Could Orange’s CEO end up in prison?

Orange CEO Stephane Richard is widely respected throughout the telco industry, but he is also currently embroiled in a legal battle which could land him behind bars.

For his alleged role in the misuse of public funds while he was working for the Finance Ministry, French prosecutors have called for Richard to be sentenced to three years in jail. He would only spend half this time in prison, but this would be 18 months too long for almost everyone you ask.

The trial itself is drawing to a close, but this is hardly news, dating back to the 90s and the financial affairs of businessman Bernard Tapie. After making millions and eventually an 80% stake in German sports brand Adidas, Tapie faced debts and instructed state-owned Crédit Lyonnais to sell his stake. After the sale, Tapie was unable to settle said debts and challenged Crédit Lyonnais, suggesting the bank sold shares at a depressed rate.

This is where Richard steps into the fray. Tapie backed Nicolas Sarkozy in the presidential election, which he went onto win. After this victory, the Sarkozy Government set up an independent arbitration panel to settle the case between Tapie and Crédit Lyonnais, instead of challenging the legal case brought against the bank which was the previous rhetoric.

After Tapie was awarded €403 million by the panel, the French Finance Ministry came under extreme criticism. At this point, Richard was serving as Chief of Staff for Christine Lagarde, Finance Minister at the time and now the head of the International Monetary Fund.

The players in this game are accused of creating this panel, and the subsequent settlement, as a convert reward for the support Tapie gave Sarkozy during the election campaign. This is the gloomy side of politics which causes so many to groan at the moral fibre of today’s politicians; there is always someone to thank one way or another. Since this point, a Paris court annulled the panel’s decision and ordered Tapie to repay the funds.

It’s all very nefarious, grimy and complicated, however Richard is tied up due to his position and alleged action during the latter stages of the affair.

What is clear, however, is that Richard is potentially facing prison time for his role.

As we understand it, Richard’s team is confident he will not end up on the losing side, though there is always a chance one of Europe’s leading telcos could be thrown into disaster as its CEO is locked up. Aside from a prison sentence, prosecutors are also pursuing a €100,000 fine and a ban from working for any organization where the French Government has a stake for five years. Currently, the Government owns around 13% of Orange.

Orange has no comment on the saga at this point, as this is a personal issue for Richard not the telco’s business. However, we suspect there must have been some whispered conversations behind closed doors discussing contingency plans; it would be irresponsible of the Orange management team if they were not.

The trial will likely conclude this week, though this does not mean we will be any closer to a decision. Richard will be left on the edge of his seat for the next couple of months, with a decision expected after the summer.

Europe is losing in the race to secure digital riches – DT CEO

Despite politicians around the world declaring the importance of technology and insisting their nation is one of the world leaders in digital, Deutsche Telekom CEO Tim Hottges does not believe Europe is competing with the US and Asia.

This might seem like somewhat of a bold statement, but it is entirely true. The US, led by the internet players of Silicon Valley, have dominated the consumer technology world, while the China and Japan’s heavyweight industries have conquered the industrialised segments. Europe might have a few shining lights but is largely left to collect the scraps when the bigger boys are done feasting on the bonanza.

“Europe lost the first half of the digitalisation battle,” said Hottges, speaking at Orange’s Show Hello. “The second half of the battle is about data, the cloud and the AI-based services.”

In all fairness to the continent, there has been the odd glimmer of hope. Spotify emerged from Sweden, Google’s Deepmind was spun-out of Oxford University, while Nokia and Ericsson are reconfirming their place in the world. There is occasionally the odd suggestion Europe has the potential to offer something to the global technology conversation.

What has been achieved so far cannot be undone. The US and Asia are dominant in the technology world and Europe will have to accept its place in the pecking order. That said, lessons must be learnt to ensure the next wave of opportunity does not pass the continent by. A new world order is being written as we speak, and it is being written in binary.

If Europe is to generate momentum through the AI-orientated economy, it will have to bolster the workforce, create the right regulatory landscape (a common moan from the DT boss), but also make sure the raw materials are available. If data is cash, Europeans are paupers.

As it stands, less than 4% of the world’s data is stored in the European market, according to Hottges. This is the raw material required to create and train complex, AI-driven algorithms and business models. If European data is constantly being exported to other continents, other companies and economies will feel the benefits. More of an effort needs to be made to ensure the right conditions are in place to succeed.

Conveniently, the data collected through Orange’s and DT’s new smart speaker ecosystem will be retained within the borders of the European Union. There need to be more examples like this, forcing partners to comply with data residency requirements, as opposed to taking the easy route and whisking information off to far away corners of the world.

Another interesting statistic to consider is the number of qualified developers in Europe. Recent research from Atomico claims there are currently 5.7 million developers across the continent, up 200,000 over the last 12 months, compared to 4.4 million in the US. Everyone talks about the skills gap, though it seems Europe is in a better position than the US if you look at the number of professional developers alone.

Europe has lost the first skirmishes of the digital economy, and to be fair, the fight wasn’t even close. However, the cloud-oriented, intelligent world of tomorrow offers plenty more opportunities.

Telecom Italia kicks out CEO Amos Genish

In one of the least surprising board room purges ever, Telecom Italia (or TIM for short) has got rid of its CEO Amos Genish.

“TIM’s Board of Directors met today and deliberated by a majority vote to revoke with immediate effect all powers conferred to Director Amos Genish, giving mandate to the Chairman to resolve further obligations in relation to the existing working relationship with Genish,” said a TIM announcement today.

“In accordance with the succession plan for Executive Directors adopted by TIM, the proxies revoked to Director Amos Genish were provisionally assigned to the Chairman of the Board. The Chairman of the Nomination and Remuneration Committee has called for a meeting of the latter, in compliance with its responsibility in identifying the new CEO.

“A new meeting of the Board of Directors to appoint a new CEO was convened for November 18. The Board of Directors thanks Amos Genish for the work done in the interest of the Company and all its stakeholders in these fourteen months of intense activity.”

The removal of Genish had seemed inevitable since investor group Elliott won a battle with French conglomerate Vivendi, for control of the TIM board room, back in May of this year. Genish had previously been installed as CEO while Vivendi was still calling the shots, but after winning control Elliott made all the right noises about Genish having their full confidence.

This always seemed somewhat tenuous, with Genish’s loyalties presumably under suspicion and him providing at the very least a convenient scapegoat as and when things took a bad turn at the company. That came to pass last week when TIM said it was writing down the value of its assets by €2 billion and exacerbated by a disagreement between Genish and the board over what to do about TIM’s fixed line network.

Rumours emerged early this week that Genish’s days were numbered and that the board was about to convene a special meeting to agree on his demise. Hilariously TIM issued statements to the press denying such a thing was going to happen just a day or two before it did. TIM has a rich history of deceptive press communications but this outright lie was shameless even by its standards.

“This is a shock,” Analyst Paolo Pescatore of Midia Research told “However, ongoing turmoil at the company continues to drag it down. The company is very well placed given its assets and early move to secure a leadership position in 5G. Further tussles will hand its fierce rivals a competitive edge.”

So what next? Elliott apparently has less than a week to come up with an alternative CEO that will do its bidding and the remaining Vivendi board members will presumably oppose whoever they put forward. Above everything else, however, this is another opportunity to finally appoint a CEO whose first name is Tim. Surely everyone can agree on the importance of that.

BT rumoured to offer top job to Worldpay CEO

Following the exit of Baywatch lookalike Gavin Patterson, everyone has had a go at guessing who will be the next BT CEO. The wait may well be over with BT reportedly offering the job to Philip Jansen.

According to Bloomberg, BT have been in private discussions with Jansen for some time now, with the rumours of his ascension emerging in September. People familiar with the matter suggest an offer has been made, with BT potentially making the official announcement on November 1, alongside its financial results for Q3.

Irrelevant as to whether the rumours prove true, the new boss will have a tough job turning around a business which has faced several scandals over the last 12 months, profit warnings and a turbulent relationship with UK telco watchdog Ofcom. The team also need to fix a heavy pension deficit, while also finding additional funds to ensure both its broadband and mobile networks remain competitive. Over the last three years, share price has dropped roughly 59%, with it currently being the lowest for six years. Jansen might be heading into one of the toughest jobs in telco.

Adding to the rumours of the Jansen discussions is his resignation from Worldpay which was announced last month. Jansen will remain in the role until the end of the year, though the stars do seem to align.

While there have been several names thrown around, Jansen does make a compelling case. During his tenure, Jansen oversaw the $10.4 billion acquisition and merger of Worldpay rival Vantiv, adding a few interesting bullet points to his CV. With the EE purchase still to pay dividends, perhaps a fresh set of eyes, with experience in significant M&A is an attractive idea.

Informa CEO doesn’t seem to fancy the BT job

It has been reported that Informa CEO Stephen Carter has been approached by BT as part of its search to replace CEO Gavin Patterson.

Sky News got the scoop, reporting Carter ‎’has been sounded out in the last few weeks about the post.’ Carter hasn’t publicly commented on the matter but apparently one of his unnamed friends has, confirming the approach but stressing he is not a candidate for the BT CEO gig, nor is he any part of the recruitment process.

It seems more likely that a headhunter has been ringing around senior telecoms execs to gauge their interest in running BT and Carter was on their list. Somehow this process came to the attention of Sky News and here we are. Intriguingly Carter’s mystery mate, who we believe accurately represents his position, indicated to Sky that Carter could yet be persuaded to shift his current position on the vacancy.

Carter was always likely to be on any headhunter’s shortlist, as and Light Reading (both of which are owned by Informa) have speculated previously. He has a strong telecoms background including NTL and Alcatel Lucent, as being the founding CEO of UK telecoms regulator Ofcom. But thanks to a recent M&A spending spree, including the £3.9 billion acquisition of UBM, there seems to be plenty to hold Carter’s attention at Informa right now.

The smart money is on EE boss Marc Allera to move up to the BT CEO role. The acquisition of EE at the start of 2016 has served to illustrate how behind the times the core BT business is. Allera has shown he gets the modern consumer telecoms game and is already part of the mix so he would seem to be the safe choice. Besides, apparent shopaholic Carter is unlikely to be interested in a company that has already blown its M&A budget for the next few years.

Finance man takes the helm at Intel after Krzanich ‘resignation’

After Brian Krzanich handed in his notice of resignation, Intel has announced Bob Swan will step out of the accountants office and will lead the company as Interim CEO.

An ongoing investigation by internal and external counsel has confirmed a violation of Intel’s non-fraternization policy, after it emerged Krzanich had a past consensual relationship with an Intel employee, though details on the saga are relatively thin for the moment. The search for the next CEO is underway, though with the 5G dawn beginning to emerge, appointing the right person to head the technology ambitions of the company is critical.

“The board believes strongly in Intel’s strategy and we are confident in Bob Swan’s ability to lead the company as we conduct a robust search for our next CEO,” Intel said in a statement. “Bob has been instrumental to the development and execution of Intel’s strategy, and we know the company will continue to smoothly execute. We appreciate Brian’s many contributions to Intel.”

What this means for the business is anyone’s guess, with future fortunes riding on the appointment of the next permanent CEO. Under Krzanich’s leadership, Intel’s share price has risen roughly 160%, while revenues have grown from roughly $52.7 billion across 2013 to $62.7 billion in 2017. The growing influence of cloud on the technology world could be seen as one of the accelerators to Intel’s success, it still is the leader in the market with its data-centre focused unit, though the importance of having an engineer in charge should not be overlooked. Despite challengers Intel is the leader in the data-centre market, it is now making positive moves with artificial intelligence and also more long-term bets such as autonomous vehicles.

Krzanich joined the business as a Process Engineer at Intel’s chip factory in New Mexico in 1982, before supervising assembly and testing facilities, and holding management roles within Intel’s manufacturing division. Krzanich progressed to become COO, leading Intel’s China strategy, before being appointed CEO in 2013. His experience is largely focused on engineering, research and operations, which we believe says a lot about Intel’s success over the last few years.

The culture of a business, as well as the operational progress is defined by senior managers. Krzanich is from an engineering and operational background, while under his leadership, Intel has positioned itself as a leader in the 5G race. By way of comparison, Apple in recent years has looked considerably less innovative and more like a well-oiled machine since the death of Steve Jobs and the appointment of supply-chain guru Tim Cook. BT is another example with Gavin Patterson, a marketer who lead the business down the ‘bells and whistles’ route of content and value adds as opposed to creating an excellent customer experience with investments into the network.

There is not necessarily a right or a wrong way to go about defining the leadership and culture of a business, but it has to be relevant to the ambitions of the company. Intel wants to position itself as a leader in the 5G world, therefore ambitions should be geared towards R&D, as well as collaborating with the best and brightest in the technology industry. There is still a lot of work to be done on the technology side of 5G, therefore the next appointment should be cut from the same cloth as Krzanich, someone who will want to spend money on R&D and building the best technology on offer.

Finance man Swan is a perfectly adequate appointment for the moment, he knows and would have helped build the Intel strategy, but a new CEO needs to be found sooner rather than later. And it needs to be someone from a technology background who can further the Intel roadmap to ensure the technology doesn’t fall into the realms of mediocrity; penny pinching and operational efficiency should not be top priorities right now.

BT CEO in last chance saloon as investors voice concern

New criticism of BT CEO has emerged, with some investors questioning his position at the helm as share price drops to the lowest point for six years.

According to the FT, five investors have requested a meeting with no-nonsense Chairperson Jan du Plessis to discuss whether Patterson is the right person to lead the transformation of the BT machine after numerous scandals and poor performances littering the record books in recent years. This is not the first time Patterson’s role has come into question, but calls for a change are starting to become louder.

“I don’t have much faith in Gavin,” one shareholder said. “Since he took over, it has not been a happy time for shareholders. I am not sure he is the right man for the job.”

“Shareholders are worn out,” another said.

Patterson seemed to have the ambition to take BT back to the promised lands of profitability, but delivery on the grand plan was somewhat lacking. When he took over, five years ago, BT was already struggling, and a vision to wrestle control of the content world out of the hands of the dominant Sky was the plan to turn fortunes around. Hindsight is a wonderful thing, as the BT content mission doesn’t look to be anything more than an expensive mistake now with subscription numbers heading in the wrong direction.

This might be the downfall of Patterson, as while other attempts at diversification might have been forgiven, the billions and billions spent on sub-par delivery cannot be over-looked. In truth, Sport promised and delivered, but the BT approach was fundamentally flawed. Subscribers were tempted in on the promise of football, but for the rest of the week the BT platform was mediocre at best.

Sky spent years developing a platform which was rich in content, for all demographics and moods of the individuals. It has something for every person in the family, and an intuitive interface, two aspects which complete the experience. Football is the poster-boy of the Sky content promise, but it is by no-means the only factor. Patterson and the BT content team didn’t take this into account, and now the CEO is seemingly being punished for it.

Of course this is not the only failing of Patterson over the years. The accounting scandal in Italy cannot be forgotten, neither can a quickly disintegrating relationship with regulators which should not be viewed as anything but negative. There have been some positives to take out of the last five-years, but it seems for investors, nowhere near enough.

Orange CEO gets thumbs up despite fraud trial

The Orange Board of Directors has approved the renewal of Stéphane Richard’s mandate for an additional four years, despite the fact he is being tried alongside five other suspects for complicity in fraud and embezzlement charges.

Richard denies the charges which date back to his days in the French Ministry and it would appear the other board members believe him. This announcement is a confirmation Ricard will serve on the board for an additional four years, the next stage of the process will be renewing his position as chairman of the board. Shareholders will vote at the Annual General Meeting on 4th May, though the signs are looking very positive. French Finance Minister Bruno Le Maire has already backed Richard, a good start considering the French government controls 30% of Orange shares as the largest stakeholder.

In a statement, Orange said:

“The Board was convinced by the solid results achieved by Stéphane Richard during the eight years he has spent as head of Orange. During this time, he has succeeded in restoring a positive working environment within the company and has overseen improved financial results despite strong competition in France and abroad. They also examined the development prospects as set-out by Orange’s management team, and in particular the strategic choices proposed by Stéphane Richard in terms of international development, the diversification of the Group’s activities, as well as the ongoing innovation and investment programmes both in very high-speed broadband networks and digital services. The Board members consider that these elements fully justify this renewed mark of confidence.”

Over the last couple of years, Richard has overseen the deployment of an extensive fibre network throughout Spain and France, as well as diversification into alternative markets such as IoT and banking. More may still be to come as the team experiment in smart security and energy services.

As you can see from the table below, under the leadership of Richard Orange has been heading in the right direction over the last few years:

Annual Revenues Annual Net Income CAPEX Share Price (end of year)
2017 N/A N/A N/A 17.19
2016 €40.918 billion €3.263 billion €6.971 billion 15.14
2015 €40.236 billion €2.958 billion €6.486 billion 16.63
2014 €39.445 billion €1.225 billion €5.636 billion 17.64

2017 full year results not available

The next couple of years will be an interesting period for Orange as the rewards of laying a comprehensive fibre network through France and Spain will be sought. Richard has seemingly weathered the vast expenditure of fibre and the telco is in a good place compared to others in Europe, but perhaps confidence in the CEO is coming from his commitment to continue investment in the network as opposed to content. Investment in positive customer experience over the bells and whistles of content is an approach few other telcos are taking, but the signs are promising. Perhaps the boring route of creating an exceptional experience on the network will prove to be more rewarding than the flamboyant content game.

All looks good for Richard. The only thing which could hold him back is if he ends up in prison for alleged dodgy payments of €405 million to Bernard Tapie in 2008. Trading champagne and caviar for bathtub wine and corned beef hash would not be ideal.

Orange CEO to face trial for complicity in fraud and embezzlement

Orange CEO Stephane Ricard has found himself in a bit of hot water with complicity in fraud and embezzlement charges dating back to his days in the French Ministry.

According to the Financial Times, Ricard will be tried alongside five other suspects in a case dating back to the mid-90s. Bernard Tapie, who also faces charges, received a payment of €405 million in 2008, after the businessman claimed he was defrauded by the now-defunct state-owned bank Crédit Lyonnais, after its advisors encouraged him to sell his stake in Adidas for less than what it was worth in 1993.

The matter was batted around for quite a few years before Tapie was awarded the compensation after Nicolas Sarkozy was elected president in 2007 and agreed to settle the case through arbitration. Unfortunately for Ricard, who was chief of staff of then Finance Minister Christine Lagarde at the time of the pay-out, corruption has been claimed by critics as Tapie funded Sarkozy’s campaign.

While a date for the trial has not be set, the timing could not be worse for Ricard. The CEO will face a vote at the next Orange AGM to see whether a further term as Chairman and CEO will be granted. The French government currently has a 29% stake in Orange, and therefore substantial weight when it comes to control over Ricard’s Orange career. The timing could be better.