Neuf Cegetel

This article is about the media company. For a definition of the word "neuf", see the Wiktionary entry neuf.

Neuf Cegetel

Type	Wholly owned subsidiary
Industry	Telecommunication
Founded	2005
Headquarters	Boulogne Billancourt, France
Key people	Jacques Veyrat (CEO), Philippe Cuverville, Michel Paulin (Deputy CEOs)
Products	Fixed telephony, Mobile telephony, Broadband, Internet services, IP TV
Revenue	EUR 3,38 billion (2007)[1]
Owner(s)	SFR
Website	www.neufcegetel.fr

Neuf Cegetel is a French wireline telecom services provider and a mobile virtual network operator (MVNO) offering different services to consumers, enterprises and wholesale customers, ranking number two in the country (based on annual revenues). It was legally established in 2005 following the completion of the merger between Neuf Telecom (formerly known as LDCOM) and Cegetel. As of June 2008, the company is a wholly owned subsidiary of SFR.

History

Origins

LDCOM (future Neuf Telecom) was established with telecom deregulation in 1998 by the Louis Dreyfus Group, "with a mission to rapidly gain access to a network, penetrate into the center of the major urban areas, provide means of interconnection with the motorway networks, and offer the possibility of competitive long-distance links". The group was originally providing services to other operators and internet services providers (national and metro fiber networks, colocation and hosting centers...). In other words, it was present on the wholesale market only. LDCOM was the owner of the network. Its main subsidiary, LD Cable, was in charge of carrying out the engineering work, obtaining the necessary permits for the construction works, supplying the fiber optic cables, laying optical cables using rights of way beside waterways, through pipelines and along transport infrastructure, negotiating with local and regional authorities in France.

Cegetel was a separate company established in 1996 as a subsidiary of "Groupe SFR Cegetel", which combined a fixed line operator "Cegetel" and a wireless operator "SFR" established in 1987. Cegetel was France's second fixed-line operator, competing directly with France Telecom. It had about 2,000 employees and was using the network operated by "Telecom Development" (TD), a joint venture of Cegetel and the French railways, SNCF. It therefore had extensive network coverage in France: 32,000 kilometers of fiber along France's railway lines and highways, fiber loops in metropolitan centers, points of interconnection at the local exchange level etc.

LDCOM was a smaller company, but it was an opportunistic and fast mover player. Cegetel had good service, recognized brand especially on the enterprise and wholesale segments (over 16,000 corporate clients), but was probably more conservative and therefore was moving at a much slower pace.

Market consolidator in France

Unlike many (80+) loss-making alternative licensed operators in France, LDCOM was not affected by the so-called telecoms crash in March 2000, due to a cautious and pragmatic overall approach. From 2000 to 2003, the French telecom services market went through a major consolidation. LDCOM acquired inexpensively several alternate operators, including^[2]:

• Kertel (January 2001 - part of its customers and assets)
• Fortel (Squadran) (May 2001)
• Kaptech (December 2001)
• Belgacom France (March 2002)
• FirstMark France (May 2002)
• 9 Telecom, from Telecom Italia (August 2002)
• Ventelo France (October 2002)
• Siris, France's third largest operator, from Deutsche Telekom (May 2003)

Thanks to these acquisitions, in 2003 LDCOM became a major competitor (#3) to France Telecom, across all segments: wholesale, enterprise, residential.

In 2003, Cegetel merged with "Telecom Development" (TD) and was 65 percent owned by Groupe SFR Cegetel and 35 percent by the French railways, SNCF. Groupe SFR Cegetel was owned 56 percent by Vivendi Universal and 44 percent by Vodafone.

Mass market DSL deployment

In contrast with the North American market, DSL is the dominant broadband access technology in France, partly because the penetration of cable systems has been historically relatively low, the incumbent operator France Telecom and the domestic telecom vendor Alcatel decided in the late 1990s that ADSL was a strategic decision to make, and also because a favorable regulatory environment was subsequently offered to alternative operators for the implementation of Local Loop Unbundling (LLU).

The country liberalised the long distance market in 1998, organised LLU trials with France Telecom in January 2000 and established a legal framework for LLU in early 2001, but in practice there was no real option for alternative operators to be profitable on the broadband access market until 2003-2004. France Telecom's tariffs and technical conditions then became progressively more attractive encouraging several alternative operators, including Free Telecom (Iliad Group) and LDCOM, to invest massively in DSL infrastructures. In 2004, LDCOM was renamed "Neuf Telecom" ("N9uf Telecom") and launched its first Triple Play service on the consumer market using this type of access technology, which produced very strong growth.

Cegetel was amongst the first participants of LLU trials in January 2000. However, Cegetel subsequently slowed or froze its investments in LLU, claiming the market and regulatory conditions in France were not acceptable. It chose to offer DSL services by means of the France Telecom's wholesale offer. In a second stage it announced a major plan to invest EUR300 million in local-loop unbundling (LLU), but the decision was made probably too late. Wanadoo, the Internet subsidiary of France Telecom, Free Telecom (Iliad Group) and LDCOM gained a considerable head start and captured significant market shares.

New steps in the consolidation of the French market and IPO

Cegetel's revenues on the traditional services market were declining and the group arrived late on the DSL market. In August 2005, Neuf Telecom and its rival Cegetel merged to create Neuf Cegetel^[3]. It was the signal for further consolidation among operators and ISPs in France.

In October 2006, Neuf Cegetel announced that French competition authorities approved the acquisition of AOL France’s internet access business (505,000 customers)^[4].

To aid its expansion program and accelerate the roll-out of broadband services, an initial public offering (IPO) of its stock was successfully performed on the French Euronext exchange in October 2006. The offering was oversubscribed nearly 15 times^[5].

In July 2007, Neuf Cegetel announced that French competition authorities approved the acquisition of T-Online France (aka "Club Internet")^[6]

At the end of September 2007, the group had 3.12 million broadband-Internet clients, up 56 percent from two million a year earlier^[7].

Major FTTH investments

In 2006-2007, several services providers including France Telecom (Orange), Free Telecom (Iliad Group), Noos Numericable and Neuf Cegetel announced plans to roll out FTTH services in major population centers in France. To make such investments pay off, it was required to achieve scale i.e. to have a large number of customers. Neuf Cegetel acquired several ADSL-based Triple Play operators (see previous section) to increase its market share and became the second-largest broadband operator in France after France Telecom (Orange).

In January 2007, Neuf Cegetel purchased Mediafibre (3,000 customers), a small regional fiber-based Triple Play operator in Pau, southwest France. This operator was in charge of a famous municipal FTTH project called "Pau Broadbandcity" and therefore brought a strong expertise in this area to Neuf Cegetel.

In February 2007, Neuf Cegetel took control of Erenis, an alternate services provider which has been laying fiber in Paris since 2003 and has more than 10,000 customers^[8].

In April 2007, Neuf Cegetel announced that its FTTH-based Triple Play offer was available to 55,000 households in Paris, with internet access at speeds up to 50-Mbit/s for a head-line price of €29.90 ($40.75) per month. The services provider announced plans to invest €300 million ($408 million) in 2007, 2008 and 2009 to pass 1 million homes in the French capital and other cities, and sign up 250,000 customers.^[9].

LD Collectivités, a Neuf Cegetel subsidiary specialised in local government networks, was selected for the first public service contract to develop a FTTH network in the Paris region.

Exploring the possibilities that WiMax can offer

Its subsidiary LD Collectivités announced, in partnership with HDDR, the roll-out of WiMax services in the department of Haut Rhin and launched a WiMax network in the department of Loiret. Through their joint venture SHD, SFR and Neuf Cegetel have announced plans to roll-out a WiMax network in the region of Île-de-France.

Fixed mobile convergence and threat on the 3G market

Unlike other European countries which have 4 or 5 mobile operators, France has three mobile operators only: Orange, SFR and Bouygues Telecom, which are also the only ones to have a 3G license. In December 2006, the Court of Appeal approved the initial decision of the “Conseil de la Concurrence” (an administrative authority in charge of competition’s regulation) and confirmed FT (Orange), SFR and Bouygues Telecom would have to pay respectively 256, 220 and 58 million euros due to collusion. The National Regulatory Authority Arcep reopened the 3G beauty contest for a fourth license, but rejected the sole bid for the license from fixed broadband access provider Free Telecom (Iliad Group), because it failed to meet the required financial conditions (the same for new entrants and for the 3 incumbents). In November 2007, the French Senate approved an amendment to the country's budget bill for 2008 that allows the government to change the financial conditions for assigning the fourth license. In December 2007, Vivendi's SFR mobile phone division, which owns 40.5 percent of Neuf Cegetel, has offered to buy the rest for €4.5 billion^[7]. The goal is to challenge France Telecom in the market for combined fixed-line, internet and cellphone services and create "the biggest, strongest non-incumbent in Europe" according to the group's statement^[10] The acquisition was completed on 24 June 2008.^[11]

About the name "Neuf"

"Neuf" in French is the cardinal number "Nine". It is also the "indirect access" prefix code granted originally by the National Regulatory Authority to Telecom Italia ("9 Telecom") in 1998. "9 Telecom" was subsequently acquired by LDCOM as indicated earlier.

The prefix code "9" is dialled call by call by switched voice customers before the destination number when they place calls from a different access network (France Telecom) and when they want to select Neuf Cegetel as the preferred local or long distance operator. Because customers tend to forget to dial the prefix code, "9" was reminded in most advertisements and, to be more effective, integrated in the brand name and logo as well ("9 Telecom", "N9uf Telecom", "N9uf Cegetel"). "Neuf" also means "brand new".

Note: Today "Indirect access" is a marginal and declining business in France^[12].

Mains services

Residential segment

According to the 2007 annual report, the "Mass Market division" generated revenues of €1.437 billion or 42% of the Group’s total revenues (€3.348 billion), mainly with the following products:

• "Neuf Box": Via different broadband access technologies and a multiservice CPE (the so called "Neuf box"), Neuf Cegetel provides its customers in the larger urban areas of France with high speed internet access (up to 20 Mbit/s download with ADSL, up to 50-Mbit/s with FTTH) and landline phone services. This type of offer enables French subscribers to fully cut out France Telecom traditional phone services by using voice over broadband (VoIP), and pushed the incumbent operator to launch similar voice over broadband services in a defensive manner. The headline price is 29€90. With 3,224,000 broadband clients on December 31 2007, Neuf Cegetel is ranking number two in the country and has expanded its client base by over one million subscribers in 2007. Its broadband market share is close to 21%, up from 17% a year ago.
• "Neuf TV": The "Neuf Box" can be connected to a separate HD decoder using HomePlug powerline bridges, to provide various Digital Television packages (over 200 channels available). Neuf Cegetel has more than 750,000 TV subscribers at year-end 2007, and is ranked #4 amongst the world's leading telco TV players by number of subscribers^[13]
• "Neuf Mobile": Neuf Cegetel provides its customers with GSM telephone services through an MVNO agreement with SFR. These are often coupled with one of the "Twin" (French) packages, a SIP-based fixed mobile convergence solution based on a dual-mode Wi-Fi/GSM handset which offers unified voice, messaging and multimedia communications services for home use or for working remotely via high-speed broadband Internet connections. The TWIN phone connects to a "Neuf box" Wi-Fi access point and enables calls to be made at the same price as from a landline phone. Users receive a consolidated phone bill as a result. The TWIN phone also enables users access to their services using 500,000+ hot spots operated by Neuf Cegetel's partners (e.g. FON, Adaël, SNCF rail stations, free-hotspot.com...). During the final quarter of 2007, Neuf Cegetel claimed approximately 300,000 "Neuf Mobile" subscribers. Twin packages accounted for over 30% of the growth in the number of "Neuf Mobile" contracts sold.

On this segment, the group competes primarily with:

• Fixed services: France Telecom (Orange), Free (Iliad Group), Alice (Telecom Italia) and Numericable.
• Mobile services: France Telecom (Orange) and Bouygues Telecom

Enterprises segment

In contrast with residential pure players like Free (Iliad Group), Neuf Cegetel has also an important activity on the enterprise segment following the acquisition of Siris and Cegetel. According to the 2007 annual report, the Enterprises division generated revenues of €1.039 billion or 31% of the Group’s total revenues (€3.348 billion), mainly with the following products:

• IP services: broadband internet access, IP VPN ("9 Ipnet").
• "9Office": a multiservice offer targeting the SMB (20-250 employees) & multi-site enterprise segments based on a VoIP-enabled multiservice router (OneAccess). On the customer's side, various data services are delivered as well as ISDN PRI/BRI digital interfaces to connect the customer's PBX. On the WAN side it is connected to the Neuf Cegetel network by means of an ADSL/G.SHDSL interface.
• "9office Mobile": Neuf Cegetel provides its customers with GSM telephone services through an MVNO agreement with SFR.
• "9Pass": a multiservice offer targeting the small business segment (3-20 employees) based on a CPE developed in house using Intel and Microsoft technologies. The CPE delivers basic IP PBX voice features, LAN and Internet services. It is managed by Neuf Cegetel or a partner.
• "9 Ipnet ToIP": a managed IP PBX offer coupled with IP VPN and SIP trunking services targeting the government and large enterprise segments.
• Connectivity and legacy voice services: Leased lines, Indirect access, direct access, special numbers...

At the end of December 2007, 173,000 business access links were connected to Neuf Cegetel’s network, representing an increase of 34,000 on annual basis. The "9office" VoIP offer in particular accounted for close to 40% of new data links during the 4th quarter 2007.

On this segment, the group competes primarily with:

• Fixed services: Orange Business Services, Completel, COLT Telecom Group, Verizon Business and BT.
• Mobile services: France Telecom (Orange) and Bouygues Telecom

Wholesale segment

According to the 2007 annual report, the wholesale division generated revenues of €871 millions or 26% of the Group’s total revenues (€3.348 billion), mainly with the following products proposed to other services providers and ISPs: ADSL wholesale, IP peering, PSTN interconnect & call termination, hosting etc. This historical activity has experienced a decline linked to the discontinuation of wholesale sales to AOL and Club Internet (following the Group’s acquisition of these ISPs), the contraction in the traditional switched voice business, the decline of dial up Internet business and the end of GSM gateways business.

On this segment, the group competes primarily with France Telecom, Completel and Telecom Italia.

References

1. ^ Neuf Cegetel press release, February 8 2008[1]
2. ^ Neuf Cegetel presentation, "Long Live voice: The voice over DSL opportunity", November 20 2003 Mission and History From infrastructure builder to full-service wholesaler to integrated telco
3. ^ Neuf Cegetel press release, August 22 2005, "Birth of Neuf Cegetel, France’s leading alternative fixed telecommunications operator" [2]
4. ^ Neuf cegetel press release, October 26 2006, "After obtaining approval from competition authorities for the acquisition of AOL France customers, Neuf Cegetel’s broadband subscribers top the 2 million mark" [3]
5. ^ "Neuf Cegetel Floats Higher" in "Light Reading" OCTOBER 25, 2006 [4]
6. ^ Neuf Cegetel press release, July 2 2007, "Neuf Cegetel Mass Market broadband customers top the 3 million mark"[5]
7. ^ ^{a b} "Heavy Reading", 2007-12-20, "SFR to Swallow Neuf in $6.4B Deal"[6]
8. ^ Neuf Cegetel press release, February 20 2007, "Neuf Cegetel signs an agreement to take control of Erenis"[7]
9. ^ Source: zdnet.fr, "Très haut débit: Neuf Cegetel lance son offre d'accès par fibre optique à Paris" [8]; Light Reading, March 2007 [9]
10. ^ "Bloomberg News", Published: December 20, 2007, "SFR makes offer to buy rest of Neuf Cegetel" [10]
11. ^ "Index Announcement: Squeeze out of Neuf Cegetel". Euronext. 20 June 2008. http://www.euronext.com/fic/000/035/833/358336.pdf. Retrieved 2008-08-20. 
12. ^ [Quarterly observatory of the electronic communications market in France - 1st Quarter 2010|http://www.arcep.fr/index.php?id=10519&L=1#c17073]
13. ^ Light Reading "French Dominate IPTV Top Ten", January 14, 2008 [11]

External links

• Neuf
• The TWIN GSM/WiFi mobile offer
• Press Release from Euronext stock exchange