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Shift to value investment to lift French telecom operators' profitability in 2016

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French telecom operators' switch to enhanced value proposition, up selling and away from aggressive price cutting strategies will improve profitability in the sector in 2016, says Moody's Investors Service in a report.

"We believe that the French telecom market is at an inflection point as operators are moving away from aggressive pricing strategies towards providing higher value to customers to support upselling. This fundamental switch in strategies will underpin profitability improvements in the sector in 2016," says Carlos Winzer, a Moody's Senior Vice President and author of the report.

Moody's expects capital expenditure levels to remain high in the coming years, which will enhance network quality and underpin future revenue growth. The rating agency believes this investment will benefit infrastructure-based companies such as Orange, Numericable-SFR, Iliad and Bouygues Telecom.

The profitability of Orange, Numericable-SFR, Iliad and Bouygues Telecom is gradually increasing and Moody's expects this trend to continue into 2016, although competitive pressure remains high.

Industry consolidation remains a possibility with Altice potentially making another attempt to acquire Bouygues Telecom in the future. This reflects the sound industrial logic of such a deal, which offers the potential of significant cost savings from duplicative operations and corporate structures.

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Tags: France