Orange 2007 results

Thomas Husson | February 06, 2008, 07:10 AM

France Telecom announced this morning its annual results for the full year. As always, I am neither going to comment the financial results nor the fixed / broadband results even though I find it quite impressive that out of the 11.6 European ADSL accesses, 41% use VoIP and 11% IPTV, I'll let the latter point to my colleague Ian Fogg.

In the mobile space, here are my key takeways:

- the mobile customer base increased from 98 to 110 million subscribers between 2006 and 2007. Poland and Romania (9.8M customers) are representing a significant share of CEE customers while Egypt is the driving engine with 10.7 subs. Moving forward, as for any mobile operator, growth will come from emerging countries. For obvious reasons, France Telecom is investing heavily in Africa (11,48M customers excl. Egypt) and recently bought GSM licenses in Guinea, Niger, RCA and Kenya...In Western Europe, customer growth is by nature more modest (from 23,2 to 24.2M in France or from 15,3 to 15,6M in the UK) when not declining (from 11,1 down to 11.09M in Spain). For the latter, the focus was on profitability with a significant migration of prepay users to pay-monthly contracts (now representing the majority of customers). As already announced, iPhone sales represented a total of 73,000 customers in December 2007, out of which 48% were new customers. As I already pointed out, SFR was more agressive with a wider range of more affordable multimedia devices and offerings (250,000 Illimythics sold in 2 months) but again the point was also to drive traffic in shops and to upsell / cross sell France Telecom products. The Q4 net additions and results tend to prove goals have been achieved in this regard!

- the challenge in more mature economies is to increase the spending per user. In this regard, the % of data revenues is increasing on a regular basis in France: from 15.4% in Q4 2006 to 17.7% in q4 2007. Interestingly, the majority of those revenues now derive from non-SMS revenues. In absolute terms, SMS revenues continue to increase due to higher volumes but expect pressure on prices to accelerate all the more as the EU commission is having a close eye on the issue. In q4 2007, Orange UK is performing better with 21.5% of its revenues deriving from data while Spain is clearly lagging behind (12.5%).

- To maintain its strong role in the value chain, Orange is currently developing a media strategy by acquiring content rights (e.g. the current mess around French football rights whose results should be announced shortly*), creating its own content TV channels and soon launching a convergent music store and potentially a satellite Pay-TV offering. Operators need to have enough consumers on various platforms to be able to recoup those significant investments. However, this is a risky approach given competition is more direct with media companies (Canal+ in this case) who are more legitimate and have a better know-how. However, most operators are more flexible in their approach, moving away from walled-gardens, and even Orange partnered with Apple for the launch of the iPhone.

*UPDATED

Results have finally been announced and Orange has obtained exclusivity on mobile rights, VOD rights and rights for live football games on Saturday evenings for € 208M. Canal+ obtained the 9 other categories including the rest of the premium rights for € 460M. It means that Canal+ managed to decrease significantly its investment in comparison to the time it was competing with TPS. It also means that Orange significantly increased its investment from the € 29M invested in 2006 for mobile rights only.