Thomas Reynaud, Directeur Général de Free, Richard Viel, Directeur Général de Bouygues Telecom

So thank you. When I thought to myself, what if I invited both of them? I figured they'd refuse. But no, they both accepted — because you can't find more direct competitors than Free and Bouygues Telecom. Today everyone is a competitor, but you can't get more competitive than the fourth French operator. And yet, you both accepted at the same speed, with the same candor and directness.

All right, let's get started. I'd like to pose a general question to each of you in turn. How do you analyze — you who are both experts and players in the current mobile, fiber, and AI market — the French telecom market?

Well, first of all, the telecommunications market has evolved strongly. Beyond what Thomas said, everyone is equipped with mobile phones and has a box at home. We're approaching what you'd call a mature market, where of course you need to innovate to capture customers. When I started in mobile telecoms, the phone you had in '98 — six minutes of use per day. Today it's two and a half hours per day on average. At two and a half hours a day, quality, availability, customer service, your stores — all of that becomes essential. This is inevitable given the impact the smartphone has had on our daily lives. Two and a half hours per day is probably, outside of sleep, the most important thing in everyone's day. So we have a duty to consumers to provide them with services, applications, and everything they need for work or leisure. On the competitive side, these last five years have been so aggressive that there have been acquisition and retention offers that have been particularly aggressive and have accelerated permanent churn.

That invites me to ask two questions. First: these promotional offers — one of your competitors went as low as five euros for an unlimited plan, it seems. That was for retention, to prevent customers from leaving. And on the other side, there's this population that's like a flock of starlings, going from promotion to promotion — unfaithful, like Don Juans. If you're a woman and want to be happy, you shouldn't pursue a man who stares at every woman passing by. These are people who spend their lives changing operators. Is it worth fighting over with promotions? What do you think of this type of promotion that destroys investment capacity? Should we focus on this population of bargain hunters? I put this question to both of you — whoever wants to go first.

You did it once and were very unstable on pricing when launching products.

So if I understand correctly, Free is not in favor of these wild promotional operations and no longer seeks to keep the flock of starlings who go from operator to operator. Is that also the case at Bouygues?

I believe, as you mentioned, the market was stimulated by a critical situation one of our competitors faced — a kind of hemorrhaging of customers that he needed to stabilize. Regarding the French who look at every woman in the street — I'd say it's not sixty-five million French people. This segment of customers looking for bargains is a small and very minor part of the population. I wouldn't say five percent of the market is capable of switching operators; it's closer to twenty percent who have this constant ability to find deals. That's the French consumer who wants to buy French products but ends up with Chinese ones — it's normal, it's part of our culture. So it's twenty percent of the market doing this. At the same time, what we've observed is that some players who took very aggressive actions captured part of this market. Those who benefit from these offers are stuck — not for life, but for a certain time — so they don't look elsewhere. We've seen the market calm down somewhat in 2019, and we'll see what happens. But as Thomas said, at some point there needs to be profitability behind it, and you have to be very careful. If clients were to multiply their usage by ten, there would be enormous technological and commercial constraints. Our equipment manufacturers predict usage will multiply by five in the coming years. There will be capacity problems everywhere, requiring massive reinvestment in coverage and capacity. At some point, clients will need to accept contributing to these investments, especially since we're one of the cheapest markets in Europe.

So, Thomas, let's talk about the new boxes. The Freebox Delta was launched about six months ago, right? Two questions: first, how is it selling? Are people happy? Are there many returns because it didn't match expectations? And does it confirm what the press reported — a move upmarket by Free toward higher-end services and more possibilities, since the Delta box isn't just a box, it does many things in the living room. Where do you stand on this? What can you tell us about the latest boxes, especially the Delta and its little sister?

What are your estimates of Deltas distributed? Well, I'll base that on Thomas's figures — they're not public, so let me know if you Google it. Anyway, the two main investment and technology topics today are fiber and 5G. Let's start with the simpler one since it's been around longer — fiber. How many fiber-connected homes do you have right now? First question, just straightforward.

Richard, where does Bouygues stand on fiber?

Free still has its lead, so we have to wish them well. As for us, we have about 650,000 fiber clients. It will take us five years to reach a million, and then perhaps the same to reach two million. So gradually we may catch up, which is all the more interesting because our fiber market share — based on eligible connections, since we now have 8 million eligible homes — is already greater than our ADSL market share. That means we're on a trend where Bouygues' overall fixed-line market share will eventually exceed what it is today. We're moving away from the scenario of a dominant Orange operator fiberizing everything. That question is closed. But we need to remain extremely vigilant because the historical operator has managed to rebuild a very significant lead, for operational and regulatory reasons. If we want to preserve competition in telecoms for the next ten to fifteen years, it hinges on fiber optics right now. I agree with Thomas on this point. When you look at the French market structure, France was divided into three zones: the public-interest network with 13 million connections shared among different players including Orange; the medium-density zones with 11 million connections where two players — Orange at 80 percent and SFR — will share infrastructure and rent to others on a regulated basis; and the very dense zones, where Orange initially moved fastest, deploying about 6 million connections with a million still to go to fully cover that zone. We're slightly behind and working to catch up, but we need to stay vigilant.

So this price war we're witnessing, which is quite violent — sure, we benefit from it, or at least we're not sure we do, because if subscriptions are cheap but the service doesn't work in many places — on the TGV, in the countryside — you don't benefit that much. Does this prevent you from investing?

No, we are investing. But let me remind you about the New Deal, which involved an exchange: frequencies extended for about ten years in exchange for adding roughly thirty thousand antennas across France to cover remote areas. Between four operators, that's thirty thousand antennas. We'll cover roads and trains, even though from a purely physical standpoint, providing very high-speed radio at 300 km/h — I invite you to look at the physics equations — doesn't work that well. Beyond that, we have a program to expand coverage, and all operators will contribute. The only risk is in the regions where we operate in shared mode — the so-called shared-counter mode — where the four of us share investments to optimize coverage that our citizens are demanding. It's a four-year plan that requires, especially during election periods, the goodwill of local politicians to allow us to install antennas, which they're usually reluctant to do at that time.

Now let's talk about 5G. Before diving in — you know the physicist Aurélien Barrau who speaks about sustainable development and climate change. We just had François de Rugy here, and he said: 5G is like a washing machine — why not stop at 4G, since 5G will consume much more energy? Because we shorten the waves each time, requiring more energy to produce, compress, and transport information. Do you think we need 5G? The 4G works very well.

But in France, we're eighty percent nuclear. We're even at eighty-five percent renewable when you include hydropower. But in a country like Germany, 5G — we know what the CO2 emissions look like, even if it seems negligible.

If I may add to this — 5G will provide bandwidth, but the first thing 5G will provide is capacity. I mentioned earlier the risk of usage multiplying by five in the coming years. 4G technologies would not be able to absorb all those needs. So 5G will offer capacity solutions, especially in areas approaching saturation. The paradox today is the temptation to deploy 5G everywhere because it's the new world, it'll be fantastic, it'll change your life completely. I say: what matters is having decent bandwidth, and for that, in some places 5G is necessary, in others it's less so. That's regarding the first function, because it's the only one available in 2020. After that, there will be other functionalities, including slicing functions that will enable service classes in the B2B world — that's 2022, 2023, not before. I'd like to dispel the myth that 5G tomorrow morning will change everyone's life. And the last element — autonomous driving is very interesting, but the entire architecture, in virtual and distributed mode with low latency, needs to be deployed across all networks, and that will take time, because the developments are mainly being done in China by three suppliers.

Those three suppliers — Huawei, Ericsson, and Nokia? Ah yes, of course. So if they proudly announce that Nokia is doing less than the workers in silk in China, and Ericsson is doing less than Nokia — then where does that leave us?

OK, and what's the breakdown — two-thirds equipment, one-third consulting and engineering?

I imagine you both have equipment contracts with Huawei?

Yes, unfortunately there isn't a single group in Europe — and I'm talking about groups — that can say they have no Huawei equipment. They're everywhere, and for a simple reason: these groups needed Huawei at some point because they had the best products and the best quality. We'll see over time. Whether it's Orange in France — perhaps saved by the fact they don't have too much Huawei — or Orange elsewhere in the world, Huawei is probably their first supplier. I'm not talking about others, but it's the case for most operators on the market. In our case at Bouygues Telecom, less than fifty percent of our equipment is Huawei, and it's only the radio parts — absolutely not the network core, and not in major cities like Paris. That corresponded to what was needed at the time for national security and political concerns. Today, I believe the issue is that laws could be introduced to better monitor these equipment choices, especially regarding 5G. In that context, the question is whether we'll have the means to verify, and whether it happens quickly enough not to delay the rollout. It would be quite something if France's control systems prevented Huawei from making its services available on the French market and didn't allow faster deployment.

Now the last question we always ask: what about reducing from four to three operators? Obviously, you're the CEOs and the shareholders decide these things. The shareholders in this industry are quite the personalities — whether it's Xavier Niel, Martin Bouygues, or Patrick Drahi, they're strong-willed people. Is consolidation a realistic perspective, or should we let it go? And specifically, Free — does Free want consolidation?

We at Bouygues are twenty-two years old — I'm a bit older than Thomas, so wisdom will speak. For things to happen, you always need three things: a buyer, a seller, and an agreed-upon price. I have the feeling that equation is very unlikely to come together. That's what we sense — we have three competitors right here, and we're not going to ask them to merge. It would be a miracle, and I don't think so.

Well, thank you very much. Let's give them a round of applause. I imagine it was a fraternal and sporting exchange — and I pictured it just that way. Thank you very much.