (WP7), Microsoft organised a guerilla marketing campaign in the French capital, Paris, to coincide with the worldwide launch. People in the streets were give flyers with a barcode printed on it and the organisers selected a few people to win a WP7 device. The highlight of this marketing is the prize; the winners have to find a way to take their WP7 device out of a frozen ice block. In 2010, the distributor The Phone House set up a recycling programme of used mobile phones in its stores. It is estimated that there are 60 million unused mobile phones in France.
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The return of used mobile phones began in May 2010. The first results were promising with 2,000 mobile phones collected in two weeks by the distributor. This recovery was directed primarily at the purchase of smartphones. French operator SFR signed an agreement with Nokia Siemens Networks to build extra capacity in its existing 3G network. SFR plans to start rolling out the upgrade from the beginning of 2011.
PROSPECTS
Over the forecast period mobile phones is expected to have volume decline with a CAGR of 4%. However, it is expected to have a constant value CAGR of 3%, as feature phones will gradually decrease while new generation multimedia phones will make a serious impact. The arrival of Windows Phone meant that competition in mobile operating systems is intensifying. Manufacturers of mobile devices will become more competitive and new technologies will also emerge such as 4G and video conferencing. Smartphones in the forecast period will be more powerful, and will incorporate microprocessors more similar to those of netbooks. They will be capable of handling high definition and 3D. Over the forecast period, smartphones could represent 90% of mobile phones. Smartphones shopping is also an important trend as it could be the key to reviving slow consumer spending and will provide retailers with renewed optimism. Since the launch of the iPad in April 2010, most mobile phones manufacturers announced they would market internet tablets. Samsung launched its Tab Galaxy in November 2010 and saw success with the brand. In 2011, Blackberry, Motorola and LG will launch their internet tablets. The mobile operators Orange, SFR and Bouygues Telecom are beginning to offer internet tablets, combined with 3G packages. In 2011, their catalogues will be more available, and internet tablets will represent a significant source of revenue for operators. People who want to buy a tablet will tend to move towards a product with the same OS as their phone. Competition in smartphones will therefore increase. The arrival of Windows 7 Phone did not substantially change the trend and Microsoft continues to lose market share. Windows Phone 7 was released in October 2010 and is expected to perform well since it is different from its competitors and has undeniable qualities. Windows Phone 7 differentiates itself from the competition through its home page offering menu in tabs, and its strong integration with popular social networking sites. A new tax on home internet packages, landlines and mobile phones is being considered to help improve broadband coverage and speeds around France. Web users in France are already facing rises because of changes to the way triple play packages, which combine internet, phone and television, are taxed. These packages will incur VAT at the full rate of 19.6%, after the government scrapped the reduced 5.5% rate. Some internet service providers said they will pass the tax rise on to customers. ARCEP recommended that mobile phones contracts be shortened from the 24-month tie-ins commonly offered, to allow end users to shop around for better deals. In a public consultation document setting down 30 key recommendations to improve transparency and make the market more competitive, ARCEP is calling on operators to be required to offer contracts of either twelve or six months. ARCEP is concerned that under existing rules customers are locked into long-term deals often to the detriment of competition and often in a way that makes it difficult for users to switch provider. The sellers of devices running Android will continue to fight for market share, which will lower prices for consumers. This was seen in the price decreases of the iPhone in France. In late December 2010, Virgin Mobile was the first to lower the price by proposing the Apple terminal
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at 99 on the condition of providing a subscription. Orange, which also distributes the iPhone 4, decided to lower the price of the terminal by at least 100. The price war for iPhone 4 will continue to intensify in the forecast period with price cuts expected at Bouygues Telecom and SFR. In 2010, customers are in a fully digital world and at the centre of several personal, professional, and social networks. This phase is characterised by the need to remain constantly connected. Operators invested heavily in the review period to improve this service and expand their mobile coverage. Mobile phones is also characterised by short replacement cycles and high rates of innovation, meaning that the competitive landscape can change more quickly than many companies can adjust. As mobile phones in developing countries approach saturation the replacement market is becoming increasingly important. Changing trends and interests have strong influence over smartphones design and features. The popular mobile phones manufacturers such as Ericsson and Nokia are working on new designs and prototypes. Consumers rapid adoption of smartphones and tablets, combined with innovative mobile applications, allow retailers to create a myriad of new ways to connect with customers when inside the store, improving customer satisfaction and driving revenue. To survive in this new connected purchasing climate, retailers need to acquire and maintain customers who are loyal and will keep coming back. 2010 was an intense year with multiple new products for both terminals and operating system launches. The various players competed mainly on the basis of hardware and technology. To win share, manufacturers need to strongly differentiate themselves. When Google unveiled the Nexus One, it attempted to separate the phone from its competitors by calling it a Superphone. Location awareness will further lead to several other innovations. Mobile phones in 2015 will know when you are near a McDonalds or Starbucks and will offer to pay your bill.
CATEGORY DATA
Table 1 % retail volume 2008 Windows iOS Android Symbian BlackBerry OS Other Total
Source:
Sales of Smartphones by Operating System 2008-2010
2009 9.5 40.7 4.7 36.6 6.9 1.6 100.0
2010 4.0 30.7 26.6 25.1 7.8 5.8 100.0
14.4 18.1 57.3 8.7 1.5 100.0
Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources
Table 2 % retail volume
Sales of Mobile Phones by Type of Contract 2005-2010
2005 Monthly Subscription Pay as You Go Phone Only 57.7 4.1 38.2
2006 61.8 3.2 35.0
2007 64.0 2.8 33.3
2008 68.0 1.3 30.7
2009 71.0 0.3 28.8
2010 76.6 0.2 23.3
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Total
Source:
100.0
100.0
100.0
100.0
100.0
100.0
Table 3 '000 units
Sales of Mobile Phones: Volume 2005-2010
2005 Feature Phones Smartphones Mobile Phones

Source:
2006 19,540.0 360.0 19,900.0
2007 20,044.5 2,155.5 22,200.0
2008 20,349.8 3,149.2 23,499.0
2009 18,238.0 4,669.5 22,907.5
2010 19,145.0 8,497.7 27,642.7
17,824.0 176.0 18,000.0
Table 4 EUR million
Sales of Mobile Phones: Value 2005-2010

Source:
2006 2,419.5 109.3 2,528.7
2007 2,092.2 559.6 2,651.8
2008 1,885.8 728.5 2,614.3
2009 1,479.3 1,041.2 2,520.5
2010 1,448.2 1,866.1 3,314.3
2,403.3 56.1 2,459.5
Table 5 % volume growth
Sales of Mobile Phones: % Volume Growth 2005-2010
2009/10 Feature Phones Smartphones Mobile Phones

Source:
2005-10 CAGR 1.4 117.1 9.0
2005/10 Total 7.4 4,728.2 53.6
5.0 82.0 20.7
Table 6
Sales of Mobile Phones: % Value Growth 2005-2010
% current value growth 2009/10 Feature Phones Smartphones Mobile Phones

Source:
2005-10 CAGR -9.6 101.5 6.1
2005/10 Total -39.7 3,224.4 34.8
-2.1 79.2 31.5
Mobile Phones Company Shares 2006-2010
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Company Samsung Electronics France Nokia France SA Apple Computer France Sony Ericsson SAS France LG Electronics France HTC Corp Research in Motion Ltd Sagem Tlcommunications Motorola SAS Sagem Communications Group Palm Inc Others Total
Source:
2006 23.7 30.9 8.8 9.6 0.2 7.4 10.6 0.1 8.7 100.0
2007 27.8 29.2 0.1 13.2 6.7 0.3 1.1 4.7 10.7 0.1 6.0 100.0
2008 32.2 28.5 2.4 11.6 9.3 0.6 1.2 5.5 2.9 5.9 100.0
2009 33.6 26.1 8.3 11.0 11.7 1.5 1.4 4.0 0.5 1.9 100.0
2010 39.5 24.2 9.4 8.3 7.3 2.5 2.4 2.2 0.7 3.4 100.0
Table 8 % retail volume Brand Samsung Nokia iPhone Sony Ericsson LG HTC Blackberry Sagem Motorola Sagem Palm Others Total
Source:
Mobile Phones Brand Shares 2007-2010
Company Samsung Electronics France Nokia France SA Apple Computer France Sony Ericsson SAS France LG Electronics France HTC Corp Research in Motion Ltd Sagem Tlcommunications Motorola SAS Sagem Communications Group Palm Inc
2007 27.8 29.2 0.1 13.2 6.7 0.3 1.1 4.7 10.7 0.1 6.0 100.0
2008 32.2 28.5 2.4 11.6 9.3 0.6 1.2 5.5 2.9 5.9 100.0
2009 33.6 26.1 8.3 11.0 11.7 1.5 1.4 4.0 0.5 1.9 100.0
2010 39.5 24.2 9.4 8.3 7.3 2.5 2.4 2.2 0.7 3.4 100.0
Sales of Mobile Phones by Distribution Format 2005-2010
2005 Store-Based Retailing - Grocery Retailers - - Discounters - - Hypermarkets - - Supermarkets - Non-Grocery Retailers - - Electronics and Appliance Specialist Retailers - - Mixed Retailers - Other store-based 88.7 16.7 2.1 12.5 2.1 62.7 53.7
2006 86.8 16.7 2.1 12.5 2.1 61.3 51.8
2007 84.7 17.0 2.0 13.0 2.0 57.7 48.7
2008 79.6 19.1 1.9 15.3 1.9 52.2 43.3
2009 73.7 20.2 1.8 16.5 1.9 43.1 34.4
2010 74.7 20.6 1.3 17.6 1.7 41.9 32.7
9.0 9.3
9.5 8.8
9.0 10.0
8.9 8.3
8.7 10.4
9.2 12.2
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retailing Non-Store Retailing - Direct Selling - Homeshopping - Internet Retailing Total

Source:
11.3 3.1 8.2 100.0
13.2 3.1 10.1 100.0
15.3 3.0 12.3 100.0
20.4 2.9 17.5 100.0
26.3 2.7 23.6 100.0
25.3 25.3 100.0
Table 10 '000 units
Forecast Sales of Mobile Phones: Volume 2010-2015

Source:
2011 13,018.6 11,556.8 24,575.4
2012 9,243.2 15,255.0 24,498.2
2013 5,083.8 19,526.4 24,610.2
2014 2,084.3 21,479.1 23,563.4
2015 396.0 22,553.0 22,949.1
19,145.0 8,497.7 27,642.7
Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources
Table 11 EUR million
Forecast Sales of Mobile Phones: Value 2010-2015

Source:
2011 925.6 2,195.9 3,121.5
2012 599.7 2,790.3 3,390.0
2013 292.9 3,482.5 3,775.4
2014 106.1 3,747.6 3,853.7
2015 18.1 3,850.1 3,868.1
1,448.2 1,866.1 3,314.3
Table 12 % volume growth
Forecast Sales of Mobile Phones: % Volume Growth 2010-2015
2014/15 Feature Phones Smartphones Mobile Phones

Source:
2010-15 CAGR -54.0 21.6 -3.7
2010/15 Total -97.9 165.4 -17.0
-81.0 5.0 -2.6
Table 13
Forecast Sales of Mobile Phones: % Value Growth 2010-2015
% constant value growth 2010-15 CAGR Feature Phones Smartphones Mobile Phones
Source:
2010/15 TOTAL -98.8 106.3 16.7
-58.4 15.6 3.1
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MOBILE PHONES IN FRANCE

Euromonitor International January 2012