Orange looks to re-enter Morocco via Meditel

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Orange-owner France Telecom is reportedly eyeing a stake in Moroccan operator Meditel as part of its strategy to double revenues in its emerging markets over the next five years. According to local media reports, the French giant has confirmed that it is in talks to acquire a 40 percent stake in the firm from Meditel’s local shareholders in a transaction valued at around EUR650 million. A deal would be the second significant change in ownership at Meditel in the space of a year after operators Portugal Telecom and Telefonica sold their joint 64.36 percent (2×32.18 percent) stake in the firm to the minority shareholders in September 2009. A deal would also be the first major acquisition at France Telecom under the stewardship of new CEO Stéphane Richard who took up the role in March.

Richard has already outlined an M&A strategy at France Telecom aimed at bolstering its presence in fast-growing African markets via the acquisition of mid-tier assets that complement the firm’s existing African footprint. The operator is thought to have earmarked EUR7 billion to finance acquisitions in the region as part of a drive to double revenues at its Rest of the World (ROW) unit. ROW revenues totalled EUR3.7 billion in 1H10, accounting for around 16 percent of the group total. Revenues from Africa and Middle East (which forms part of the ROW division) were EUR1.2 billion, up 6.8 percent from a year earlier and the fastest-growing segment in the France Telecom group in 1H10.

France Telecom has operations in over 20 African markets with a particular focus in West Africa where it has networks in countries such as Cameroon, Senegal and Niger. However, the more technologically advanced North African markets have been a focus for the firm in 2010; it launched a new network in Tunisia in May and completed the consolidation of its Egyptian business, MobiNil (ECMS), in July.

According to the latest Wireless Intelligence data, Meditel is the second-largest mobile network in Morocco on 10.4 million connections at the end of Q2, giving it a 37 percent market share. The firm reported annual revenue of MAD5.2 billion (EUR466 million) last year and also has a fixed-line business. In both mobile and fixed-line, Meditel competes with the market-leader (and former state-owned incumbent) Maroc Telecom, which is now controlled by French media conglomerate Vivendi – a fierce rival to France Telecom both home and abroad. Maroc Telecom controls a dominant 57 percent of the country’s mobile market. 

However,this duopoly has been disrupted in recent quarters by the re-emergence of the third-placed player Wana. Now rebranded as ‘inwi’, the former CDMA-based operator has made good progress in attracting subscribers to its new GSM and WCDMA-based networks, which launched last year and now account for two-thirds of its mobile connections. According to our figures, inwi surpassed the 1.5 million connections mark in Q2, more than doubling its customer base from a year ago. The operator currently has a 6 percent market share overall but is growing fast, taking a 35 percent share of Morocco’s mobile net additions in the quarter.

Formerly an ISP with limited mobility capabilities, Wana was owned by France Telecom until 2005 (Wana being a name derived from France Telecom’s earlier ISP brand, Wanadoo). In March 2009 – a few months prior to the launch of the new GSM/WCDMA network – a consortium involving Kuwait’s Zain and a Middle East investment fund bought a 31 percent stake in the operator for US$324 million. The deal marked Zain’s last investment in the continent ahead of its sale of the majority of its African networks to India’s Bharti. However, the Moroccan stake was one of just two African assets retained by the Kuwait firm (the other being Sudan).

Matt Ablott, Senior Editorial Analyst

Although briefly linked to Zain’s pan-African network sell-off last year, France Telecom’s new leadership now appears content with picking-off assets one-by-one as opportunities arise. Now that large-scale acquisitions have been ruled out, Meditel looks exactly the type of mid-tier emerging market investment that the operator is targeting for future growth. Moreover, Morocco is one of Africa’s more stable mobile markets and – as arch-rival Vivendi has demonstrated – one that is able to turn a profit. The country is also one of Africa’s most technologically advanced mobile markets, boasting a 3G customer base that is almost twice that of Nigeria, Africa’s most populous nation. Meditel’s former owners – Portugal Telecom and Telefonica – boasted of leaving behind a state-of-the-art (HSPA-based) 3G network when they exited Morocco in 2009 – though the operator has less than a million 3G connections to date (8 percent of its total). Meanwhile, mobile penetration in Morocco currently stands at around 82 percent – high in African terms – suggesting market growth could be slowing. Against this backdrop, France Telecom will be wary not to pay an overinflated price for its initial stake. If the deal is done, France Telecom is likely to move toward acquiring a majority stake in Meditel and rebranding it under the Orange brand.

Morocco mobile connections, 2Q10
Source: Wireless Intelligence