France Telecom to withdraw from several European markets

29 Jul 2011

As part of an ongoing portfolio review started by its Chief Executive Officer earlier this year, France Telecom (FT) has put up for sale its Austrian, Swiss and Portuguese assets. As a result of slow growth in European markets, FT is attempting to maximise profitability by pulling out of countries where it is not one of the top two operators and where it does not have a controlling stake in the company. By consolidating into countries where it is strongest, FT is mirroring the actions of its competitors: UK-based Vodafone has been selling its minority interests overseas, most recently with the sale of its Polish mobile arm, Polkomtel of which it had a 24% share. The sales are expected to raise up to EUR2 billion (USD2.9 billion) for the French Group. Chief Financial Officer Gervais Pellissier said that ‘No talks have yet begun on Switzerland; the process is starting today. We are working with the other shareholders in Austria and Portugal to find ways to alter our stakes there.’

In Portugal, FT currently has a 20% stake in Sonaecom, a fixed line and broadband operator with a market share of 4.7% in March 2011. Its Austrian operation consists of 35% ownership of the nation’s third largest cellco by subscribers, Orange Austria.

Whilst the sale of its assets in Portugal and Austria has been on the cards since May 2011, the announcement that FT will divest Orange Switzerland is a recent development. FT owns 100% of the Swiss wireless operator, but has struggled to improve its position there. TeleGeography notes that its market share has remained consistently below 18%, and has recently begun to decline further. Switzerland’s market is dominated by the incumbent, Swisscom, which has continually secured in excess of 60% of mobile customers since competition was introduced, despite attempts by the regulator to level the playing field. Last year, FT attempted to merge Orange Switzerland with its closest rival, Sunrise, in order to compete more effectively with Swisscom. The move was blocked by the watchdog citing fears that the combined company would establish a dominant position. With the failure of this last-ditch effort to compete with the incumbent, FT appears to have chosen to cut its losses and withdraw from the country entirely.

Austria, Portugal, Switzerland, Optimus (Clix), Orange Austria, Orange Group, Salt (Switzerland)