Operator group Orange reported healthy Q1 numbers in April, with revenue and EBITDA growing for the first time since 2008. Against this positive backdrop, delegate CEO (Finance and Strategy) Ramon Fernandez (pictured) met with reporters in Paris this week to offer an update on the company’s strategy.
Here are the highlights of his comments:
– Orange raised its 2017 capex guidance to €7.2 billion, up €100 million on its earlier forecast, as it ramps up fibre investment in Spain (Fernandez called its 2015 Jazztel acquisition “probably the best deal Orange has done in a long time”). In 2016 the operator group invested close to €7 billion across its footprint in Africa, Europe and the Middle East.
– The operator expects capex to peak in 2018/19 as it prepares for the launch of 5G. However, Fernandez warned the picture isn’t clear on 5G spending or rollout: “We don’t have all the answers yet as standards aren’t finalised…[Our forecast] incorporates some expenditure related to 5G, but you have to have the full picture to make a full assessment of the level of capex that will be required. Our assumption is we are reaching the peak in these years and thereafter it should go back down.” The Orange executive will take 5G launches “on a country by country” basis, noting regulatory constraints such as spectrum availability: “Obviously France is our home market – you can imagine that France will be very high on the agenda.”
– Orange is diversifying big time, and much has been made of its plans to launch a banking service in its domestic market (see our separate story here). By 2018 financial services will generate around €400 million a year in revenue, while IoT is planned to become a €600 million business: “The global target of having an extra billion revenue by 2018 is very much correct,” confirmed Fernandez.
– While Orange attempts to turn itself into a bank, Fernandez isn’t optimistic other sectors of the ecosystem could threaten its own core services. Asked whether Facebook could become a telco, Fernandez responded: “As a telecom operator I don’t see them coming.”
– Orange is a longtime (but frustrated) supporter of consolidation in the French operator market. Following failed attempts to agree a Bouygues Telecom merger, Fernandez stated the operator remains convinced “consolidation would be good for the market as a whole for all operators and would facilitate the very important investments required by broadband, mobile and 5G tomorrow.” For now, though, the company’s strategy is to deliver on the basis the market will continue to have four mobile operators.
– And don’t expect Orange to splash the cash on an acquisition spree across Europe: “There is a view in some cases that the absence of in-market consolidation would accelerate pan European consolidation – I think that’s the wrong view,” said Fernandez, adding: “Our strategy is not to go into pan European consolidation – our strategy is to be stronger where we are operating.” On the prospect of any further M&A activity across its EMEA footprint (following its Spanish deal and four African markets last year), Fernandez noted the company will remain “very disciplined.”
– Finally, Fernandez touched on the subject of how Europe’s regulatory bodies are tackling the issue of online digital players riding on the back of operator networks: “I’m happy to see us going in the right direction because there is an issue of a level playing field….There has been some progress. The awareness of the imbalance is better than before.”
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