Orange has set out its latest five-year plan, named Essentials 2020, which involves investment of €15bn in its networks between now and 2018, in order to support a wider range of services and revenue streams.
These include the internet of things (IoT), of course, with Orange targeting €1bn in revenues from this sector and from financial services, CEO Stephane Richard told a Paris event this week.
Its network capex plan – which spans fixed and mobile but is particularly focused on high speed broadband – mirrors those of its peers, including Vodafone’s Project Spring and Deutsche Telekom’s multi-network strategy. However, the cost of the networks must be balanced by an ongoing cost reduction program, says Orange, and will be justified by an enhanced ability to diversify its revenues, and to deliver converged and quad play services.
The key areas for diversification in the coming five years are connected ‘things’ and mobile financial services, both areas where there are clear synergies with the core connectivity and services businesses, Richard said. “We can provide added value to our customers in these areas,” he explained, setting out the goal to “exceed €1bn in turnover in 2018” from these activities, split 60:40 between IoT/M2M and financial services.
Half of the revenue from the financial sector will come from the Middle East and Africa, where Orange is highly active, and where it already has 13m users of Orange Money, a figure it aims to boost to 30m by 2018. It has also launched Orange Cash and NFC-based m-payments in its European footprint, as well as deploying an m-banking service called Orange Finance in Poland, which will be extended to other countries such as France and Spain in the coming years.
Underlining the importance of the financial sector in emerging markets, Orange unveiled its first international m-payment service that connects to a rival offering from Airtel Africa. This came less than a week after Vodafone opened its first international payment service in the region. Orange Money users in Côte d’Ivoire can now send money to Airtel Money customers in neighbouring Burkina Faso and vice versa, the first time the French operator has supported funds transfer outside its own footprint. The company has already launched international transfer facilities between Orange Money services in three countries – Senegal, Côte d’Ivoire and Mali. Vodafone last week opened its first international payment support for users of its M-Pesa service in Tanzania and Kenya.
Richard was less forthcoming about the IoT plans, beyond reiterating Orange’s key areas of focus, healthcare and the smart home.
Lateral moves into these new markets will contribute to the telco’s wider targets of increasingly revenues and EBITDA by 2018 – although it acknowledges that the latter will only happen after the “low point” of 2015.
In terms of the network upgrades, €5bn has been earmarked for mobile access, including €1.5bn for LTE, with the aim of exceeding 95% 4G coverage in the European territories by 2018. The surprisingly low percentage allocated to LTE indicates the ongoing importance of extending and upgrading 3G in the Middle East and Africa regions where Orange is targeting significant growth.
Meanwhile, €4.5bn of the €15bn total “will be allocated to the deployment of fiber”, according to the company, because fiber is “a tool for the conquest and loyalty of high value customers”. Orange generates €5 greater ARPU from its fiber customers compared with ADSL and expects that gap to increase to €7 in 2018. Richard said quad play services would be essential to the strategy, saying: “We want to be present in the homes of our customers”, not just their mobile devices. For instance, in Spain it is rolling out fiber-to-the-home and TV services through Jazztel, the broadband operator it is in the process of acquiring. Orange aims to double its share of fixed/mobile revenues in Spain.
In Poland the operator is rolling out its own fibrer network, in Romania it has launched a TV service, and in Belgium it is testing a cable TV offering.
The main areas of cost cutting will come from mobile network sharing (though not in France, where Orange says it is unwilling to renew its national roaming deal with disruptive fourth cellco Free, which expires in 2017). Other cost efficiency moves include digitizing processes, streamlining internal systems and cutting energy costs, as well as “salary moderation policies”. And 25,000 people will leave the company through retirement between now and 2020.
Richard also announced that Orange had redesigned its brand with a series of icons representing its wider range of services, including smart home, security, music and finance, providing a visual reminder that the company is not just about connectivity any more.