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In just nine months of operation, Free has attracted 4.4 million customers, or 6.4 percent of the country’s mobile market, putting enormous pressures on France’s big three. Orange gained 320,000 customers, SFR gained 40,000 and Bouygues Telecom gained 124,000. Free has achieved that feat by offering dirt-cheap mobile voice and data plans, which it maintains in part by offloading much of its traffic onto the millions of home Wi-Fi access points used by its broadband customers.

Some of Free’s enormous growth, however, can be attributed to its free mobile plan, a baseline 60 minute/60 SMS plan it makes available to Iliad’s 5.27 million residential broadband customers. Free doesn’t seem to have much trouble finding paying customers, though.

Despite the low cost of its plans, Free generated €238 million (US $304 million) in revenues in the third quarter. When you subtract handset sales revenue from that number you get an monthly average revenue per user (ARPU) of roughly €16 per month. That’s a pittance compared to what the typical U.S. carrier brings in each month, but price competition is much steeper in Europe, and Free’s whole business model is based on pushing those prices down even further.

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What’s next? Faster and cheaper mobile networks, an array of new devices to connect to those networks, disruptive payment models, and more captivating user interfaces. So which companies are likely to help power that new wave of innovation? Welcome to The Mobile 15.

These aren’t necessarily the most successful companies in the mobile world, though you could argue that a few of them might qualify for those lists as well. Rather, what we’re highlighting here is simply innovation: These are the companies, startups and giants alike, that are changing, or could potentially change, the mobile landscape in the most profound ways. We’ll be talking about this list — as well as many of broader themes and challenges in mobile– at Mobilize, our conference in San Francisco later this week.

The Mobile 15 includes some big brands, like Alcatel-Lucent and Samsung, but also some lesser-known names, like the printed memory company ThinFilm and crowdsourced traffic app developer Waze. Some of our picks may surprise you, like the inclusion of long-suffering Nokia. We know Nokia has hit a rough patch in recent years, but we think its attempts to radically reinvent itself with a new OS and new technologies are compelling — see more on our rationale below.

A word about our methodology: To create the list, we didn’t simply pick a bunch of names we liked and throw them into a spreadsheet. Our team — which included writers Katie Fehrenbacher, Kevin Tofel, Ryan Kim and Stacey Higginbotham– submitted dozens of candidates in categories ranging from app development to handset technologies to infrastructure vendors. We even included the Internet of Things — companies are turning everything from medical devices, energy-management systems and product packaging into small mobile computers.

We then graded every company on several different measures of innovation. Those with the highest total innovation scores earned a spot on our Mobile 15 list. Some of these companies, like Israeli startup Intucell,  are working on one-time innovations, while others, like Apple, of course, have a longer track record of breakthroughs. What connects all the companies on our list is that they will have a big impact on the mobile industry.

So keep your eye on these companies in coming months. To the 15!

—Kevin Fitchard

Go to page 2 (of 16) on GigaOM .

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Free Mobile, owned by entrepreneur Xavier Niel’s ISP Iliad, now accounts for 5.4 percent of France’s roughly 67 million mobile subscribers. It still has a long way to go before its catches up to smallest of France’s three incumbents Bouygues Telecom, which has 11 million subscribers, but Bouygues, France Telecom’s Orange and Vivendi’s SFR are all worried about Free’s momentum.

Iliad founder Xavier Niel

Since the French mobile market is saturated, Free’s new customers are primarily defections from those three operators. That’s set off a price war among France’s carriers, and a few have begun imitating Free’s strategy of using Wi-Fi to offload mobile traffic. Bouygues has signed a deal with Devicescape to access its virtual hotspot network. The pressures of that new competition has even prompted France Telecom CEO Stephane Richard to suggest that all of the country’s operators start sharing networks to cut costs, Reuters reported.

Still, Free’s growth is coming at some cost to Iliad. The wireless group brought in €320 million (US $404 million) in new revenues for Iliad, but the division also saw a €44 million operational loss.

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Devicescape doesn’t own its network. Instead it uses crowdsourcing software embedded in millions of customers’ smartphones to identify and test the quality of open hotspots around the world. It then forms a virtual network around those free access points, which Devicescape customers automatically link to when in range. Last month, Devicescape announced a deal with Intel to add its virtual network capabilities to Intel-powered Ultrabooks and tablets.

Free Mobile and Bouygues’ Wi-Fi networks won’t have much overlap as they target different kinds of hotspots. Free’s network is built into the home broadband set-top boxes Iliad installs in residential customers’ homes. So its coverage is limited to areas where people live and is optimized primarily for indoor usage.

While Devicescape’s network does include some open residential access points, it also incorporates the free Wi-Fi offered by local governments, restaurants, coffee shops and retail businesses. If you’re in a public plaza, you’re probably much more likely to encounter a Devicescape connection than a Free Mobile connection. But Devicescape doesn’t have the sheer volume of nodes as Iliad. It offers 8 million hotspots, but only a fraction of them are in France (Devicescape doesn’t break down numbers by country). Bouygues customers, though, will have access to the full network when they leave France.

Since Free Mobile launched five months ago, it has shaken up the normally staid French mobile industry, setting off price wars with the big three carriers in France. In the first quarter, Free added 2.6 million customers – an unprecedented haul for a country the size of France – lured in by its ultra-cheap voice and data plans.

Free, however, may have some trouble keeping its revolution going. It’s leaning heavily of its competitor/network partner Orange to supply 3G coverage in the large portions of France Free’s HSPA+ network doesn’t cover. For every customer Free steals from Orange, it winds up paying the carrier back in roaming fees.

Free’s hotspot network only went live in April so it has yet to make an impact on Iliad’s financial statements. We’ll have to wait to see if Free can truly use that huge resource to manage its data costs and whether operators like Orange and Bouygues can overcome that advantage with their own Wi-Fi services.

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So far it’s been clear that the company has been winning users from incumbent mobile networks, with an incredibly low-cost package that starts at just a few Euros each month. But precisely how many people have signed up has been a mystery — until now.

The numbers are in, and they’re higher than most estimates: in the three months since officially launching, Free has brought on 2.6 million new subscribers.

That’s an unprecedented number, at least in the last decade or so of the European mobile market.

To put it into context, France has a market for around 67 million mobile subscriptions. The current leader, France Telecom’s Orange, has around 24 million users, followed by Vivendi-owned SFR, with 20 million, and third place Bouygues Telecom with around 11 million. Free is now firmly in fourth spot, with around 4 percent of the overall market.

And it seems that it has taken its subscribers from those big rivals, not the pre-pay market, since the number of requests to switch numbers from one operator to another is also 2.6 million (which is triple the usual rate).

Still, things aren’t perfect. Many consumers have complained that Free’s network is poor, and it’s not yet clear whether the WiFi offloading service — which was only switched on last month — is operating as intended. At the same time, rival networks say that the rate of defections has slowed dramatically in recent weeks, perhaps as customers wise up.

There’s also the question of finance — how much it cost to get those 2.6 million users on board, and how expensive the system that Free operates (which is reliant on a deal with Orange) actually is. But Free has deep pockets thanks to its parent company, French ISP Iliad. One thing’s for certain: all eyes will be on its next quarterly report in August.

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While competitors griped about the brash new entrant, the reality is that Free wasn’t slashing prices for no reason — it had an innovative method up its sleeve: to offload a large amount of traffic to its network of 4 million Wi-Fi hotspots spread across the nation.

But after an initial boost of users who switched to Free, which is part of billionaire entrepreneur Xavier Niel’s Iliad Group, the question now is whether the service can keep them for long enough to become a serious competitor.

While somewhere between 800,000 and 2 million users defected from rival services, those competitors now say that the shift has slowed down dramatically.

According to Les Echos, Orange France marketing director Alice Holzmann says that:

The number of requests for change of operator — which had skyrocketed during the first half of January — has dried up. Today she says “the number of applications for portability has returned to the same level as it was prior to the launch of Free.”

In addition, each week around a thousand customers who had switched to Free rejoin Orange, SFR or Bouygues Telecom. So it’s become a numbers game — how can Free balance growth and stop the sort of churn that could undermine its strategy right from the start?

While the reasoning for the customer shift is not yet clear, the fact that the Wi-Fi offloading was only rolled out last week could be playing a big part. And, of course, rivals have a big reason for playing up defections — when the reality is that high churn levels are a natural, accepted part of the mobile business.

Coming several months after the initial launch, it’s enough time for users to become disenchanted or frustrated. Can it last the distance?

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Those 201,000 lost subscribers may not seem like a lot, but keep in mind that European countries don’t grow operators quite as large as they do here in the States. With 27 million subscribers, Orange is smaller than even T-Mobile USA, which has 34 million customers. Orange saw more than 1 million overall terminations in the period, but those were offset by 837,000 new customers. So while Free is definitely having an impact, it’s not as if customers are shunning the major operators now that Free is on the scene.

Free uses its 5 million Wi-Fi access points located in customer homes as the backbone of its network. Wi-Fi is the secret to its low prices, and Free is using that advantage to the hilt, offering unlimited voice, SMS and data plans for a mere €2520 (U.S. $25.50) a month. When customers leave Wi-Fi coverage, they connect to HSPA networks built either by Free or by its roaming partner (which is, ironically, Orange). While on the cellular network, they face 3 GB monthly caps, but even with restricted use, Free’s data prices far undercut anything France’s three major operators are offering.

Free’s momentum may have slowed down considerably since its high-profile launch in January. Orange said that on the day following Free’s debut it received 150,000 number portability requests, i.e., customers moving their phone numbers over to other operators. That rate has since slowed down to 15,000 per day. Orange has also dropped its rates considerably, offering monthly voice and data plans below €10, but Free’s cheapest plan is an astonishing €2 a month.

Image of Eugene Delacroix painting courtesy of the Louvre.

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