Telecom

Why Richard Branson's French Revolution Isn't So Revolutionary


Sir Richard Branson attends a Virgin Mobile news conference in Paris, on Sept. 18, 2013

Photograph by Eric Piermont/AFP via Getty Images

Sir Richard Branson attends a Virgin Mobile news conference in Paris, on Sept. 18, 2013

The price war among French mobile phone operators has a new combatant: British tycoon Richard Branson, who rode through the streets of Paris this week in Che Guevara fatigues to announce what he billed as a “revolutionary” deal by his Virgin Mobile in France.

Virgin will offer unlimited calling and texting within France, unlimited calls to phones in some 50 other countries, and 10 gigabytes of data—as well as a free Android smartphone—all for €20 (about $26.70) a month. “We have a chance of shaking up the industry,” Branson told Bloomberg News, adding that Virgin will roll out similar plans in other countries.

Strange as it may seem, the French may not be bowled over by this deal. For one thing, subscribers would be required to use the Virgin-supplied handset, an entry-level Acer Liquid Z3 model that can’t match the capabilities of higher-end phones made by Apple (AAPL), Samsung Electronics (005930:KS), and others.

What’s more, €20 a month for mobile service is not all that cheap in France, where rates have plummeted since Paris-based Groupe Iliad (ILD:FP) launched its Free mobile service last year. Iliad’s service isn’t free, but it also offers a €20-a-month plan, and subscribers can use any handset they want. Free’s cheapest mobile plan, with very limited phoning and texting, costs only €2 per month.

Even Virgin’s “revolutionary” sales pitch doesn’t sound new. The latest version of Iliad’s triple-play service for Internet, phone, and television is called Freebox Revolution.

Virgin Mobile entered France in 2006 and is the country’s biggest virtual network operator, meaning that it essentially rents space on other operators’ networks rather than having its own. But with 1.7 million subscribers, it’s far behind Free, which has attracted more than 6.8 million in less than two years of service. Free, in turn, has only about 10 percent (pdf) of the French market. Incumbent operators Orange (ORA:FP) and SFR (VIV:FP) together have more than 50 percent, while Bouygues Telecom (EN:FP) has 15 percent.

Bouygues, which is launching its 4G mobile offer this fall, confirmed to the French newspaper Les Echos this week that it has signed an agreement to provide 4G service to Virgin Mobile in France, starting in 2014.

Matlack is a Paris correspondent for Bloomberg Businessweek.

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