Orange aims to generate €1 billion in revenues from new services in the Internet of Things (IoT) and financial services sectors, CEO Stephane Richard announced on Tuesday as he presented the telco’s new five-year strategy at an event in Paris.
The France-based operator detailed a number of key areas of focus for the period through 2020, including network investments in fixed and mobile, a converged services push and an ongoing focus on costs. It also demonstrated what it described as a redesign of its brand, that fortunately leaves the fundamentals unchanged.
Diversification is one of the key tenets of Orange’s five-year plan, dubbed Essentials 2020. It will focus particularly on connected objects and mobile financial services because in these areas it can generate synergies with its core connectivity and services assets, Richard explained.
"We can provide added value to our customers," in these areas, he said. "[Our goal is to] exceed €1 billion in turnover in 2018."
€600 million of the total will come from IoT and M2M, and €400 million from financial services, Ramon Fernandez, Orange’s CFO, added.
Within that financial services revenue, half will come from Europe and half from the Middle East and Africa, he said.
Orange currently has around 13 million users of its Orange Money service, its money transfer and payments service in the Middle East and Africa. It aims to incre ase this to 30 million by 2018.
Meanwhile, its operations in Europe centre on Orange Cash and NFC technology, and mobile banking. Late last year it launched Orange Finance in Poland, a mobile banking service in conjunction with mBank. It plans to replicate the service in France and Spain by 2018.
"Our ambition is to launch a wider offer of mobile financial services," Richard said.
However, the telco did not provide details of how it aims to achieve its target on the IoT side, beyond naming the markets it intends to concentrate on, namely healthcare and the connected home.
Orange’s ambitions in adjacent markets will help it to achieve its target of growing revenues between 2014 and 2018 and increasing EBITDA over the same period, with the exception of "a low point" in 2015. It targets 2x debt-to-EBITDA ratio.
Spending spree and cutting costs
The telco’s foray into new services will be backed by, amongst other things, a focus on its network infrastructure, and that means major investment over the next few years.
In total, the operator plans to invest €15 billion in its networks over the 2015-2018 period, prioritising high-speed broadband.
Around a third of the total, or €4.5 billion, "will be allocated to the deployment of fibre," Fernandez said. Fibre represents "a tool for the conquest and loyalty of high-value customers."
Orange generates €5 in additional ARPU from its fibre customers compared with ADSL "and the gap will broaden up to €7 in 2018," he said.
Meanwhile, the firm has allocated €5 billion for mobile access spend, including €1.5 billion on 4G. It targets "4G coverage in excess of 95% on our European footprint in 2018," Richard said.
"We’re going to launch voice over WiFi as of this year," in France, he announced.
The CEO also highligh ted the growing fixed-mobile convergence trend in Europe, and reiterated that it is something Orange seeks to be a part of.
"We want to be present in the homes of our customers," he said.
In Spain Orange is concentrating on rolling out fibre to the home (FTTH) and TV services, particularly through Jazztel, the broadband operator it is in the process of acquiring. Orange aims to double its share of converged revenues in Spain, Richard said.
In Poland the operator is rolling out its own fibre network, in Romania it has developed a TV service, and in Belgium "we are testing the use of cable," in order to bring a TV service to market this year.
The telco plans to balance investment with savings though.
"Orange will also continue to curtail its costs," Fernandez said.
Direct costs will stay "under control", although the mix will change, while indirect costs will fall, he explained.
Mobile infrastructure sharing initiatives, digitisation of process, simplification of systems and reduced energy costs will all help, he said. In addition, 25,000 people will leave the company through retirement between now and 2020. The telco also has "salary moderation policies."
Despite the desire to save money, network sharing is unlikely to be an option in Orange’s home market.
Orange’s national roaming deal with Iliad’s Free will come to an end in 2017. Renewing the deal is an option, "but that’s not what we want," said Richard, adding that the company is also disinclined to broker a sharing arrangement with Free.
"Why should we share our exceptional assets?" he asked.
"We like sharing networks," he said, noting that across the group 50% of Orange’s mobile sites are shared. However, "in France it is not in our interests to take this direction."
Brand on the run
Richard also announced on Tuesday that Orange has "redesigned" its brand in order to help it reach its goals, a comment that momentarily raised a few eyebrows. However, thankfully not much has changed.
The operator has created a series of icons, some of which resemble jigsaw pieces, that appear to represent different areas of its business, such as home services, security, music, finance and so on.
"[We need to] make sure our visual identity evolves," said Richard.
