IHS Global Insight Perspective | |
Significance | France Telecom's new chief executive is looking to make his mark with some aggressive expansion plans, as the company seeks a new dawn following some uneasy times. |
Implications | France Telecom may be interested in any operations Bharti Airtel might choose to sell from its recent Zain acquisition, although it is unclear whether any of these may be offered. |
Outlook | The average mobile penetration rate in Africa is estimated at less than 45%—representing a huge opportunity for European operators looking for fresh pastures. |
The new chief executive of France Telecom has said the operator plans to double its income from emerging markets in Africa and the Middle East, and may invest as much as 7 billion euro (US$9.3 billion) to reach this goal.
In an interview with news and information services provider Bloomberg, incoming CEO Stephane Richard said France Telecom intended to expand its global presence, by acquiring a "portfolio of assets", or by buying separate licenses country by country.
The French incumbent operator has already committed some 2 billion euro to expansion over the next five years, which is expected to grow by another 1 billion euro funded by internal growth—and this figure could be more than doubled if the right acquisition opportunity presented.
France Telecom says emerging markets currently account for about 7% of its total revenue, or 3.3 billion euro out of an annual income of some 46 billion euro. The French giant, Europe's third-largest telecoms operator behind Vodafone and Telefónica, announced its free cash flow at the end of 2009 amounted to 8.3 billion euro, and the company also has predicted cash flow of some 8 billion euro for the next two years.
Outlook and Implications
- Africa Targeted as Being Ripe for Growth: The average mobile penetration rate in Africa is estimated at less than 45%—representing a huge opportunity for European operators looking for fresh pastures. France Telecom has made no secret of the fact it is focused on key expansion in West Africa, where it has operations in some huge potential markets, including Cameroon, Senegal, and Niger. Elsewhere in the North, the operator has reportedly signed an agreement to take over the management of state-owned Ethiopia Telecommunications Corp (ETC) (see Ethiopia: 5 April 2010: France Telecom Signs Agreement to Manage ETC). Bharti Airtel, India's leading mobile operator, has recently signed a deal to buy the assets of Kuwait-based operator Zain in 15 African countries, as it expands its business overseas to offset the effects of stiff competition at home. Bharti is now waiting for regulatory approval in each of the countries to formally close the deal, which will see the Indian giant become the world's fifth-largest mobile operator with a customer base of some 179 million and operations across 18 countries (see Sub-Saharan Africa: 31 March 2010: Zain Announces US$10.7-bil. Sale of African Operations to Bharti Airtel). Richard said he would be interested in picking up any operations Bharti might choose to sell from the Zain portfolio, although it is unclear whether the Indian giant will be willing to give away any of its new prize, as it has been seeking a foothold in the African market for some time. Although a buyout of a controlling stake in MTN would likely be a bit beyond France Telecom's purse, there is potential for some degree of joint operations here, if the South African group is willing. There are also a number of independent mobile operations and groups FT could target. It is already working with HITS Telecom in Uganda. Meanwhile, Vivendi—owner of France Telecom's key French rival SFR—is expanding in Africa through its Maroc Telecom unit, although any such co-operation here is less likely.
- New CEO Looking to Make His Mark: France Telecom has recently appointed Stephane Richard as its new CEO, as it looks to put 2009 and the recent global economic slump behind it. The operator recently announced its full-year 2009 earnings (EBITDA) were down 3% year-on-year (y/y) to 16.3 billion euro (US$21.9 billion), as global sales fell and the operator was hit by a weaker Polish zloty and U.K. pound (see France: 25 February 2010: France Telecom's Q4 EBITDA Down 1.3%, Approves Stephane Richard as Incoming CEO); however, there were some signs of a turnaround as cost cuts began to take effect. France Telecom's poor performance has also been exacerbated by the public-relations disaster caused by a spate of staff suicides at home, and the ensuring row with trade unions (see France: 9 March 2010: France Telecom Signs Union Deals Aimed at Improving Working Conditions). The operator has begun to consolidate its operators in stagnant Western European markets, (see United Kingdom: 2 April 2010: T-Mobile, Orange Announce Completion of U.K. Merger), and is increasingly looking to the value-added content market and broadband and data use to bolster stagnant call and SMS revenues (see France: 9 December 2009: Orange Apps Store Goes Live with 5,000 Offerings). France Telecom's new chief executive is looking to make his mark with some aggressive expansion plans, as the company seeks a new dawn following some uneasy times.