France Telecom to push further into Africa's high-growth markets

LONDON Sun Jan 13, 2013 12:31pm EST

LONDON Jan 13 (Reuters) - France Telecom wants to expand its presence in fast-growing African mobile markets by entering Benin, Togo, Burkina Faso and Mauritania.

Elie Girard, the group's head of strategy and development, said plans for Africa also included seeking to sign management contracts with telecom groups in Libya and Algeria.

He said no talks on acquisitions were currently underway, but Africa and the Middle East were a priority for growth.

"If we manage to enter Benin, Togo, Burkina (Faso) and Mauritania, for example, that would be very valuable for us," he told reporters at a briefing in London. He said the countries' proximity to Orange's existing operations in Mali and Senegal made them more attractive.

The group, which markets its services under the brand Orange, operates in 21 Middle East and African countries.

Orange, sponsor of soccer's Africa Cup of Nations in 2013, is the third-largest mobile operator in the region, behind South Africa's MTN and Britain's Vodafone.

A presence in Benin would also improve a link between the company's network in Niger and the submarine cables that carry Internet traffic between Africa and the world, Girard said.

He said France Telecom also wanted to expand into Libya, Algeria and Ethiopia, and would seek contracts to manage other operators' telecom networks as a way to get a foot in the door.

"There are two operators in Libya today and there is a tender for management contracts and we are working hard to get one of those."

Algeria as a large, underdeveloped market was also strategically interesting, he said, but any progress would be slow.

Girard gave no update on whether France Telecom would bid for Vivendi's stake in Moroccan operator Maroc Telecom . Vivendi hopes to get at least 5.5 billion euros ($7.34 billion) for its 53 percent stake in Maroc Telecom in a sale process now underway.

South Korean telecom firm KT Corp submitted a preliminary offer for the Maroc Telecom stake in mid-December.

A move by France Telecom would be complex given that it already owns a 40 percent stake in Morocco's second-biggest operator Meditel, which it might have to divest.

Nor is it clear that the French group could afford the purchase price given its high debt and falling profits in its all-important home market, analysts say.

Vivendi did not return a request for comment outside business hours.

LOW INCOMES

France Telecom has set a target to double its turnover in emerging markets to 7 billion euros by 2015, and has said it is on track to reach that after making acquisitions in Morocco, Tunisia, and Iraq in the past two years.

At the end of 2011, it had 14 million customers in Africa and the Middle East, according to its annual report.

But France Telecom and other telcos have had difficulty turning customer growth into profits given the low incomes in the region, which mean customers spend less per year on phones than in Europe.

Orange earns average revenue per user per year of 36 euros in Egypt and 80 euros in Senegal, compared with 375 euros in France and 163 euros in Spain. Changing that will require a push to get local middle classes to adopt smartphones and surf the Internet from their mobiles.

Also, running communications networks on the continent is expensive and difficult given patchy electricity coverage and lack of high-capacity cables for Internet traffic in the interior. As a result, many have reached mobile-tower sharing deals to reduce costs. Orange, for example, shares towers in Ivory Coast and Cameroon.

Other infrastructure-sharing agreements would be decided on a country-by-country basis, depending on the location of towers and Orange's market position, he said.

Unrest such as the current conflict in Mali and the Arab Spring can also have a big impact on the telecoms business.

Despite the challenges, Girard said the group was committed to diversifying via growth in Africa and the Middle East.

"Our goal is to rebalance the different parts of the group," he said. "It doesn't mean we are going to invest a whole lot of money in huge acquisitions just to make the business visible but we'll continue a very reasonable step-by-step strategy on development and acquisitions, just as we have in the last 15 years."

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.