David Molony
Eight reasons why France Telecom/TeliaSonera makes sense
Financial markets and analysts may not like France Telecom's offer for TeliaSonera, but that's no excuse not to at least consider the strategic reasons behind it. Here they are (and we promise not to mention 'scale'):- France Telecom and TeliaSonera don't overlap much geographically. They aren't head-to-head competitors in any services or sectors except maybe carrier wholesale and IP transit - and the operators tend to work in their own regions there.
- Where they do overlap, in emerging markets, there could be mutual benefits e.g TeliaSonera has network into Russia, where Orange has enterprise customers and new licences for national and long-distance licences. TeliaSonera has a troublesome mobile network in Eastern Europe (Ukraine) where Orange has been more successful (Slovakia) but on a smaller scale. Orange could bring brand and management influence to turn around the TeliaSonera fortunes in overseas mobile.
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Supply chain/verticals. Playing in global managed services in enterprise means having a stake in understanding global business supply chains. You need to understand your customers' customers. It's no coincidence CEO Didier Lombard has been spending time talking to other huge French multinationals outside the telco field. A global telco needs to have a roadmap into secure SCM services, based on an extended applications infrastructure. A TeliaSonera that provides services to Swedish automotive and banking companies brings an extra dimension to the Orange Business Services vertical offerings.
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E-commerce/ecosystems. Other operators are recognising e-business opportunities. For example, Verizon Business's joint marketing agreement with GXS, or AT&T's relaunch of Sterling Commerce. TeliaSonera is not a Google, but it was always ahead of the curve on hosted IPT, enterprise mobility, SIP and other next-generation building blocks. It's less clear how much of that has translated into money-making e-business products and services, but there's no doubt TeliaSonera is an innovator.
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Regional managed services. Here's a potential big prize. TeliaSonera has made a couple of attempts to break out its local IT and managed telecoms as combined ICT services in the Nordic region (Integrated Enterprise Services) but had second thoughts. Orange Business Services could provide the strength in depth it needs to rival IBM and TietoEnator in the region. IES was based on the idea of using network services to drive IT engagements. Tier 1 telcos that have fought and lost that battle previously now understand that it is not necessarily the best way to look at it - in fact the telco needs professional services (PS) and/or systems integration (SI) professionals to smooth the way for network-based ICT services. Orange Business Services could bring that leadership to the Nordics.
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SME services. TeliaSonera has innovated in bundled services for SMEs and could be a good partner for le forfait informatique (IT Plan) services into Nordic and even CEE markets, looking further out. Orange Business Services already serves 3,750 companies in 166 countries, and (unlike BT Global Services or Verizon Business) it serves SMEs as well as MNCs.
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If it's good enough for private equity_ Telcos are filling the vacuum left by private equity investors, and any telco with decent assets and cash flows like France Telecom should be putting them to work.
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Telco cannot live by brand alone. The Orange global mobile acquisition was audacious but France Telecom needs a new momentum driver.
