France Telecom will double its investment in fiber networks in 2012 to $395-$460 million and won't scale back its broadband ambitions because of intensifying competition in its home market, its chief executive said on Wednesday.
In testimony before the French National Assembly, Stephane Richard said fiber investments were key for the former state-owned monopoly to modernize its broadband network and offer high-speed Internet to customers.
France's telecoms (Paris) market has been in turmoil in recent weeks since Iliad (Paris) launched an aggressive low-cost mobile service, touching off a price war. Analysts expect the new market conditions to erode profits at other mobile operators, France Telecom, Vivendi (Paris), and Bouygues Telecom (Paris), and could lead some to trim network investments.
"The arrival of a new competitor in the mobile market a few weeks ago will not call into question our dedication to invest in fiber," said Richard. "I will protect fiber in our budget because it's crucial to our future competitiveness."
France Telecom has pledged to spend $2.6 billion by 2015 on rolling out a national fiber network. It has also signed accords with its three competitors to collaborate on fiber projects in rural areas and some mid-sized cities so as to speed up deployment and share the cost.
Nevertheless, France Telecom and its rivals have been slow to get fiber investments off the ground because of their high costs and long payback times of 30-40 years.
For example, Richard said France Telecom spent $198 million on fiber last year, while Iliad has said it spent $280 million in 2010. These levels are far short of the roughly $33 billion that France's telecoms regulator has estimated it will take to cover the country with fiber broadband.
The French government has been trying to spur its four telecoms operators to build national high speed fiber broadband networks, and in 2010 pledged several billion euros to that end.
The issue of Europe's slow pace of fiber broadband buildouts is also on the radar of policymakers elsewhere. In October, the European Union floated the idea of cutting the rates that large telecoms operators charge smaller players to rent copper-based networks as a way to spur them to invest in faster fiber optics networks.
The proposal by Digital Agenda Commissioner Neelie Kroes was immediately slammed by Telefonica and Telecom Italia, among others, who argued such a move would actually weaken companies ability to invest in fiber.
Richard echoed that stance and urged French lawmakers not to keep changing the rules on telecoms operators. "It's not by cutting off the lifeblood of operators that you will encourage them to invest," he said.
Kroes' proposal on fiber "is counterproductive to say the least," he added.
(Reporting by Leila Abboud, Gwenaelle Barzic; Editing by Elena Berton and Mark Potter)
Historically, network infrastructure is the most expensive component in a mobile operator's overall CAPEX, which holds true in China, the biggest and fastest growing 4G market in the world. This report provides an in-depth overview of market revenue, equipment shipments, and the competitive landscape for carriers. Buy now