Preamble
Orange SA is perhaps the global carrier with operations in the most diverse geographies and cultures. From its headquarters in Paris, Orange (formerly France Telecom) now serves 265.162,000 subscribers worldwide with mobile, broadband, fixed telephony, TV and a range of advanced enterprise services. In Part 1 of this series, the company’s recent performance indicators were covered; in Part 2 the two growth segments, Africa and mobile money, were profiled. Part 3 will cover Orange’s innovation activities and growth opportunity in Spain.
The inertia of incumbency
By any measure, Orange is enormous. With 155,000 employees supporting 265 million customers in 29 countries, the management challenge of guiding such a large enterprise must be considerable. Like many formerly fully-state owned, incumbent, fixed line operators, the former France Telecom has a certain inertia due to its heritage and ongoing regulatory and social obligations. Earlier this year, Orange reached a labour agreement with the main trade union representing it workers in France. The contract provides an average wage increase of 2.3% and offers some special incentives to support young employees who have joined the company in recent years. Orange has about 95,000 employees in France.
Given the large employee base, it may seem incongruous to think of Orange as an innovation leader, but this has clearly been the ambition of the company’s management for many years. Of course some of the company’s history coincides with pioneering telecommunication technologies that were developed in France. The Minitel comes to mind – the iconic online videotext service that scaled to millions of terminals across France in the years before the Web. France Telecom officially retired the Minitel service in June 2012. Today, Orange has approximately 650 employees directly in the R&D programmes and the company is involved in 100 research partnerships with universities and public laboratories in France and abroad.
Looking for start-ups
Orange Fab is the company’s international accelerator or start-ups. The program, launched in 2013 and now active in 14 countries, creates commercial partnerships between chosen start-ups and business units inside of Orange. It functions as a launch pad by providing business advice as well as local and international visibility. The latest location for an Orange Fab is Belgium/Luxembourg, where the company hopes to cultivate specialists in Big Data, AI, IoT and all the hot topics of the industry. To date, Orange Fab has contributed to the development of nearly 250 start-ups worldwide.
In April, Orange and Facebook kicked off a program designed to support start-ups focused on network infrastructure development. Orange, a member of the Telecom Infra Project (TIP) initiated by Facebook, said this new partnership would identify and support start-ups focused on network infrastructure technology. The Orange Fab, France Telecom Track accelerator, will support and guidance from experts at Orange, TIP and Facebook, as well as facilitate collaboration and investment opportunities. The project is managed through Orange Fab France, Orange’s established accelerator program for start-ups located at the Orange Gardens campus in Paris.
Expansion on its southern border
Outside its home market, Spain is perhaps the most important region of focus for Orange, where the company has the ambition to reach 14 million connected homes by the end of 2019 – a major incursion into Telefonica’s home market. Already, Orange has more fibre-connections in Spain than it does in France. Currently, a total of 21.5 million households had fibre connectivity across the group’s footprint at the end of March 2017 (up 53% year on year), of which 10.0 million were in Spain, 7.4 million in France, 2.1 million in Romania (following the cross-network-sharing agreement with Telekom Romania), 1.7 million in Poland and 352,000 in Slovakia.
In Spain, despite heavy discounting from competitors since last December, Orange’s overall Q1 2017 revenue grew by 8.5%, suppressing the 7.9% the group achieved in Q4 2016 and more broadly over the full year 2016 where Orange widely over performed its two closest competitors. Mobile revenue accelerated to more than 8%, driven by a 5.4% growth in the contract base, and 4.6% growth in mobile quarterly ARPU, supported by recent service upgrades, the latest on the Jazztel brand and on the Orange brand. The company also reported strong results for commercial sales in both fixed broadband with 196,000 net fibre sales for the quarter (1.806 million fibre customers at March 31, 2017) and mobile contracts with 119,000 net sales.
As of the first quarter of 2017, Orange Spain had a total of 8.2 million customers. The contract customer base grew 3.2% year on year to 11.297 million customers and the quarterly ARPU of contracts rose 4.0%. Growth was also significant in mobile services provided to other carriers, in particular the growth of MVNOs and network sharing. Fixed services rose 7.5% in the first quarter, led by continued strong revenue growth in fixed broadband (up 8.5%). Fixed broadband had 4.2 million customers at the end of March (up 5.4% year on year), and quarterly ARPU rose 3.0%. TV services also rose rapidly, with 537,000 customers at the end of March, led by the success of content offers and notably the broadcasts of football championships.
In 2015, Orange acquired Jazztel, a network operator offering broadband and triple play services in Spain, for approximately Euro 3.4 billion. With Jazztel, Orange’s fibre network reached 9.6 million connectible homes as of December 31, 2016. A joint investment agreement with MasMovil in July 2016 established the second largest fixed high-speed network. The latest figures from Q1 2017 show the incumbent, Movistar (Telefonica), losing some 25,000 subscribers, while Orange, MasMovil and Vodafone each gained subscribers.
