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A decade ago, Orange started trialling convergence in the Slovakian market, but today the success proves it should be the foundation of every successful business.
“Europe is a success story and convergence is the jewel in our crown,” said Ramon Fernandez, Orange CFO and Head of Europe.
In fairness to the Orange business, it has a way of investing in ideas and leading innovation for the European telecoms industry. It wanted to diversify into financial services, so it bought a bank. It wanted to drive home convergence, so started investing heavily in fibre. The smart home, security and energy services are on the horizon, once again proving Orange does not wait around for industry consensus before making its move.
Convergence is a trend which has now seemingly caught fire in the telecoms industry, with Orange arguably the most advanced telco strategically worldwide, but perhaps it should no-longer be considered innovative. Any telco with any sense is positioning themselves for a convergence play.
In the UK, BT is making the ‘Halo’ initiative the centrepiece of the consumer business, while Vodafone’s purchase of Liberty Global’s cable assets in Germany, Hungary, Romania and the Czech Republic sets the telco in the same direction. Convergence is not innovative anymore, it is something that telcos just have to do to stay relevant.
Looking at the Orange business, Fernandez said the telco now has 10.6 million convergence customers across Europe; 5.8 million in France, 3 million in Spain and the rest split across the remaining territories in Europe. Convergence customers now account for 40% of revenues across Europe.
|Territory||Revenue to Sept 2019||Convergence customers|
|Poland||1.9 million||1.3 million|
In terms of Group revenues during the last period, Orange reported growth of 0.8% to €10.57 billion for the third quarter, adding to €20.57 billion brought in over the first half. While financial growth might not be eye-watering, the foundations being laid through the convergence strategy offer excellent opportunities in the future.
After years of investing in both mobile and fixed networks across Europe, Orange’s fibre deployments are progressing very effectively, the connectivity foundation is sound. Few telcos can compete with Orange in terms of assets across the bloc, but the customer retention benefits of convergence are allowing Orange to explore new services. Security products are being launched, connected objects are being sold, banking is expanding, energy services are being played with and the team is investing in a smart home platform. Orange is making the evolution through to Digital Service Provider, built on the foundation of connectivity convergence.
While this is an enviable position, it is not one which can be created overnight. Orange has been investing towards the convergence strategy for years, and now other operators are playing catch-up. With results proven, perhaps we should stop talking about convergence as innovation, and just the way telcos should do business.
The proposed network sharing joint venture between Orange and Proximus has been slowed as the Belgian Competition Authority (BCA) launches an investigation.
At the request of Telenor and Telenet, the Belgian authorities have placed temporary measures on Orange and Proximus to halt a network sharing joint venture while it investigates the potential impact on competition in the market. The original agreement was between the two parties was concluded in November and will remain stagnant until at least March 16.
Both Orange and Proximus have noted the complaint but rejected the basis of the opposition from Telenet.
“The sharing agreement for the mobile access network will have positive effects for the customers and for the Belgian society as a whole, in particular a faster and more extensive deployment of 5G, a significant reduction in total energy consumption and an improvement of the global mobile service experience, while maintaining a strong differentiation between the parties on services and customer experience,” the pair said in a joint statement.
As part of the joint venture, the pair have said the rollout of a joint radio access network would allow the number of mobile sites to be 20% higher compared to each operator’s current stand-alone radio access network. This improved coverage is claimed to increase the footprint to more than 10,000 households across the country.
Each party would retain full control over their own spectrum assets and operate their core networks independently to drive differentiation. The network sharing agreement would span across 2G, 3G, 4G and 5G.
While this does sound positive for the consumers of Belgium, a complaint from the third-largest operator should not be a monumental surprise.
Statistics curtesy of Ovum World Information Series (WIS)
Telenet’s has suggested the joint-venture would create a quasi-monopoly, as the number of infrastructure players in the market would be reduced from three to two. The telco also suggests BEREC guidelines would prevent such a joint-venture from materialising as it would undermine intense infrastructure competition.
Telenet is also pointing towards a similar agreement in the Czech Republic between O2 and T-Mobile. Despite this agreement was far less wide-ranging (it did not span across 2G, 3G, 4G or 5G), the European Commission opposed the tie-up with the suspicion it would have a detrimental impact on competition in the country.
With the drive towards 5G and full-fibre broadband straining CAPEX budgets throughout the industry, the impact is perhaps felt more in countries such as Belgium where populations prevent scale. Network sharing agreements are not uncommon as a means to more efficiently invest, though these are usually focused on specific geographies or limited to 5G expenditure. Other initiatives are usually in countries where the base-level of competition is higher than what is currently in play in Belgium.
While this investigation is underway, Orange and Proximus are able to begin the groundwork for the joint-venture, sending out RFPs (Request for Proposal) or select staff to be transferred for example, though Telenet has presented an interesting case. European regulators are incredibly sensitive to competition, especially in markets where there are only three telcos.
Orange has announced it has opened its new headquarters for the Africa and Middle-East region in Casablanca Finance City Tower in Morocco.
The Africa and Middle has been gradually offered more autonomy as a unit since 2015 and opening a headquarters on the continent is as much a symbolic gesture of this trend continuing. With 125 million customers across the region already, Orange is certainly making progress in an often challenging market.
“Orange is one of the rare international groups to have made the strategic choice, 20 years ago, to seek to develop in Africa and the Middle East,” said Group CEO Stephane Richard.
“We have always been convinced of the immense potential of this continent. In many ways, it can be seen as a model for digital transformation; mobile money is a great example of this.
“One of the key success factors behind new services is to develop them in Africa so that they are adapted to specific local requirements and so meet the needs of our customers. That is why we have decided to organise the management of our business in Africa and the Middle East from within the region directly from the African continent.”
While many telcos have desires to cash-in on the under-developed markets around the world, few have made as obvious a success of the ambition as Orange in Africa.
Looking at the most recent financial figures, revenues for the Africa and Middle-East business rose 7.6% for the third quarter of 2019, bringing in €1.447 billion. For the first nine months of 2019, revenues across the unit accounted for €4.185 billion. Orange now has 22.5 million 4G customers across the region, up 49% year-on-year, while a third of 44m Orange Money customers are active.
Looking forward, the prospects are looking very favourable for Orange. The team has launched 4G in 17 markets, while investing €1 billion in the networks across the year will certainly see some new developments. The team is also heavily targeting the agricultural industry with IOT services, hoping to increase revenues between 10-30% on average.
Looking at the Engage 2025 strategy, Africa and the Middle-East has been highlighted as the most significant growth engine for the business. This is potentially a very lucrative region for the telco which has laid the groundwork in recent years to realise its ambition of being the ‘reference digital operator’ in the region.
French telco Orange has been found guilty of ‘moral harassment’ by a French court, with former CEO Didier Lombard facing a suspended jail sentence.
As the punishment is below two years, and Lombard is not considered a threat to the general public, no time behind bars will actually be served, though the ruling could prompt a significant shake-up for workers rights across the country. Lombard has also been fined €15,000, while Orange has been fined €75,000.
According to Reuters, the courts decided the corporate culture of overworking employees at Orange during the period was a direct contributor to the spate of suicides.
What is worth noting is that while it has been a decade since the accusations were directed towards Orange, the company has undertaken several transformation projects to ensure the same cannot happen again.
Orange has said it will not dispute the ruling from the court and has pointed to several initiatives to correct the toxic world culture which was in place at the time.
Earlier this year, the telco created a Compensation Commission to review individual situations, which resulted in the Evaluation and Compensation Committee which began operating in October. As a preventative measure, Orange has also said it has undertaken a vast social transformation project designed to prevent workplace suffering and psychosocial risks.
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With the Essential2020 plan all but complete, Orange has released the details of the Engage2025 strategy to drive growth over the next five years.
The new strategy is going to be focused on four key pillars; reinventing the operator business model, accelerating growth in the developing markets and emerging segments, integrate artificial intelligence at the centre of every aspect of the business, and building sustainability goals through the organization.
“If I had to summarise Engage2025, Orange’s new strategic plan, I would use two words: growth and sustainability,” said CEO Stephane Ricard.
“The first one is growth. We are going to grow our core business – connectivity – by adding to our competitive edge and by making the most of our network infrastructure. We are also going to foster growth beyond connectivity in Europe thanks to three elements which set us apart from our competitors, namely Africa & the Middle East, B2B IT services and financial services.
“The second is sustainability. At Orange we are convinced that in the years ahead strong economic performance will not be possible without exemplary performance on social and environmental issues.”
Looking at the operator business model, the next five years will be focused on the development of fibre and 5G at the core of Orange. 5G will begin to be switched on across Europe throughout next year, and the team plan to transition through to a 5G core by 2023. At this point, low-latency services and network slicing will be a reality and, arguably, 5G will have actually arrived for Orange.
Another interesting element of this section is the passive infrastructure assets. Like many of its competitors, Orange will spin-off the 40,000 towers assets into a standalone business. Orange will maintain majority control of the pan-European tower company, in a move which is becoming increasingly common in the telecom world.
The second component is an obvious one; make more money in places where the business can make more money. For Orange, this means rolling out more infrastructure across Africa, increasing enterprise revenues, particularly in IOT and cybersecurity, and finally, launching the financial services unit in all European nations where Orange has a presence.
The third pillar of this strategy is artificial intelligence. AI is a collection of technologies which have incredible power to revitalise a business if implemented correctly. For Orange, this means more personalised interactions with a customer, improving back-office functions such as fraud detection, and embedding intelligence into the network strategy. The latter applies to both planning the deployment of mobile and fibre assets, as well as more efficient maintenance.
Finally, sustainability. This applies to areas which are obvious, such as helping to tackle climate change, but other areas such as being a more responsible employer. Upskilling and retraining employees is a big part of this segment, with Orange suggesting it will train 20,000 employees in network virtualisation, artificial intelligence, data, cloud computing, code and cybersecurity.
For the most part, it is difficult to measure the delivery of such a strategy, as this is more a blue-sky thinking vision being presented to investors. That said, it does give a bit more flavour to what Orange will look like in a few years, even if there are no surprises at all.
Rumours of corporate courtship between Deutsche Telekom and Orange have resurfaced by they seem as implausible as ever.
The bringer of the rumour this time is German publication Handelsblatt, which witters on for several paragraphs before getting to the point that DT CEO Timotheus Höttges is wargaming how a merger with French operator Orange would play out. Even allowing for the idiosyncrasies of Google Trnaslate, the piece seems to be thin on substance, but they presumably got the goss from somewhere so we thought we’d do a spot of war gaming of our own.
The first major impediment to such a deal would be ownership of the combined entity. You might think two former state monopolies from similar-sized countries might be roughly the same size, but that’s not the case. DT has a market cap of around €73 billion, while Orange is worth a mere €40 bil.
The last time this came up this was apparently the main deal breaker but surely shareholders should just get a stake in the combined entity in proportion to the market caps at time of deal. This would give DT shareholders roughly two thirds of the merged company and Orange one third. It’s presumably a lot more complicated than that, but it’s not immediately obvious to us why.
Then there’s the not inconsiderable matter of regulation. The European Commission isn’t a big fan of M&A because it reckons the consumer always ends up getting ripped off as a result. However in the case of telecoms this has tended to be focused on keeping at least four MNOs in each country. If the EC focuses solely on national considerations then the fact that two of the world’s largest operators merging has broader competition implications may be overlooked.
They’re not totally in the clear, however, as both have significant operations in Poland, Romania and Slovakia. They would presumably have to do that manoeuvre when they hand over a bunch of their combined assets in each country, which in turn would be made available for a new entrant to the market to ensure the magic MNO number is maintained.
But lastly, and most importantly, we have the resulting colour scheme. Unless you have an irrational love of 60s psychedelia, pink and orange have no business appearing on the same sheet of paper. If they chose to combine them, possibly in proportion with the respective market caps, we’d be left with some kind of smoked salmon abomination that would surely spell disaster for the resulting company. For this reason alone we can’t see the deal happening.
Orange has launched what it claims is the first operator-brand 5G compatible smartphone, the Orange Neva jet, which will be debuted in Romania.
While 4G and 3G compatible versions of the device will be available in various markets, the 5G version will be sold as and when 5G networks are switched-on. Romania was the first of Orange’s national business to enter the 5G fracas in recent weeks, though the rest will have to wait until 2020.
“As we gear up to launch our 5G networks in 2020, the Orange Neva jet is testimony to our long-held promise to deliver the very best innovation and technology,” said Philippe Lucas, SVP of Customer Equipment and Partnerships at Orange.
“This is the start of that journey as we prepare customers for the arrival of 5G.”
Looking at the device itself, it is a customisation of the ZTE Axon 10 Pro 5G variant. Orange is keen to point out this is not simply a re-branding of the ZTE device however, with several distinctions on both the software and hardware elements.
Starting with the software, the smartphone will use Android Pie OS software but also include the Orange Experience with Live Screen, the content aggregation tool, as well as Gestures, a feature which allows specific actions to dictate functionality, such as speed-dialling or launching apps. The app store will also feature specialised applications for the device.
On the hardware side, the design and finish of the phone have been customised for Orange. Components such as the battery, processors and cameras are identical, though let’s not forget that Orange is not a smartphone manufacturer.
Another important point to note about ZTE is that its own branded devices will not be on sale through the Orange distribution channels.
The wider range of Neva devices (start, play, zen and link) will now be available in France, Spain, Romania, Poland, Slovakia and Moldova, while the 5G version will be available as soon as the 5G networks are switched-on in the respective markets.
Orange does have history in selling its own branded devices, it has sold 12 million since 2002, though this is an interesting proposition. Priced at €899, it is certainly more friendly to the wallet than other 5G devices. Orange has an incredibly strong brand across its European footprint, so it should surprise few if this device proves to be popular.
Orange has joined the 5G fracas, launching the connectivity euphoria in Romania with a very attractive exclusive partnership with Samsung.
As the market leader in a fast-evolving market, Romania is a sensible option to lunch the Orange assault on the 5G world, but it also happens to be one of the regions where valuable spectrum assets are plentiful. With 115 MHz in the 3.4-3.6 GHz band, the much-heralded ‘Innovation Band’, this is a very comfortable position to launch 5G services.
And while the team are remaining tight-lipped on the European 5G strategy, spectrum will largely dictate how 5G services are driven over the coming months. Deputy CEO Ramon Fernandez highlighted the availability of spectrum and the success of auctions will largely inform the teams switch-on strategy over the next few months, though do not expect any major announcements before the end of the year.
Although Romania is not a market which attracts headlines consistently, there are some very interesting elements to this launch. First and foremost, the exclusive partnership with Samsung.
This is a partnership which works both ways. Samsung devices can only be sold by Orange, and Orange 5G tariffs can only be run through Samsung devices. It might sound unusual that two companies would want to limit this potential in this manner, but considering Orange is the market share leader for 4G (roughly 40%) while Samsung is the devices market share leader (estimates range between 50-55%), there are attractive gains for both parties.
The second interesting element of this announcement is the focus on Fixed Wireless Access (FWA). Orange has never been shy about its convergence ambitions, the success of bundling is evident in numerous markets but with no fixed assets in Romania it becomes difficult. There is a wholesale agreement in place with Telecom Romania, however this is far from an idea position.
With 5G, FWA becomes a much more apparent opportunity to compete with the fibre services which are being offered by competitors. It certainly isn’t perfect by any means, but if Orange can deliver the promised gigabit speeds over the air, there will certainly be demand from increasingly speed obsessed consumers.
The final twist to this story is an aspect which could count against the telco. After performing a number of speed tests across Bucharest, it became very apparent, very quickly, that the 4G network is excellent, providing speeds which even the most demanding consumer could not make use of. In delivering such eye-watering speeds over 4G, one should ask whether this weakens the selling point of 5G. As attractive as 1.2 Gbps download speeds are, who actually needs that much power now?
The initial data tariffs do look attractive, €25 for unlimited data, Orange TV, Deezer and number sharing eSIM features across multiple devices, but in creating such an comprehensive 4G network in Romania, Orange much have weakened the underlying argument for 5G.
This is of course until new services become available, though CTIO Mari-Noëlle Jégo-Laveissière highlighted the purpose of these new services is to demonstrate how the user experience can be enhanced. As new services emerge, whether they be in entertainment or the connected world, new features will be introduced. It does create a bit of a sense of purgatory, but this is a better looking 5G launch than most.