Orange CEO Stephane Richard (pictured) was in bullish mood at the operator’s investor day, insisting its position as “the leading convergence player in the world” puts it on a strong footing for 5G, while also setting the record straight on M&A rumours.
Speaking at the event in London, Richard described 2017 as a “decisive year” for Orange, with recent growth providing proof its Essentials2020 strategy is working.
While updating on the company’s progress in mobile, FTTH and adjacent industries (content, mobile financial services) Richard also took the opportunity to clear up M&A rumours, which “the company is often accredited to”. He explained Orange had established four M&A priorities in line “with our transformation”, but was adamant expanding into new markets was not one of them.
“Let me be clear, footprint expansion is not our priority.”
Instead, Orange’s first goal is to position itself as a leader in telecoms through network investment in particular: “This could mean in-market mobile to mobile consolidation, where possible and appropriate. Mobile to fixed convergence everywhere in Europe, consolidation and optimisation of our infrastructure, as well as steps to manage our asset portfolio,” Richard said.
The CEO committed to developing and investing in new technologies to improve customer experience and lower consumer prices: “There are untapped opportunities here. Taking new technologies, such as artificial intelligence (AI) and big learning can enable us to achieve this objective. M&A can be a way to acquire these skills more quickly,” he added.
He also said the company may boost its content and mobile financial services plays through cash injections.
On pan-European consolidation in general, Richard said this was not being stopped or hindered by regulatory boundaries, but Orange was unlikely to make such a move.
Senior EVP of innovation, marketing and technology, Mari-Noelle Jego-Laveissiere, said Orange’s position as a “European leader in FTTH” boosts its preparations for 5G, because it will be able to leverage existing backhaul when it begins deploying the technology in 2020.
“In France more than 90 per cent of our mobile sites are connected with fibre, and therefore 5G ready, which means limited future implementation costs.”
The company is already preparing for upcoming spectrum auctions in all of the European countries it operates in.
For Orange, there are three drivers to 5G: enhanced mobile broadband; fixed on 5G; and innovative new services including more vertical applications dedicated to specific industries.
She also added 5G-specific investments between 2017 and 2020 will “be marginal”.
Richard revealed Orange Bank, which it launched in France in November following numerous delays, beat expectations after 30,000 accounts were opened in the ten days after launch.
The CEO noted the time is right for a mobile first bank given predictions 90 per cent of millennials in France will use online banking by the year end and explained mobile financial services are “central to Orange’s wider vision”. However, Richard said he was not yet in a position to provide a forecast on the expected returns from Orange Bank.
2020 strategy update
Orange is now roughly half-way into its Essentials2020 strategy, and Richard hailed the ability of “targeted investment, enhanced services and a renewed focus on customer care” to help the company reestablish a positive sales trend and return to growth.
He noted Orange posted its ninth consecutive quarter of growth during Q3, while EBITDA had risen continuously since 2015.
In an accompanying statement, the company said it already achieved a gross saving of €3 billion it aimed to deliver by end-2018 and will now aim to shave another €1 billion from its costs between 2019 and 2020 through increased use of digitisation, simplification and pooling resources.
After increasing adjusted EBITDA 2 per cent through 2017, Orange forecast “an acceleration of growth rate” from 2018 onwards. Investments in 2018 will hit a peak of €7.4 billion, before a decline the following year.