June 13, 2012 / 4:12 PM / 8 years ago

Everything Everywhere could float stake: France Telecom

PARIS (Reuters) - France Telecom FTE.PA would consider floating a stake in its market-leading British mobile joint venture Everything Everywhere as the tie-up finally starts to realize its potential, Finance Officer Gervais Pellissier said on Wednesday.

Gervais Pellissier, Chief Financial Officer of France Telecom attends a Reuters Global Media and Technology Summit in Paris June 13, 2012. REUTERS/Mal Langsdon

France Telecom’s FTE.PA Orange joined forces with Deutsche Telekom’s (DTEGn.DE) T-Mobile in 2010 to become the biggest operator in the highly competitive market with more than 27 million customers. The group pledged 3.5 billion pounds ($5.4 billion) in cost savings largely by creating one network and taking down excess mobile towers to go from 28,000 to 18,000 sites.

But the joint venture has taken longer than expected to generate synergies and the group is still yet to decide how many brands to maintain and how to resolve other operational issues.

“It could be an opportunity,” he told the Reuters Global Technology and Media summit when asked about the possibility of a float, adding that he expected both sides to want to remain in control of the business.

“If EE is really on the right track in terms of synergies and if we can make a good case to investors, we might look at a listing. But my feeling is we would keep control, both of us.”

“In the UK, we have created the number one operator in the market and if we succeed it will have value,” he continued.

“But the partners need to distinguish between the short-term value we could get from an IPO or a sale, and the long-term value of being number one in the UK for the two companies.”

Analysts have suggested that Deutsche Telekom may have to exit the lucrative joint venture one day to protect its dividend and strengthen its fixed and mobile business in Germany.

Deutsche Telekom failed in a bid to sell its U.S. business to AT&T (T.N) for $39 billion last year due to regulatory opposition, leaving the group with a $6 billion breakup package but also with a need to invest in its U.S. unit.

In response to the speculation, Deutsche Telekom’s Financial Chief Tim Hoettges said last month he had no intention of leaving the British market. Fourth generation wireless technology will be rolled out there soon, offering faster speeds to mobile-data hungry tablet and smartphone users and a new business opportunity for operators.

“We want to be there when demand for mobile data increases. We want to participate in upgrading the network,” he said.

Deutsche Telekom has always been seen as the most likely partner to exit the joint venture after the French firm took over the main management roles in a reshuffle last year, and as it struggled in other markets such as the United States.

An analyst said earlier this year that Deutsche had at that time considered an IPO for either part or all of its stake in the joint venture but had pulled the move due to market conditions and other factors. The analyst said the business was still expected to come back to market sometime this year however.

Pellissier said France Telecom was happy with the joint venture but that it had taken longer than expected to grind out synergies.

“In the first two years we didn’t dismantle any antennas; now we are taking down 2,000-3,000 a year and in about two years we will be at our target.”

But he acknowledged that the more thorny cost cuts on stores and brands still remained to be tackled.

“There will be a new brand probably, whether the two other brands survive or not that is a big question,” Pellissier said.

Despite initial hope in 2010 that Everything Everywhere could scrap one of the brands, the two names of Orange and T-Mobile still exist in Britain.

Pellissier said that keeping multiple brands to target various segments of the market was a good idea.

“You cannot cover 40 percent market share with one brand today,” he said. “The question is how do you organize the brands between themselves.”

Follow Reuters Summits on Twitter @Reuters_Summits ($1 = 0.6432 British pounds)

Reporting by Paul Sandle, Kate Holton, Leila Abboud and Gwenaelle Barzic; Editing by Hans-Juergen Peters

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