France Telecom SA (FTE), the French phone company whose sales have dropped for the past two years, will look for deals with cable companies to cross-sell services, offering European users packages combining TV, mobile and Web.
The company wants to mimic the relationship between Verizon Wireless and cable company Comcast Corp. (CMCSA:US) in the U.S., which allows the companies to sell each other’s services under their own brands, strategy chief Elie Girard said.
France Telecom is looking for ways to expand into increasingly popular, multiservice bundles -- a strategy its competitors are adopting across Europe -- without making expensive acquisitions, Girard said. Romania and Belgium, where France Telecom only offers mobile service, are the top candidates for this type of relationship, he said.
“When you look at the addressable market, it’s shrinking by several points every year,” Girard said over lunch at the French Open in Paris. “You have this idea of trying to sign deals. Look at what Comcast and Verizon have done. One needed mobile. One needed fixed, so they cross-sold to each other.”
France Telecom offers bundled packages already in France and has said the strategy has helped it retain customers in the face of cheaper offers, led by Iliad SA (ILD)’s Free brand mobile service. Still, the company has pledged to cut costs this year as a price war initiated by Iliad last year continues. Earnings, excluding interest, taxes, depreciation and amortization, fell 9 percent in the first quarter and sales dropped 5.9 percent. The company cut its dividend last year and has said it will stay away from major acquisitions to save cash.
France Telecom rose 0.7 percent at 10:21 a.m. in Paris to 7.82 euros. The shares have fallen 6.9 percent this year through yesterday.
Vodafone Group Plc (VOD)’s Chief Executive Officer Vittorio Colao has also cited the Comcast-Verizon partnership as a model for carriers across Europe as they confront declining prices, weak economies and regulators who have delayed or rejected acquisitions. Newbury, England-based Vodafone has network sharing agreements with Germany’s Deutsche Telekom AG (DTE) and Telefonica SA (TEF) in Spain.
The average European consumer spent $38 per month in 2012 on mobile subscription, compared with $69 in the U.S., the GSMA said in a report published last week. Wireless phone bills in Europe have declined steadily since 2000, while U.S. carriers have reversed that trend since 2010, it said.
France Telecom failed in its effort to buy Yoigo, TeliaSonera AB (TLSN)’s Spanish unit, when the parent company stopped the sale in April after being disappointed with the bids. France Telecom had to make a lower offer for Yoigo than it might have in a friendlier regulatory environment to account for delays that can leave management teams on the lurch for as long as a year, Girard said. He declined to comment on the size of the discount.
France Telecom’s sale of video-sharing website Dailymotion also failed last month when talks broke down with Yahoo! Inc. (YHOO:US) because the Sunnyvale, California-based Internet company wanted to own a larger stake than France Telecom was willing to sell, Girard said. He’s still looking for an American buyer to help Dailymotion break into the U.S. market and has restarted a screening process for potential acquirers who would be willing to take a 51 percent holding, he said.
“We said no. We want to remain minority shareholders,” Girard said. “We’re coming back to the step before. We want an American partner for Dailymotion, so we are starting our screening again.”
Still, France Telecom is prepared to spend money in high-growth markets outside of Europe. The company is part of a consortium that’s bidding for one of two licenses to operate a mobile-phone network in Myanmar. The group, which includes Japanese finance firm Marubeni Corp. (8002) is prepared to spend $1 billion to build the network by 2019 and will cover more than 75 percent of the country’s geography in five years, Girard said.
Myanmar “is the biggest telecom desert. There is less telephone use in Myanmar than in North Korea and Cuba,” he said. “We’ve never seen anything like this.”
Myanmar has a mobile-phone penetration rate of 9 percent, compared to 70 percent in Cambodia, 87 percent in Laos and more than 100 percent in Thailand, Myanmar’s Communication Ministry said in January.
The country’s transition to democracy was hailed by U.S. President Barack Obama last year after decades of military rule, peaking the interest of Western brands such as Coca-Cola Co. and MasterCard Inc. (MA:US) whose executives have said they plan to expand in the Southeast Asian nation.
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