Monday, May 12, 2014

French Mobile Service Providers Have a Revenue Per Employee Problem

It often is possible to suggest that operating costs for incumbent service providers are too high, for the level of competition in their core markets. Lower operating costs are an advantage attacking service providers, large and small, often employ when competing with incumbents.

Sometimes, though, even attackers can find their costs out of line with other key competitors.

Consider that Bouygues in France has about 11.1 million mobile customers, and nine million employees, while Illiad’s Free Mobile serves eight million mobile customers with 4,500 employees.

Likewise, Bouygues has sales of about 4.17 million euros, while Free Mobile has sales of about 3.7 million euros.

In other words, Bouygues generates gross revenue of about 463 euros per employee, while Free Mobile earns about 1,777 euros per employee.

SFR, newly purchased by Numericable, has mobile revenue of about 1258 euros per employee.

Orange, by way of comparison, apparently generates only about 208 euros per employee. That is perhaps a measure of how much more costs need to be cut at Orange, to compete long term in the French mobile market.

Free Mobile generates an order of magnitude more revenue per employee as does Orange. Even Bouygues generates double the revenue per employee as does Orange.

To be sure, Orange continues to have significant French government investment, so social goals--especially employment--are a consideration for Orange.

To be sure, by some estimates perhaps 33 percent of current employees will retire over the next six or seven years, allowing Orange a chance to gradually reduce the labor intensity of its French operations, assuming the French government will allow that to happen.

Some doubt much will be tolerated on that score, making it tough for Orange to get its cost structure in line with its major competitors, precisely at the point that SFR now will be able to marry cable TV services and fixed line high speed access with mobile service, more directly challenging Orange.

Also, Orange carries significant long term debt on its books as well, perhaps 30 billion euros. Paying down that debt on the basis of existing cash flow seems unlikely in the extreme.

For its part, Bouygues now seems likely to cut employees by a significant amount, in an effort to align its revenue per employee more closely with those of the other competitive French mobile service providers.

Time Warner Cable, not among the best managed U.S. cable TV companies, generates revenue of about $436,000 per employee.

The average sales per AT&T employee totaled $495,000 in 2012, up from $209,000 in 2006. At Verizon, revenue per employee has been about 669,000.

So at least for the moment, U.S. tier one service providers are vastly outperforming French mobile operators in terms of revenue per employee.


source: Le Figaro

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