Wednesday, June 29, 2005

France Telecom Outlines NExT -- New Experience in Telecom services

France Telecom outlined its vision for transforming itself into a full-service, integrated wireline/wireless broadband operator with a new business model.

France Telecom's NExT (New Experience in Telecom services -- Nouvelle Expérience des Télécommunications) is a three-year initiative that will leverage both its legacy brands (France Telecom, TP, etc.) and Orange, provide customers with a personalized portal for all their communications, introduce new services, and integrate all of the company's networks under a single management system. The company will use the Orange brand for its mobile, broadband and enterprise services globally.

With the move to converged services, France Telecom will adopt a number of flat-rate pricing plans with unlimited on-network communications. These include the launch next month of a "Family Talk" service with unlimited, 24/7 communication between a family's fixed and mobile devices for EUR 39 per month, and "LiveCom," a software application integrating voice, videotelephony and instant messaging between fixed-line terminals, mobiles and videophones. A "HomeZone" service is expected to launch in 2006, bridging mobile and broadband services. The "MaLigne" TV-over-DSL service, which has been available in France since late 2003, will be rolled out in the UK, Spain, the Netherlands and Poland by mid-2006.

NExT has set a number of operational objectives for 2008, including:

  • 5% to 10% of the Group's total revenues from convergent offerings

  • single portal available to 100% of the client base

  • more than 2 million IP mobile telephones and more than 30% of the mobile customer base using signature devices

  • more than 12 million fixed-line broadband clients, including more than 8 million Livebox subscribers (of which 6 million in France)

  • more than a million subscribers to MaLigne tv in France, and more than EUR 400 million in revenues from direct paid content

  • more than 12 million mobile broadband customers, including over 6 million in France and over 5 million in the UK

  • in the Enterprise market, more than a million Business Everywhere clients and more than 2 billion EURs of revenues from Information & Communication Technology (ICT) services.

To accomplish its NexT objective, France Telecom announced a number of industry partnerships. These include:

  • M@Home -- an alliance with Ericsson to deliver a fixed-mobile voice service that would bridge its UMTS network and a broadband VoIP line at home. Pilot testing is planned for Paris later this year.

  • VideoLyra -- a partnership with Thomson to develop a portable, multimedia player that could leverage Wi-Fi hotspots and home networks. A consumer launch is planned for Christmas.

  • Microsoft -- the companies have agreed to cooperate on multimedia products and services both businesses and consumers. The products are aimed at fixed-mobile convergence. First results are expected in early 2006.

The NexT strategy calls for the development of a "LiveBox" device that unifies home networks, provides the ADSL connection, VoIP, TV service, photos, music, etc.

The company foresees only a limited amount of fiber-to-the-home, preferring instead to upgrade to faster DSL technologies. Already, the company said it can achieve 7 Mbps on 65% of its lines. ADLS2+ and VDSL2 will significantly boost these rates. France Telecom is also planning a very gradual migration of its fixed line network to an NGN architecture. NGN deployments are not expected to start until late 2007 or 2008.

Also part of its transformation plan, France Telecom announced a 25% increase in employee training efforts and a reinforced staff incentive programme. The company also confirmed its 2005 guidance, including:

  • Revenue growth on a comparable basis between 3% and 5%

  • EBITDA in excess of EUR 18.5 billion

  • CAPEX to revenues ratio in the high end of 10% to 12% range

  • Net debt to EBITDA ratio below 2.5