Orange CFO laments high cost of content, says financial services to outperform IoT

Ramon Fernandez has given coded criticism of Altice's "extremely aggressive" content strategy and said Orange would not "pay extremely high prices for products that do not necessarily make a difference".

The France-based operator’s Chief Financial and Strategy Officer made the comments in a wide-ranging discussion with journalists in Paris on Tuesday that also touched on Orange Bank, M&A and the company’s share in BT.

Responding to questions from European Communications about Orange’s content strategy, Fernandez said the operator was spending more than €600 million a year on film, TV and video offerings.

In France, rival Altice has made waves in the past 12 months with the acquisition of TV and broadcasting assets, football rights and with the creation of subsidiaries to create film and TV series as well as entire channels.

“Content is part of what we need to offer...but this does not mean that there is a compelling case to pay extremely high prices for products that do not necessarily make a difference,” Fernandez said.

“In France there is one actor which is being extremely aggressive...this is leading to a very steep increase in prices that we think is not very wise.”

He added: “We’re not going to participate in the hyper-inflation of sports rights.”

The CFO did not mention Altice by name, but he didn’t have to.

Instead, Fernandez placed Orange’s content strategy as being more pragmatic, focusing on specific areas where it thinks it can gain traction.

One of these areas is in co-production. As trailed in March, Orange and HBO are looking at co-producing series together.

At last week’s Cannes Film Festival, the CEO of the operator’s cinema-focused subsidiary Orange Studio told the French press that he was ready to spend several millions on producing content.

Fernandez said Orange would “talk more” about this in the future.

“It’s an area we are working on without participating in a game that is probably going to be extremely costly,” he added.

Fernandez rebuffed the notion that as the man holding the purse strings he was a sceptic holding back on a wider desire within Orange to do more in the content space.

“There are other people in the group sharing the same view,” he said.

Content is just one area in which Orange is investing as it looks to drum up new revenue streams.

In 2015, the operator committed itself to finding €1 billion in revenues from mobile financial services and the Internet of Things by 2018.

Fernandez said he expected mobile financial services would slightly outperform a target of €400 million in new revenues over the period, while revenues from the IoT would come in slightly under target.

He did not specify why IoT services are expected to underperform.

With the launch of Orange Bank just six weeks away, Fernandez said it would take five to six years for the new venture to break even and six to seven years to reach its target of two million customers.

After Orange’s CMO told European Communications earlier this month that credit services would be key to driving customer acquisition, Fernandez confirmed personal loans would be available “in a matter of months” after launch, while mortgages and insurance offerings would arrive in 2018.

The CFO also said Orange Bank would be an “extremely powerful tool” when it came to staff retention.

Elsewhere in the discussion, Fernandez said he did not expect consolidation between operators in France to happen any time soon.

“Our strategy is to deliver as if the market remains the same for the foreseeable future,” he said.

Orange and Bouygues denied new merger talks were happening in March.

On wider consolidation efforts in the industry, Fernandez said: “There is a view that in-market consolidation would accelerate pan-market consolidation. I think this is wrong, I think it’s the opposite.”

He added that pan-European, virtualised networks and EU-wide regulation for spectrum may change the game but that this prospect was “very, very far away”.

Asked about Orange’s four percent stake in BT, Fernandez said there was “no urgency” to sell its shareholding.

Finally, the CFO said Orange was ahead of schedule on its cost saving plans.

Fernandez claimed the company was 56 percent of the way along to making €3 billion of gross savings by 2020.

Read more: Orange CEO says strategy is bearing fruit as he unveils Q1 figures

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