France Telecom SA (FTE), trying to reverse falling sales while avoiding boosting expenses or debt, plans to expand into new countries this year without major acquisitions or building costly networks.
In an unusual strategic move for a phone carrier, the former French monopoly is adding well-placed shops and online stores for its Orange wireless brand to add sales in new markets like Italy and South Africa while keeping a lid on costs, strategy chief Elie Girard said in an interview in Barcelona.
“There are many countries in which people know our Orange brand very well, but we’re not selling them anything,” Girard said. “We can get extra sales and, in some cases, test the field before we decide to go in for an acquisition or to deploy as a full-blown carrier.”
Years of declining sales, profit and share price combined with a debt pile topping 30 billion euros ($39 billion) are forcing France Telecom to look at new ways of finding growth. The company is targeting regions such as Africa as competition from smaller, cheaper rivals weighs on sales in its shrinking home economy.
France Telecom, which last year cut its dividend and said it will shy away from acquisitions to save cash, is part of the bidding process for TeliaSonera AB (TLSN)’s Yoigo in Spain, and is also studying Mauritanian carrier Mattel, Girard said. It is also scouting opportunities in Libya, through network-management contracts, as well as in Togo, Burkina Faso and Benin, he said.
France Telecom’s revamped expansion plans, dubbed “Orange Horizons,” started a month ago in South Africa, where it sponsored the Africa Cup of Nations soccer tournament.
In that market, the company sells phones and accessories online. Its local websites also promote services such as music and video streaming by French startups Deezer Inc. and Dailymotion SA, a YouTube rival partly owned by France Telecom.
Online sales have also started in Italy. In both cases, France Telecom works with a distributor to limit its investments, and collects a “small margin,” Girard said.
“The strategy is compatible with our financial policy,” Girard said. “It allows us to keep our international development rolling, with softer models.”
At home, France Telecom is coping with falling prices amid competition from discounters. Its stock was the worst performer on France’s CAC 40 index last year and has lost 12 percent this year. It rose 1.4 percent to 7.36 euros at 1:10 p.m. in Paris.
The company reported a 79 percent drop in 2012 profit, hurt by impairment costs in Poland, Egypt and Romania, and said 2013 would be a tough year in its markets.
“We used to think of our company as having business in 35 countries, but that’s an incomplete vision,” Girard said. “We looked at travel and migratory routes. Our footprint is potentially much bigger.”
Starting news websites in Latin America or shops in airports in the United Arab Emirates or New York are all options as part of the “Horizons” plan, Girard said. The company could also rent network capacity from another carrier to start mobile services as a so-called virtual operator, he said.
The new strategy is also a way to get around tough regulation for foreign companies in some countries.
Closer to home, doing business in Algeria would make sense, Girard said. The company’s brand already has visibility in the market because French television, and thus France Telecom’s advertisements, are popular.
“There are some countries we’ve been trying to get into for years through the classic routes,” Girard said. “We’ll try this approach too.”
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