France Telecom and Bouygues Sign Urban Fibre Sharing Deal

France Telecom and Bouygues Telecom have entered a partnership to share France Telecom's fibre-optic network in very densely populated areas, in a deal which will cover up to 1.7 million homes. The agreement will see France Telecom providing Bouygues with access to its fibre network as far as the foot of apartment buildings and office blocks in very densely populated areas. Beyond this, Bouygues will construct its own networks within these buildings, or subscribe to available cable-sharing offers.

Outside these areas, Bouygues has also agreed to share cables installed by France Telecom to provide services to customers, giving Bouygues access to a further 8.9 million homes. France Telecom says the deal optimises its deployment costs by sharing the available resources of its optical fibre networks.

Outlook and Implications

• French Fibre Rollout Gathers Pace as Investment Flows: France Telecom, which operates under the Orange brand in the mobile and broadband sectors, says the agreement reinforces its fibre-to-the-home (FTTH) deployment goals, and is testimony to the constructive spirit in which it is co-operating with the other market players. Following years of prevarication and delay, fibre rollout in the country is finally gathering pace, as a number of operator agreements and increased investment drive growth. SFR recently announced a deal with France Telecom to jointly deploy fibre-optic broadband networks in more rural regions outside France's major conurbations (see France: 15 November 2011: Orange and SFR Join Forces for Rural Fibre Rollout, Targets 9.8 Mil. Homes by 2020), which will see the two major players draw up a co-operative deployment plan which will allocate a number of regions to each operator, thus avoiding duplication, and hopes to bring high-speed broadband connectivity to some 9.8 million homes outside major cities by 2020. France Telecom has already pledged to spend some EUR2 billion (USD2.7 billion) over the next three years to roll out fibre broadband to 60% of French households, or 15 million homes by 2020, and has recently signed a deal with rival Iliad for the joint rollout of fibre to some 5 million homes in rural areas (see France: 25 July 2011: France Telecom and Iliad Sign Rural Fibre Rollout Deal), as part of an initiative from the French regulator to enable operators to co-invest in networks, which has earmarked some EUR900 million for fibre deployment in low population density areas. Meanwhile, Vivendi's SFR says it is spending some EUR150 million-EUR200 million a year to bring FTTH to some 10 million homes within the next 10 years, and has already signed a partnership with Bouygues Telecom to build such networks together in urban areas.
• Fixed-Line Sector Looks to Broadband Growth: The French fixed-line operators continue to see falling revenues, as they are hit by the economic downturn exacerbated by higher regulation and competition, meaning they have been cautious about investing in costly fibre rollout projects. However, the regulator has now provided regulatory stability to the sector, encouraging the operators to invest and co-operate in rollout plans. The French regulator recently revealed that revenues from fixed services fell 2.1% year-on-year (y/y) to EUR4 billion, as fixed voice sales fell 14.2% y/y, and this drop was not offset by a 7.3% y/y rise in revenue from fixed broadband services. The fixed sector was hit by the ongoing rise in VoIP use, with VoIP subscriptions now outnumbering subscriptions to classic plain old telephone service (POTS) lines for the first time. Broadband services now account for over two-thirds of fixed-line income, specifically 62%, or six points more than the previous year (see France: 13 January 2012: French Telecoms Revenues Down 2.7% in Q3 Despite Doubling in Data Use).
• France Telecom Continues to be Dragged Down by French Performance: France Telecom recently announced disappointing third-quarter results which saw decreasing revenues and falling mobile device sales (see France: 27 October 2011: France Telecom's Q3 Revenues Down 3% on Slump in Mobile Device Sales), and investors will be hoping for better news when the company announces its full-year 2011 performance next month. Meanwhile, France Telecom is reportedly close to selling its Austrian unit Orange Austria to Hutchison Telecom, owner of rival operator 3 Austria, as the French incumbent looks to offload non-core assets in stagnant European markets in favour of expansion into emerging regions in Africa and Asia, following the recent sale of Orange Switzerland for EUR1.6 billion (see France: 16 January 2012: France Telecom Nears Deal with Hutchison Whampoa on Orange Austria—Report).