Orange drops €515 million on yet another cybersecurity acquisition

French telecoms group Orange is buying Dutch cybersecurity services outfit SecureLink as it looks to become a major security player.

Orange’s security division already brings in around €300 million a year and this acquisition will almost double that. It comes just a few months after Orange spent an undisclosed amount to buy Securedata, which put €50 million more revenue into the pot, so probably cost in the region of €100 million.

SecureLink seems to be more about cybersecurity services and consulting than the actual software, but that includes a fair bit of value-added reseller work. It employs 660 people and has 2,100 customers. The total headcount for the whole of Orange’s cybersecurity division will be around 1,800 so this is a pretty major boost.

“Cybersecurity is a growing priority for companies of all sizes, and we believe the two most important success factors are Scale and Proximity,” said Hugues Foulon, Executive Director of Cybersecurity at Orange. “Scale because today’s threats are global, complex, and require matching protection capabilities. Proximity because in the global IT world, you want a trusted local partner to secure your most strategic assets.

“With the acquisition of SecureData and SecureLink, Orange has the highest scale to anticipate and fend off attacks, as well as local defense teams in all the main European markets, positioning the combined organisation as the go-to defense specialist. I am looking forward to building the integrated organisation with Michel Van Den Berghe, CEO of Orange Cyberdefense, Thomas Fetten and all the teams”.

“We have been very impressed by the ambition and successful development of Orange Cyberdefense over the past few years, and are very excited to build a pan-European leader of cybersecurity together,” said Thomas Fetten, CEO at SecureLink. “Orange Cyberdefense, SecureData and SecureLink are highly complementary and share a common vision for the sector, and the combined organisation will be in a phenomenal position to address the needs of our customers, partners and employees.”

A weak France overshadowed Orange’s Q1

The telecom operator Orange reported a flat Q1, with a weak performance in its home market partially compensated by the strength in Africa and the Middle East.

Orange reported a set of stable top line numbers in its first quarter results. On Group level, the total revenue of €10.185 billion was largely flat from a year ago (-0.1%), and the EBITDAaL (earnings before interest, tax, depreciation and amortisation after lease) improved by 0.7% to reach €2.583. Due to the 8% increase in eCAPEX (“economic” CAPEX), the total operating cash flow decline by 10.2% to €951 million.

Orange 2019Q1 Group level numbers.pdf

Commenting on the results, Stéphane Richard, Chairman and CEO of the Orange Group, said that “the Group succeeded in maintaining its high quality commercial performance in spite of a particularly challenging competitive context notably in our two principal countries of France and Spain. Our strategy is paying off since EBITDAal is continuing to grow while revenues remain stable, allo wing us to reaffirm our 2019 objectives”

On geography level, France, its home and biggest market is going through a weak period. Despite registering net gain in the number of customers, the total income dropped by 1.8% to €4.408 billion, the first quarterly decline in two years. The company blamed competition, a one-off promotion of digital reading offer towards the end of the quarter, and “a weaker performance on high-end equipment sales in the 1st quarter of this year”. The move to “Convergence” was positive, but not fast enough to offset the lose in narrowband customers. The competition pressure is still visible. The Sosh package (home broadband + mobile) Orange rolled out to combat Free is gaining weight among its broadband customers, which resulted in a decline of revenues despite the growth in customer base.

Orange’s European markets, including Spain and the rest of Europe, reported modest growth, with strength in Poland (+2.6%) and Belgium & Luxembourg (+3.8%) offset by a weaker Central Europe (-1.9%). The bright spot was Africa and Middle East, which registered a 5.3% growth to reach €1.349 billion revenue, taking the market’s total revenue above Spain and just marginally behind the rest of Europe. The company’s drive to extend its 4G coverage in Africa is paying off, with mobile data service contributing to 2/3 of its mobile growth. Orange Money also saw strong enthusiasm, with the revenue up by 29% and total number of monthly active users totalling 15.5 million.

Both the Q1 results and outlook to the rest of the year spelled mixed messages for the wider telecom market and Orange’s suppliers, but negatives look to outweigh positives. On the consumer market side, the slowdown of high-end smartphone sales and prolonged replacement cycle has once again been demonstrated in the weak numbers in France. On the network market side, Orange predicts more efficiency. This includes both the network sharing deal signed with Vodafone Spain, which is expected to deliver €800 million savings over ten years, and an overall reduction in CAPEX this year.

As the CEO said, “while the level of eCapex for this quarter is higher, it should reduce slightly for 2019 as a whole, as predicted, excluding the effect of the network sharing agreement with Vodafone in Spain announced on 25 April.” This means, to achieve the annual target of reduced CAPEX, the spending will drop much faster in the rest of year. There is no timetable to start 5G auction in France yet, but it will be safe to say that any expectations of 5G spending extravaganza will be misplaced.

On the positive side, Orange has seen its efforts to diversify its business gaining traction, especially in IoT and smart homes. But these areas, fast as the growth may be, only make a small portion of Orange’s total business.

Orange Spain and ZTE complete Europe’s first standalone 5G call

The mobile operator claimed that the voice and data call over end-to-end 5G network in Valencia was the first of its kind in Spain as well as in Europe. All other trials have been done over non-standalone networks.

The Spanish branch of Orange successfully trialled a voice and data call on a “100% 5G” network with standalone architecture, the company announced. The end-to-end solution was provided by ZTE, one of Orange’s suppliers. The test achieved a peak downlink data rate of 876 Mbps on one test terminal, and 3.2 Gbps with 12 test terminals working simultaneously in the same cell.

“It is critical to understand this new and disruptive technology, with which we could close the gap from our 4G networks to offer our customers the best possible 5G network in the world when the time is right,” said Mónica Sala, Director of Networks at Orange (translated from Spanish). “The know-how of ZTE is evident in achieving this milestone and we are very proud of the results.”

The live 5G networks today, in South Korea and the US, for example, are primarily providing enhanced mobile broadband services, which can be achieved with non-standalone mode, i.e. overlaying 5G radio networks on top of 4G core. This was the architecture that Huawei used when demonstrating 5G at MWC on Vodafone’s network. On the other hand, to achieve 5G’s full capabilities, including to provide virtualised networks (e.g. network slicing for a particular client) and to run the extreme low latency applications (e.g. automatic cars) there would need end-to-end 5G networks, i.e. 5G radio and 5G core.

ZTE was also obviously happy with the success of the trial. “It is a great pleasure for us to work hand in hand with Orange for technological innovation and 5G leadership,” Xiao Ming, President of Global Sales at ZTE stressed. Orange is one of ZTE’s two biggest accounts in Europe (the other being the Three group), so holding on and expanding the partnership is critical for the company that has been struggling in the mature markets.

Orange Spain plans to extend 5G trials to other industries including construction, energy, health, automotive, and tourism, to test out the use cases. The company also said that it is going to test 5G in a handful of cities with the support provided by Red.es, the country’s digital transformation programmes, operated under the direction of the Secretary of State for Information Society and Digital Agenda.

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.

Orange Bank is on a roll

Cutting through the noise at Mobile World Congress is a tough job but Orange’s play for the financial industry is certainly a good attempt.

After a successful venture in the French market, Orange Bank CEO Paul De Leusse gave us a brief run-down of future plans for the business. Spain is on the horizon, as is Poland, while the African markets are going to be given some more love.

“The aim of Orange is to build banks in every country we operate as a telco,” said Leusse. “We want a bank which benefits from the telco and brings benefit to the telco.”

It’s a bold ambition for the business, though there certainly is strong progress being made. At the end of 2018, Orange Bank had 248,000 customers, only 40,000 of which were Orange employees, while the synergies between the telco and the bank are very apparent. 150 of the telcos branches now have banking sales people, each of which can open more than 12 accounts a month. Compared to a traditional banking representative opening three or four a month, the numbers are encouraging.

Looking at where the telco benefits the financial business, the facts are somewhat surprising. Using telco data, Leusse claims he can take out the 30% of customers who represent 80% of the credit risk, while the insight on risk is more reliable than the data from the Romanian credit bureau. And of course, the benefits head the other direction as well.

Those customers who have both a banking and telco relationship with Orange are 15% more satisfied, while churn has been decreased. The Polish business has seen a 18% churn reduction, while Orange Money customers in Africa are 40% less likely to. Orange is a massive believer in the convergence business model, but this is taking the idea to another level.

Interestingly enough, fortunes could be greater on the road, with the Spaniards the next to get the banking dream.

Leusse pointed out the in Spain there is no need for the sales staff to be certified by the financial regulator, perhaps suggesting there will be a larger retail footprint. The Spanish market is digitally more advanced than the French, with customers more readily embracing the new normality of the internet.

According to research quoted by Leusse, 77% of Spaniards suggest they would happily do without a banker, while the number is only 51% in France. 66% of Spanish customers would also be open to being advised by Djingo, the telcos digital assistant, while this number is only 50% in France. Launching a bank in Spain could be just as a promising opportunity as France, maybe even bigger.

Xiaomi brought an old phone to Barcelona but added 5G to it

Xiaomi used Mobile World Congress 2019 to launch a 5G version of its Mi Mix 3 smartphone. The product will be available in the markets by May 2019.

Under the banner of “We Make It Happen” and billed as its first Mobile World Congress product launch (despite that it took place one day before MWC started), Xiaomi introduced the Mi Mix 3 5G version. The original 4G version of the phablet / super-sized phone was launched in October 2018. The new 5G reincarnation is powered by Qualcomm’s Snapdragon 855 equipped with the new X50 5G modem.

“Xiaomi has spent tremendous efforts developing a 5G smartphone solution and Mi MIX 3 5G represents Xiaomi’s quest to create innovative products for everyone,” said Wang Xiang, Senior Vice President of Xiaomi. “We are also delighted and honoured to be working with our partners to make 5G a reality for even more users all over the world.”

By partners on this particular occasion he definitely included Qualcomm and Orange, both of which endorsed the product launched. Cristiano Amon, President of Qualcomm Incorporated, shared the stage at the event. “We are thrilled to continue our long-standing collaboration with Xiaomi to help bring deliver unprecedented 5G speeds and transformative user experiences to consumers through their latest flagship smartphone, Mi MIX 3 5G,” he said.

Then a live 5G video call on the Mi Mix 3 5G was made on stage with an off-site Orange Spain executive, using Orange network. This may look commonplace nowadays, but it made history for Xiaomi: it was Xiaomi’s first 5G video call outside of China, the company claimed. It did not let go the opportunity without a subtle poke on AT&T either. When pointing at the on-screen 5G symbol, the Xiaomi product development director stressed this is real 5G, “not fake 5G”.

With the exception of 5G, all the other features and specs of Mi Mix 3 5G are the same as its 4G predecessor. The 5G version will be available in May and is priced at 599€.

Xiaomi Mi Mix 3 launch Feb 2019

Also introduced at the event is Mi 9, its new flagship smartphone launched in China a few days ago. Xiaomi spent a fair amount of time promoting the triple-camera, especially the AI performance to support different picture taking scenarios. Also being highlighted was Mi 9’s full-curved back cover, which it claimed to be inspired by the works of Antoni Gaudí, much to the delight of the local audience.

The Mi 9 is priced at 449€ for the 64GB version, and 499€ for the 128GB version. It is open to pre-order from today in Spain, France, and Italy.

The new product launches are packaged as steps taken to carry out the company’s “dual-core strategy” of Smartphone+AIoT that Xiaomi’s founder launched recently. Xiaomi’s executive threw in quite a few impressive numbers as proofs. For example, the number of monthly active users of MIUI (Xiaomi’s skin on top of Android) has reached 224 million; more than 2,000 products have been brought to the market by over 200 companies in the Xiaomi ecosystem; there are 132 million activated Xiaomi consumer IoT products, which has made it the world’s largest consumer IoT company.

It is also collaborating with IKEA and Philips to popularise smart homes and smart lighting. To make the point, Xiaomi’s executive went into a demo home environment on stage, attempting to switch off the smart air purifier with Google Assistant voice command. He did not quite pull it off. The air purifier refused to switch off, twice. Then he gave up.

Ericsson reckons it has finally got the hang of this partnership business

Ericsson’s partnership with Juniper is actually producing results, which makes it a distinct improvement on previous efforts.

The fact that it doesn’t have a fixed line offering has always been a strategic disadvantage for Ericsson. As a result it continually flirts with companies that specialise in that stuff in the hope of being able to offer that elusive end-to-end solution without going to all the hassle of buying one of them, as Nokia did with Alcatel-Lucent.

The most high-profile example of this came when Ericsson announced its engagement to Cisco back in 2015. This strategic partnership was sold as the best of both worlds; bringing all the synergy of a merger without all the hassle. There’s a reason why M&A is still generally the preferred option however, with the Cisco partnership yielding little fruit and being left to wither on the vine.

After a couple of years Ericsson gathered the courage to get back game again, this time taking it slow via the announcement of a backhaul partnership with Juniper. Five months of chilling in front of Netflix together seems to have strengthened the relationship such that the shy couple are now “unveiling further enhancements” to their relationship.

“The positive market response to our expanded partnership with Juniper is a testimony to the strength of our joint end-to-end transport solutions,” said Per Narvinger, Head of Product Area Networks at Ericsson. “We hope to sustain this momentum by further enhancing our leading, high-performance transport portfolio to ensure that next-generation networks continue to benefit our customers.”

“By integrating complementary portfolios and technologies, Juniper Networks and Ericsson continue to partner and further develop end-to-end transport solutions for the 5G era – solutions that give service providers greater flexibility, performance, security and automation,” said Manoj Leelanivas, Chief Product Officer said Juniper Networks.

The rest of the industry seems to be really happy for them and secretly have their fingers crossed that we’ll be hearing the pitter-patter of 5G networks before long. Juniper Networks and Ericsson have implemented renewed DNA core network that supports 5G transport capacity, boosting our 5G readiness,” cooed Mikko Kannisto, Director of Transmission Networks at DNA.

Elsewhere Orange and NTT have been spending a lot more time with each other recently and things have got serious enough for them to sign a strategic R&D framework agreement, no less. What’s more they expect to “mutualise research findings in several key domains,” which sounds downright saucy, the lucky things.

“As Europe embarks on its own 5G journey, our collaboration with NTT will be very precious,” said Stéphane Richard, CEO of Orange Group. “Both parties share a commitment to continuous learning and cultural exchange, which I fundamentally believe is essential in today’s global environment. The mutualisation of our respective research learnings will enable us to identify and develop better services for customers in our respective regions, and support the development of our multinational business customers internationally.”

“Orange is one of the most innovative and important players to cooperate closely in various ways to progress AI, IoT and 5G,” said Jun Sawada, CEO of NTT Group. “With this agreement, we will be able to enhance our capabilities and accelerate digital transformation in various industries, cities, sports and international events in worldwide.”

The weather is expected to be a lot better than it was last year in Barcelona and, with Spring in the air, there’s every chance MWC 2019 will see a lot more telecoms ‘partnerships’ get started, especially after many ‘networking evenings’ on offer. We wish them all the best.

Samsung looks to capitalise on Huawei’s woes

Samsung is reported to be investing heavily in infrastructure business to fill the market gap left by Huawei’s ban from 5G business in the developed markets.

Sources inside Samsung and other industry executives have told the Reuters that Samsung is pouring resources into its telecom infrastructure business unit, aiming to seize the opportunity created by the ban on Huawei in a number of important western markets. Samsung’s infrastructure business had been insignificant until recently, trailing Huawei, Nokia, Ericsson, Cisco, and ZTE, according to figures from the research firm Dell’Oro Group. But it saw a chance when first ZTE then Huawei found themselves being shut out of the lucrative 5G markets in one country after another in the developed world.

To join the ranks of Ericsson and Nokia, Samsung is said to be moving strong management resources as well as software engineers from the smartphone unit to the infrastructure business and to have started charming Huawei’s current customers. One of the global heavyweights that has been impressed by what Samsung has got to offer is Orange. After visiting Japan, where Samsung was conducting a 5G trial, Mari-Noëlle Jégo-Laveissière, Orange’s CTO, was happy to include Samsung in its shortlist of alternative suppliers, after the telco decided to ban Huawei, its long-term top supplier, from its 5G business in France. An Orange 5G trial with Samsung will be conducted this year.

One difficulty Samsung needs to overcome is the shortage of talents. To start with it needs good engineers. To this end, Samsung’s heir apparent and de facto head Lee Jae-yong, or Jay Y. Lee as he is known in the western world, has sought the support from the Prime Minister when the latter visited Samsung in January. “We need more software engineers and want to work with the government to find that talent,” Lee was quoted by government officials. Samsung’s infrastructure unit has a workforce of about 5,000 people, both Nokia and Ericsson employ more than 100,000 people, and Huawei is said to have employed 200,000 people.

Another type of people Samsung needs to get onboard is those that can build operator relations. This needs a different skill sets from what Samsung has excelled in dealing with distribution channels for its smartphones, and it needs them to be in all the right places in the mature markets, and, better still, to have already worked with the potential operator customers. Due to the nature of business, trusty relationship with telcos often need to be cultivated for years or even decades.

However, Samsung may have just chosen a perfect timing for expansion. Both Ericsson and Nokia are laying off people, either wholesale shutting down of full business units, or selectively downsizing certain teams. Many of these functions have actually had customer interface experience. Huawei’s founder meanwhile has warned that the company may also need to adopt some cost control measures. Though they could not bolster Samsung’s strengths to the same level of its competitors, these could all be good recruitment targets for Samsung to pounce.

Orange builds out security credentials with SecureData acquisition

Orange has announced the acquisition of SecureData, building out the increasingly extensive cybersecurity operations at the telco.

The Orange Cyberdefense Division is another one of Orange’s ventures into the world of differentiation. Like banking and smart home services, this is not a segment which is necessarily core for the telco, but with a close enough link to connectivity it’s a low risk approach to diversification. With annual sales approaching €300 million, over 1,300 employees and a presence in 160 markets, it is also fast becoming more than just an ‘other bet’.

In SecureData, Orange has bought itself more of a presence in the UK, the largest Western European market for managed security services. SecureData’s existing Security Operations Centre (SOC) in Maidstone will add to the existing 9 Cyber SOC’s and 4 CERT’s around the world. The footprint is steadily increasing, gradually making the Orange security business more appealing to both national and international customers.

“SecureData, just like Orange Cyberdefense, has successfully made the transition toward Managed Security Services, and shares the same passion for Cyber,” said Hugues Foulon, Executive Director of Strategy and Cybersecurity activities at Orange.

“Cybersecurity has become a critical element for both large and small companies as they evolve in an increasing digital-reliant world. We are convinced that the combined expertise of Orange Cyberdefense and SecureData will provide a powerful resource for our customers in ensuring the protection of their valuable data.”

While Orange has not necessarily been spraying the cash everywhere, it has steadily been building its cybersecurity credentials. Aside from this purchase, Atheos and Lexsi are two other examples, with the services now being extended to 160 different countries.

These two acquisitions do date back a few years, though in cybersecurity Orange has once again proved it can think ahead of the game. This is a segment which is only starting to get the attention it rightly, and responsibly, deserves but it has been an ambition for Orange for years.

A recent survey from Tripwire claims 60% of respondents were more concerned about IoT security in 2019 compared to the previous year. IoT is a blossoming segment, an opportunity many companies will want to take advantage of for both new revenues and operational efficiency, but few know how to keep themselves secure. The perimeter of the network is about to vastly expand, but right now it is nothing more than a risk. Security needs to radically rise up the agenda.

Like getting ahead of the fibre trends across Europe, Orange looks like it onto a winner with a focus on cybersecurity. With tighter regulations on data protection and privacy, combined with increased public backlash with recent breaches and leaks, as well as new business models, security is becoming more of a priority for companies. The low-risk, long-thinking approach from Orange definitely looks to be paying off.