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French TelCo Equities Underperformed Last Week On Pricing Concerns

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  • Orange equity ended the week at -8% with Bouygues -11% compared to -6% for the CAC 40 and -2.4% for SXXP Telcos though the bonds of both were broadly in line through the market sell-off.

  • Moves appear to have been driven by pricing developments after Altice France cut mobile plan prices (200GB plan from EUR 35 to EUR 20) in response to ongoing subscriber losses. Iliad and Bouygues in turn responded with price cuts
  • The moves look contained to the mobile market with no news of big changes in broadband pricing. Bouygues' acquisition of La Poste Telecom is expected to consolidate the French broadband market, reducing pricing risks in the space though we previously noted that this deal is facing potential delays.
  • A more significant longer term price war seems unlikely due to SFR's weak financial standing and focus on the budget end of the pricing spectrum. Market segmentation by Orange and Bouygues seems likely to provide some protection at the more premium end of the market where competition could prove more destructive.
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