France Telecom sets out to conquer the world

OvumFrance Telecom has unveiled its new strategy, entitled Conquests 2015, which focuses on employees, customers, networks, and international development. However, investors will struggle to find anything revolutionary among its concepts.
 
In fact they are more reactionary – a glitzy launch to enable new CEO Stéphane Richard to stamp his personality on the Group’s direction without altering course.
 
A cynic would suggest that the placing of “employees” as the first conquest is an internal PR gambit.
 
However, given that 46 employees have committed suicide at the firm since 2008, reinvigorating the workforce is of critical operational and (some would say) legal and moral significance. It could also be claimed that Richard’s elevation to CEO occurred as a result of this internal crisis.
 
Specific measures announced include empowering management, which suggests that centralized control from Paris will be reduced. Centralization was certainly one of the reasons mooted for Orange UK’s post-acquisition strategic and commercial stagnation earlier in the decade.
 
It has also been reflected in the continued dogmatic implementation of convergence strategies in all France Telecom’s territories, despite the limited success of this approach, particularly in fixed services.
 
France Telecom also intends to spend €900 million to the end of 2012 on recruitment, employee benefits, and improved working conditions. The reason stated for hiring 10,000 additional staff in France is to alleviate the effects of rising average age among its staff.
 
 
However, this move will also appease the French government and media, which became uneasy at France Telecom’s focus on headcount reduction as part of its New Experience in Telecoms (NExT) transformation program – and the tragic consequences that they feel it has brought.
 
Elsewhere, the new strategy struggles to find anything new to say compared to the old. An emphasis on international development as one of the key pillars initially piqued our interest, but again there is little new in the substance.
 
There is a stated intention to grow the client base from approximately 200 million subscribers today to 300 million by 2015, but the emphasis is on Africa, the Middle East, and Asia. No change there then, particularly when Richard stated on the analysts’ call that he was not looking for major M&A opportunities.
 
Indeed, he emphasized the recently completed Orange–T-Mobile deal in the UK and the aborted Orange–Sunrise deal in Switzerland as examples of deals that limited France Telecom’s financial liability.
 
We therefore expect more deals of a similar ilk in the future, which makes a lot of sense in the current financial climate and will pacify investors concerned that purse strings were loosening for a new round of global consolidation.
 
The remaining two strategic pillars are networks and customers, which are nice to see at the heart of a telco strategy, but would have been more surprising had they been omitted. This also highlights another issue with the announcement: it’s terribly light on details.
 
“Increase bandwidth and coverage to meet demand”; “build up network quality of service”; “simplify products & services portfolio, and leverage customer knowledge”; and “improve customer experience, innovate in customer relations and loyalty” – all very noble intentions, but they are on every telco’s to-do list.
 
Even the promise of more content partnerships was a continuation of a theme begun under Didier Lombard at the investor’s day earlier this year.
 
 
It would have been helpful to have heard more about precisely how these targets will be achieved, how much they will cost France Telecom, and what it expects as a return on its investment.
 
Instead we heard that France Telecom expects €8 billion in organic free cash flow in 2010 and 2011, and wants to double revenues from emerging markets in three to five years. Details are promised later this year, but for now we are left with a sense of more of the same, but with a friendlier face.

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