Orange (France Telecom) Revenues Drop Four Percent: Is it a Problem?

By Gary Kim October 23, 2013

Orange (France Telecom) revenues in the third quarter of 2013 of 10.162 billion euros declined four percent, year over year, while dropping 4.8 percent in the second quarter of 2013.

You might say that is a definite problem, and of course it is. A public company has to grow, or it surely will die. On the other hand, observers have known for some time that a structural problem exists in Western Europe's communication markets, and firms already are engaged in efforts to replace lost revenues.

So the revenue decline is not surprising, given predictions by some analysts that revenue growth in countries such as France, the United Kingdom, Germany, Italy and Spain is forecast to decline between now and 2020, or might start growing again by about 2016.

The long-term danger lies in failure to reverse the trend over time, and that could take as long as a decade.

Observers tend to agree about the proximate causes, ranging from fierce competition to lack of service-provider scale. But some would say regulator policies have not helped.

Regulators wanted to stimulate competition, and succeeded, by mandating wholesale access as well as low wholesale rates. Many observers would say those successful policies also have discouraged investment because the policies lower profit margins and gross revenue.

Some might reasonably add that economic conditions have had a negative impact as well, even if the fundamental problems are structural.

In France, Orange revenue fell 4.9 percent, comparable to the 4.7 percent decline in the second quarter of 2013.

Performance in other Orange markets was mixed. In Spain, revenues rose 6.9 percent.

In Poland, revenues declined in the third quarter by 2.6 percent, but that was an improvement from the first half, when revenues fell 4.5 percent.

In the rest of Europe, revenues were down 2.7 percent, though Belgium revenues dropped 10.1 percent.

In Africa and the Middle East, revenues grew 4.1 percent. Enterprise customer revenues fell 7.2 percent.

In and of itself, the revenue declines are a problem, but only strategically dangerous if Orange and other service providers, as well as regulators, cannot agree that structural reform is necessary, and if service providers prove unsuccessful in their efforts to create new lines of revenue.

Edited by Rory J. Thompson

Contributing Editor

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