February 5, 2013
France Telecom’s recent hints that it might expand into new markets in Africa — namely Benin, Burkina Faso, Mauritania, Togo, Libya and Algeria — should come as no surprise. What does come as a surprise is France Telecom’s bold move to launch a new subsidiary, Orange Horizons, through which it plans to seek out adjacent opportunities in emerging markets, including countries where the group is not already a licensed player.
France Telecom’s announcement to expand its presence in North and West Africa fits well within the group’s current strategy. These markets are geographically ideal because of their close proximity to other markets in which Orange is already a strong brand, particularly Senegal and Mali. Expanding into Benin would also be beneficial because it would improve the link between Orange’s network in Niger and the submarine cables that pass along the west coast of Africa. Algeria and Libya are ideal conquests for France Telecom because they are relatively rich countries with a great potential for growth for high-priced products like value-added services and mobile broadband, while Ethiopia is a low-penetration country with little or no competition for operators.
Exhibit: African map portraying France Telecom’s dominance in the region
Source: Pyramid Research
France Telecom expects to make a move into these markets through a combination of traditional licensing, acquisition and partnerships (Algeria), and management contracts (Libya and Ethiopia). France Telecom is currently officially bidding for an MVNO license in Togo.
These expansions are anchored by the operator’s recently deployed and potentially expansive African Coast to Europe (ACE) submarine cable. The ACE submarine cable will extend from France to South Africa and link 13 countries, providing better Internet connectivity to Africa as well as adding extra capacity to existing networks.
Exhibit: The countries connected by the ACE Cable
Source: France Telecom
France Telecom Seeks New Horizons in Africa
All of the above developments tie in with France Telecom’s Conquests 2015, their five-year group strategy launched in 2010, which reiterates their determination to grow a sustainable business in Africa & the Middle East and become a leading operator in the region. Conquest 2015 also calls for doubling revenue from emerging markets, a target largely achieved by further consolidation of the operator’s ownership share in Egypt, Morocco and Tunisia in 2012.
The launch of Orange Horizons, however, was not necessarily as pronounced. France Telecom launched Orange Horizons a few weeks ago with the stated purpose of seeking out business opportunities in countries where the company is not already present as a mass-market telecommunications provider. According to Elie Girard, the company’s Senior Executive Vice President of Strategy and International Development, “there are many countries where Orange is already very well-known despite not having an operational presence.” And therefore “there is strong potential to create a new source of revenues in these countries by leveraging awareness of the brand to propose very simple mass-market offers.”
Orange Horizons first move has been in South Africa with the launch of two websites and the possible launch of an MVNO. The two websites were launched in mid-January, one being an e-commerce site and the other being a country site. The e-commerce website focuses on selling telecom related devices and accessories, while the country website provides online content specific to the South African market, such as news, sports and music. The launch was cleverly planned by France Telecom to coincide with the Orange African Cup of Nations 2013, which is being hosted by South Africa this year and is sponsored by Orange. The tournament also includes six countries where Orange already has a strong presence.
Other announced plans for South Africa include niche telecom services for tourists travelling to South Africa and specific products and services not already offered in South Africa. Orange Horizon’s Managing Director Sebastien Crozier estimates that “over a million people will be coming to South Africa” from countries where Orange is already an operator, providing an opportunity for Orange to market to this target group from within South Africa.
Exhibit: Products currently offered by Orange Horizons in South Africa
Source: France Telecom
We believe this move was more about branding than about the actual products sold by Orange on its South African website, before trying to break into a market heavily dominated by MTN and Vodacom. The South African mobile market is highly competitive, with 100% mobile penetration and strong market players like MTN, Vodacom and Cell C. It would seem that France Telecom is testing the waters with the launch in South Africa and perhaps getting a feel for the market before unleashing some bigger plans.
These bigger plans would in all likelihood take the form of one of two options:
- France Telecom is planning to launch an MVNO in South Africa
- France Telecom is planning to acquire a South African operator
Should France Telecom launch an MVNO in South Africa, it would likely be as part of a regional (AME) MVNO strategy. This would clearly be a new direction for the group, presenting multiple opportunities in the rich Gulf region and beyond to the unchartered waters of the Asia-Pacific region.
The second option of acquiring an operator in South Africa would be riskier because it would require a greater investment, but it would fall within the operator’s core competencies. Possible operators that France Telecom would acquire would be Cell C, Telkom’s 8-ta or even Neotel. Each of these possible acquisitions would clearly require different levels of engagement and different strategies, with Cell C being closest to France Telecom’s core business and comfort zone.
France Telecom’s official communication about Orange Horizon’s strategy and next moves is still limited. The only official statement has come from Sebastien Crozier, who stated that the launch of an MVNO in South Africa could be very plausible but that it would be a long-term strategy and perhaps not something that would happen in the next two years. Crozier has made it very clear that France Telecom is not interested in becoming a limited MVNO or an operator by brand only. They are looking to compete and to be able to offer more. “We want to create a global system and be able to offer the same services as mobile operators,” Crozier told South African news site ITWeb.
Whichever route France Telecom decides to take, it will make for some very interesting developments in the region in the near future and is worthwhile to follow.
— Jessica Gendall, Associate Analyst
South Africa Telecom Market Forecast
Thematic Report published November 2012
This report analyzes the South African telecom market in some detail, highlighting a number of key areas of growth now that traditional voice services revenue is flattening. The report focuses on three main areas of growth: mobile apps, enterprise cloud services, and mobile advertising and their influence on the South African market.
Pyramid Research Mobile Operator KPI Forecast
Forecast published quarterly
The Mobile Operator KPI Forecast measures key performance indicators for up to six operators per country, and breaks down key mobile demand metrics at the operator level. It is available for 84 markets worldwide at the country level. When combined with the standard Mobile Demand or enhanced Mobile Data Forecast, they provide the most comprehensive demand, growth and market share tracking available in the industry today.