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The stagnant French mobile market is to receive its biggest shake-up in years this week, with new entrant Free Mobile going live on Tuesday. The subsidiary of Iliad will look to undercut rivals, harnessing a variety of network technologies to reduce its own costs and offering bundles with its existing broadband and video services.

The highlight pledge by the new 3G player is to halve the French consumer's cellphone bill, a promise which has already seen incumbents Orange, SFR and Bouygues launching their own cutprice offers. Although the market is close to saturation already, Iliad has a track record for disrupting established markets, having shaken up the fixed triple play sector already with its Free.fr brand. This was the first in the country to combine VoIP, IPTV and broadband for a flat monthly fee.

On the mobile side, it launches with a contract-free monthly plan priced at €19.99 ($25), a sum which includes unlimited calls and SMS/MMS, plus up to 3Gbytes of internet usage. This works out well over twice as cheap as rival plans, says Free. It is also offering an entry level option at just €2 ($2.50) a month with no contract, which includes 60 minutes of calls and 60 text messages, claiming to be just one-quarter of the cost of rival tariffs geared to light users.

Existing Iliad broadband customers with the Freebox home gateway will receive the unlimited mobile plan for a reduced rate of €15.99 and the low end option for free and Free is widely expected to be planning to integrate a free femtocell into the gateway, challenging SFR's free femto scheme. The full handset line-up is still to be announced, but the flagship will be the iPhone 4S, which will be offered for €1 for the first month and €19.99 a month after that (16Gb version) - though with a huge 36-month contract.

Iliad founder Xavier Niel knows that, to buck the trend which is seeing the saturating European market consolidating around large multinational brands, his firm will have to be highly innovative in its services and pricing. The other priority will be to keep network costs down in order to continue to tempt users with low data prices, and Free will use a combination of Wi-Fi, HSPA and - presumably - 4G in future, supported by its existing high capacity all-fiber backbone, a massive advantage over rivals (especially Bouygues), which are fighting to expand backhaul to meet mobile broadband demands. Free also has the ability to leverage its installed base of home gateways, especially when it rolls out femtocells, which will further increase the cost efficiency of its overall mobile data delivery systems.

Niel takes the unfashionable view that broadband providers - whether fixed or mobile - should concentrate their business models entirely on the access pipe, with services, cloud storage and content just features which ride on that. He told GigaOM that telcos should make money from access charges and by selling services to third parties, not by charging end users for voice and text. These should include support for mobile payments and ID services. "In your pocket you have three things - your keys, your phone and your wallet," he said. "I think of those three only one will remain - your phone ... it is crazy to pay for voice by the minute as voice is so cheap."

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