IHS Global Insight Perspective | |
Significance | France Telecom has indicated on its strategy on the Spanish market, following the release of its annual results. |
Implications | In terms of acquisitions, its subsidiary—Orange Spain—is not interested in cable operator Ono, but is considering TeliaSonera's low-cost mobile unit, Yoigo. France Telecom is also planning to start deploy fibre-optic infrastructure in cooperation with other alternative telcos. |
Outlook | The purchase of Yoigo is be primarily down to the price, as Orange has no inclination to take over Yoigo's no-frills clientele just for the sake of subscription growth—whereas the nature and the extent of possible fibre partnerships will shed light on whether the Spanish regulator's hands-off approach is delivering any positive outcomes in terms of competition. |
France Telecom has outlined near-term plans it has for improving the performance of its Spanish subsidiary, Orange Spain, reports Total Telecom. Commenting on the possible acquisition targets, Gervais Pelissier, the group's chief financial officer (CFO), said that the company is not interested in buying Ono—the country's largest cable operator—because "it is still a very expensive asset in terms of quality and coverage". However, Orange does not rule out the possibility of acquiring Yoigo—TeliaSonera's local mobile unit—if the price is right. Commenting on Yoigo, the CFO said that "the question is clearly the price", adding that in his opinion there is not much value in the operator's customer base, as such.
Furthermore, in regard with Orange Spain's fixed-line operations, France Telecom intends to explore the potential of collaborating more closely with other telcos in extending coverage. In the words of Pellissier, the company is "exploring further network sharing … and when it comes to very high-speed broadband development we may consider some network-sharing agreement with other alternative players in Spain".
At the same gathering with the press and investors yesterday, following the release of the group's full-year results on Wednesday (see France – Europe: 4 March 2009: France Telecom 2008 Earnings Up 1.5%), France Telecom also addressed its strategy for the U.K. market—the most notable announcement being that it has decided to outsource the operation of its local mobile network in order to reduce costs (see United Kingdom – France: 6 March 2009: Orange to Outsource U.K. Mobile Network Maintenance).
Outlook and Implications
- Flat Mobile Revenue: Orange Spain's mobile unit delivered annual revenue of 3.382 billion euro (US$4.257 billion) in 2008, which was down 0.6% year-on-year (y/y), while rolling 12-month ARPU stood at 785 euro at end-December, down from 807 euro a year earlier; of the cellco's 11.374 million subscribers (up 2.6% y/y), 6.434 million were on price plans and 4.015 million used pre-paid subscriptions. The flat revenue growth primarily reflects the tariff war, ignited amid the economic slowdown, which has entangled all operators (see Spain: 16 February 2009: Telefónica Ready to Compromise Mobile ARPU in Spain—Interview). Orange's customer mix in terms of price-plan uptake is somewhat below the market's average (see Spain: 12 February: Mobile Market Reaches 50.9 mil. Accesses, Broadband Market 9 mil. in Spain—Regulator) and, as the parent company's CFO has pointed out, adding no-frills Yoigo's clientele to it would drag down the ARPU levels further. TeliaSonera confirmed its wish to exit Spain after posting its own 2008 results last month (see Spain: 23 February 2009: Doughty Hanson, TeliaSonera in Negotiations over Yoigo—Report).
- Growth from Broadband: Although the mobile branch kept (revenue-wise) muddling through in 2008, France Telecoms fixed-line business in Spain showed growth, increasing the full-year revenue by 21.9% y/y to 736 million euro; the Internet clientele comprised 1.303 million subscriptions, which was down 6.9% y/y, but in the meantime included 863,000—9% more than at end-2007—customers served through local-loop unbundling (LLU). Citing Orange Spain's chief executive, Jean-Marc Vignolles, newspaper Cinco Dias writes that the carrier is namely talking with Vodafone and Jazztel—the other two fixed-line alternatives—over possible co-investments and network sharing arrangements as a means of deploying fibre. The Spanish telecoms regulator, CMT, having authorised Telefónica a regulatory holiday for its next-generation network (NGN), the alternative operators are pushed to start rolling out their own equivalents, if they want to keep up with the incumbent's access speeds in the long-term. If the regulatory holiday does lead in alternative roll-outs and—ultimately—a more competitive marketplace in the future, the CMT may well be able to shrug off some of the heavy criticism it has received recently (see Europe: 5 March 2009: ECTA Sees Broadband Connections Up 20% in 2008 But Warns Against Dominant Incumbents).