France Telecom

Swiss networks to merge; France Telecom become majority owner

Paul Rasmussen — Wed, 25 Nov 2009 12:41:19 -0500

The agreement to merge the Swiss-based operators Orange and Sunrise has given fresh momentum to the consolidation of Europe's telecoms sector. The companies, respectively owned by France Telecom (FT) and Denmark's TDC, will see FT paying €1.5 billion to TDC to gain a 75 per cent ownership of the new company.

Analysts believe that the merged firm - with around 3.4 million customers and a market share approach 40 per cent, should be able to offer stronger competition to Swisscom, the state-controlled market leader. Also, significant Capex and Opex savings look possible by reducing the number of planned antenna sites by around a third. Estimates provided by FT indicate that Opex savings could reach an annual run-rate of €132 million, with Capex savings of €376 million expected between 2010 and 2015.

Gervais Pellissier, FT's deputy chief executive, said, "Following the UK joint venture between Orange and T-Mobile, FT completes another major in-market consolidation, consistent with our M&A policy". Jesper Ovesen, CFO of TDC, said the deal "is a natural last step towards TDC focusing on the Nordic markets, which is our strategic goal".

Neither executive made reference to job redundancies, but there is significant overlap between Orange's and Sunrise's operations in Switzerland.

For more on this story:
Financial Times

Mobile data growth is recession proof, claims Orange exec

Paul Rasmussen — Fri, 13 Nov 2009 12:46:54 -0500

The seemingly unstoppable demand for mobile internet access and data services appears to be recession proof, said the global head of France Telecom's Orange mobile business, Olaf Swantee.

He has stated that 24 per cent of its mobile customers were using 30Mb of data per month, compared with just 17 per cent of the customer base who were using 25Mb in February this year, and it includes customers who took pay-as-you-go and pay monthly contracts. It does not include mobile broadband customers.

While Swantee admitted that voice traffic in mature markets was reaching ‘stabilisation', "non-voice revenues seem to be quite recession proof, with music services very successful, and have exceeded expectations."

However, Swantee accepted that the growth of mobile data and the recent trialling of high definition voice services would put pressure on their network, but said they had invested in their 3G infrastructure accordingly.

Of note were comments made by the FT Orange exec concerning network sharing and mergers. Swantee claimed that FT would look for such deals where it made sense in other markets - hinting that the group was looking at potential in-country consolidation opportunities.

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Reuters

T-Mobile and Orange agree JV terms, huge costs savings promised

Paul Rasmussen — Fri, 06 Nov 2009 12:23:42 -0500

Two months after entering exclusive negotiations, terms have been agreed to between Deutsche Telekom and France Telecom over the merging of their mobile operations in the UK. The companies said that the 50:50 joint-venture should produce savings in excess of €4 billion, generate revenues of €9.4 billion and EBITDA of €2.1 billion.

However, these costs savings are seemingly based on some far-reaching assumptions. The merger statement claimed that the Opex savings of €490 million per year from 2014 onwards were dependent on up to €880 million in integration costs over the period from 2010 to 2014, which relate mainly to the decommissioning of mobile sites, the rationalisation of the network of retail stores and the streamlining of operations.

The JV anticipates large scale Capex saving over the first five years due to the integration and unification of the networks and from jointly expanding 3G coverage. The potential for Capex savings, net of integration Capex, is estimated by the JV at €680 million on a cumulative basis over 2010-2014, prior to stabilising at approximately €110million a year from 2015 onwards.

The leadership of the new company, which will have over 28 million customers, has been fudged by having Tom Alexander, currently CEO of Orange UK, as CEO and Richard Moat, currently CEO of T-Mobile UK, as COO. The two brands will continue to operate separately for 18 months after which branding alternatives for the JV will be developed.

For more on this story:
Cellular News and Mobile News

Orange UK revenues down 15% despite booming mobile broadband sales

Paul Rasmussen — Fri, 30 Oct 2009 14:26:54 -0400

The Orange PR machine has been in overdrive with the agreement the company has made to become the first operator to offer Google Mobile App across Europe. However, this interesting alliance was not adequate to disguise the fact that its UK Q3 revenues were down 15 per cent at £1.14 billion, while revenues for the first nine months of 2009 are also down around 15 per cent to £3.41 billion.

On a brighter note, Orange revealed that it recorded a 64 per cent rise in mobile internet subscriptions during the third quarter of 2009, reaching a total of around 4.7 million customers. The company was recently rated as the UK's No. 1 mobile broadband provider for getting connected and staying connected in a YouGov survey. Subscribers have benefited from cheaper mobile broadband plans with prices starting at £4.89 a month for speeds up to 3.6Mbps.

The picture is not much different for the parent company of Orange UK, France Telecom (FT), which has reported Q3 profits down by just over eight per cent. The company partly blamed this poor performance on regulatory measures but also the impact of the strong euro versus the Polish zloty and the British pound. Poland generates 10 per cent of FT's total revenue, while UK operations account for about 11 per cent. Domestic revenue accounts for almost half of overall FT group sales.

For more on this story:
Cable and Telegeography

France Telecom hints at more European acquisitions, Belgium tops list

Paul Rasmussen — Fri, 25 Sep 2009 11:19:19 -0400

Having agreed to swallow T-Mobile UK, France Telecom (FT) has dropped heavy hints that Switzerland and Portugal were two countries where partnerships or deals would make sense, to alleviate intense competition.

But the focus would appear to be centred on Belgium where shares in the country's second-largest mobile operator, Mobistar, jumped by nearly seven per cent following speculation that FT was close to making a takeover bid. The notion was given further credence following comments from Gervais Pellissier, FT's CFO, that consolidation would make sense in Belgium. Mobistar is already majority-owned by FT which holds 52.9 per cent of the shares. However, the FT rumour reignited gossip that Mobistar and the Belgium cable operator, Telenet, could form a close partnership. Telenet is keen to become a bigger player in the mobile sector and has already agreed an MVNO deal with Mobistar.

Adding fuel to its expansion plans, Pellissier said that its interests were centred on where Orange had a minority shareholding in a European operator, and not elsewhere in Europe, adding that the main focus remained in Africa and the Middle East, including Zimbabwe and Tanzania. He ruled out a move into South Africa or Nigeria, where the investment required would be too big to justify the risks involved with trying to control operations in those countries.

Having thoroughly stirred up the market, FT has poured cold water on the likelihood that it was again mounting a takeover of the Nordic telecom operator TeliaSonera--which again had seen its share price boosted by industry speculation. FT abandoned an unpopular bid worth around US$42 billion for TeliaSonera last year.

For more on this story:
Trading Markets

All change in UK mobile market

Ian Channing — Wed, 09 Sep 2009 12:08:24 -0400

After months of speculation over possible suitors, the fate of T-Mobile UK has been settled. Deutsche Telekom, owner of the struggling UK mobile operator, is forming a 50-50 joint venture with France Telecom subsidiary Orange UK. The new JV will be the largest mobile operator in the UK with a total customer base in excess of 28 million, equating to around 37 per cent of the UK mobile market.

The deal completely changes the dynamics of the UK mobile market, forcing current leader Telefonica O2 and Vodafone into second and third place with minnow 3UK bringing up the rear. The new entity had combined revenues of approximately £7.7 billion in 2008. Existing branding will continue for the next eighteen months whilst the two companies develop and agree on a new corporate brand.

The two parent companies are committed to the joint venture for three years, after which one of them can buy the other out.

On the financial side, Deutsche Telekom is putting T-Mobile UK into the JV on a cash-free, debt-free basis, adding in T-Mobile UK's 50 percent holding in its 3G network joint venture with Hutchison and with gross tax losses carried forward of at least £1.5 billion. France Telecom is putting in the whole of Orange UK including £1.25 billion of intra-group net debt in order to equalise the value of the contributions to the joint venture. Orange UK's fixed assets are part of the deal.

The intention is to realise savings of £445 million a year from 2014 onwards but there will need to be expenditure of up to £800 million in the intervening period, mainly caused by the decommissioning of cellsites, rationalisation of retail outlets and streamlining of operations. However, there will be significant economies in capital expenditure through network integration and unification as well a joint 3G coverage expansion. The two companies believe there is the potential to save up to £620 million in capex on a cumulative basis in the period up to 2014.

Currently T-Mobile UK has around 10,000 2G base stations with Orange having some 13,000. The two companies also have around 7,000 3G base stations each. The plan is to upgrade all the 2G sites to support 3G, a process which T-Mobile has already begun, with the long term aim of the JV having between 14,000 and 16,000 multiple use base stations.

Deutsche Telekom and France Telecom will spend the next two months carrying out due diligence with the intention of presenting the new company to UK regulator Ofcom and the European Commission at the end of October.

It is not expected that Ofcom will raise any objections although as this situation has never previously occurred in the UK the approval process may take as long as six months. There is also the possibility that Ofcom may impose some stringent conditions, possibly requiring a commitment to expanding rural broadband coverage. Concerns have been expressed that the deal will reduce consumer choice and perhaps increase prices but the consensus is that the UK market was over-competitive and a reduction in the number of players is likely to be good for customers in the longer term.

T-Mobile UK's MVNO deal with Virgin Mobile is already at an end as the latter has evoked the ‘new ownership' clause in the contract. The Radio Access Network sharing agreement between T-Mobile and 3UK is unaffected and is likely to continue under the new company.

For more on this story go to The Register and Cellular News

Orange, T-Mobile merge UK operations

Sue Marek — Tue, 08 Sep 2009 09:58:53 -0400

Last week's rumors are now a reality. Deutsche Telekom and France Telecom have agreed to merge their UK wireless operations. T-Mobile UK with Orange to create a yet-unnamed venture with a combined customer base of 28.4 million, or 37 per cent of the UK wireless market.

The deal, which is a 50-50 merger, will make the unnamed firm the largest UK carrier. Competitor 02 has 27 per cent share of the market and Vodafone has 25 per cent. Hutchison Whampoa's 3 has 8 per cent of the market. Orange CEO Tom Alexander will be CEO of the new company and T-Mobile UK CEO Richard Moat will be COO.

The two firms say the merger will cost between $655 million and $983 million but will create synergies that could equate to savings of more than $5.7 billion. The deal is expected to close sometime in October, depending upon approvals from regulators.

Matt Hatton, principal analyst with Analysis Mason, said the merger will likely face a number of regulatory hurdles before it is finalized and regulators may attach some stringent requirements to the merger--such as making the operators agree to help provide rural broadband coverage.

For more:
- see this article

Sinking sands: France Telecom's Egyptian plans

Paul Rasmussen — Wed, 27 May 2009 13:06:06 -0400

Another attempt by France Telecom to lift the company into the ranks of the major players in the cell phone business seems to be running into problems. The company, which had been looking to acquire the Egyptian mobile operator ECMS, has had its bid turned down for a second time by the national regulator, which said the offer was unfair. Last year, FT walked away from a €34 billion offer to acquire TeliaSonera, the Scandinavian operator.

FT's CEO, Didier Lombard, said the company would use national and international legal avenues to try to overturn the regulator's ruling. However, if the regulator's decision stands, then FT would drop plans to buy the rest of the ECMS shares.

FT's attempts to enter the Egyptian market have been thwarted by a dispute with Orascom, which holds a 28.75 per cent share in Mobinil Telecom. The local regulator previously stated FT must bid for all of ECMS as part of its purchase of MobiNil Telecom shares.

Separately, FT has been forced to make statements to the financial community at its AGM that it is not at risk of breaching any of its covenants, and that the €36 billion of net debt held by company is not at risk of being upheld.

For a review of the history behind FT's bid for ECMS see: Interactive Investor

For more on this story:
AP, Wall Street Journal and Interactive Investor

Spanish mobile market could worsen, believes FT CEO

Paul Rasmussen — Fri, 22 May 2009 11:13:09 -0400

Having seen Vodafone's year-end results dragged down by the lacklustre performance of its Spanish subsidiary, France Telecom (FT) has admitted it, too, is suffering from the same problem, and believes the cell phone market in Spain could become even worse.

The downturn in the Spanish mobile business has been driven by the overall recession, but with the added impact of migrant labourers returning to their homelands as the once booming construction industry collapses. Telefonica has also reported poor results in its home market.

Separately, FT's CEO, Gervais Pellissier, said he had no interest in making a bid for T-Mobile's UK operation, claiming that it wasn't for sale, in his understanding. Adding to this lack of interest, Pellissier said the UK had too many networks and would be happy to see consolidation. However, he warned that any merger would be fraught with problems with the risk the combined company would not manage to retain their customers.

While the company is mired in attempting to gain a majority holding in the Senegalese cell phone operator, Sonatel, and struggling to attract the Egyptian mobile operator ECMS with a better deal, Pellissier stated that the financial markets lacked the stability to launch a mega-bid. Last year FT failed in its attempt to acquire Nordic operator TeliaSonera.

However, this has not stopped FT from further involvement in Africa, with the news that it has made a bid for a Tunisian mobile and fixed-line licence which will involve the installation of network infrastructure as well as providing 2G and 3G services. Turkcell is also bidding for the licence.

For more on this story:
WSJ, Interactive Investor and Yahoo News

France Telecom stopped from acquiring largest Egyptian operator

Paul Rasmussen — Wed, 08 Apr 2009 12:46:08 -0400

The Egyptian stock market regulator has thwarted an attempt by France Telecom (FT) to gain control of the country's largest mobile operator, claiming the French telco bid below a price mandated by the Egyptian court, and undervalued the company. France Telecom has commented it now has no intention of making a new offer for the Egyptian Company for Mobile Services (ECMS), which operates under the Mobinil brand.

However, FT will continue to have a large say in ECMS/Mobinil following a recent decision by an Egyptian arbitration panel ruling in FT's favour which will force Orascom--which had a near 30 per cent shareholding in Mobinil--to sell this stake to FT. Mobinil has a 51 per cent holding in ECMS which will now be sold to FT for approximately US$1.7 billion.

This sale will effectively mean FT has a 51 per cent shareholding in ECMS, a level it claims it is "very comfortable with."

This tangle of ownership remains complex given a shareholding in Mobinil that will remain under the control of Orascom and may again lead to the lawyers becoming involved. FT and Orascom went to court in 2007 over a dispute about their joint shareholding in ECMS, although the specifics of the disagreement have not been made public.

For more on this story:
Telegeography, Total Telecom and Computer Business Review