France Telecom CEO: Consolidation Necessary In EU
France Telecom SA Chief Executive Stephane Richard launched a broadside against European antitrust authorities late Tuesday, saying a hard stance against mergers and acquisitions across the region could hobble attempts to roll out fast broadband networks.
Blocking consolidation in Europe’s mobile telecommunications sector would be “criminal,” Mr. Richard said, as fewer, bigger companies would be better placed to fund the broadband rollout the bloc needs.
“There’s a problem–either European authorities will let this consolidation happen and let the market reorganize itself…with less players than previously, or they will block it,” he told The Wall Street Journal in an interview. “I think it would be criminal to block this.”
Mr. Richard, who has been chief executive of the partially state-owned telecoms firm since 2010, said there is a need for consolidation “nearly everywhere” in Europe.
Temperatures have risen since the European Union’s antitrust tsar, Commissioner Joaquin Almunia, appeared to be taking a hard line on Hutchinson Whampoa’s Austrian unit’s bid to take over France Telecom’s Orange Austria when he questioned whether “effective remedies will be found,” to enable the merger to go ahead. The proposed $1.6 billion bid would take the number of competitors in Austria’s mobile market to three from four.
Fewer companies with bigger market shares would be better placed to fund the huge investments required to modernize Europe’s telecoms network, Mr. Richard said.
At the ETNO telecoms operators’ conference here, the EU’s technology chief Neelie Kroes stressed the importance of building Europe a full optic-fiber network to replace ageing copper infrastructure. The EU is proposing to make public funds available to spur companies to invest.
“No-one has a clear view on the horizon for the payback of this investment,” Mr. Richard said, although investing is becoming more attractive as maintenance costs for the existing network continue to rise.
Having a fiber network could also help bring customers back to France Telecom, he added.
“I am rather confident in our capacity to increase average revenue per user with fiber,” he said. “It will be a powerful tool to win back customers, we have lost customers to DSL [digital subscriber line], especially in big cities.”
France Telecom had rolled out fiber services available to 1.3 million homes in France at the end of June, and is on track to invest roughly EUR2 billion on fiber rollout by 2015, Mr. Richard said on an earnings call at the end of July.
Asked about Europe’s debt crisis, Mr. Richard said while scenarios such as a breakup of the euro-zone currency bloc are no longer feasible, there will probably be several tough years of flat growth or even recession in some countries, such as Spain, where France Telecom’s mobile brand Orange is active.
“What we have to do is deal with this macroeconomic environment,” he said. “We have to innovate, to invest, because there’s appetite for broadband, and to adapt, which means cost reduction.”
Turning to the situation outside of Europe, he said France Telecom isn’t interested in bidding for Vivendi SA’s (VIV.FR) Brazilian phone unit GVT.
“It’s certainly a nice asset, but it doesn’t make sense for us to enter the Brazilian market through a fixed line provider only,” he said.
Market Watch
