Tuesday, September 16, 2008

France Telecom turns its attention to Africa

By Ben Hall in Paris and Andrew Parker in London - Published: September 15 2008

France Telecom is turning its attention back to Africa, with a new focus on making acquisitions in Anglophone countries, according to its chief executive Didier Lombard.

In his first newspaper interview since France Telecom abandoned its $41bn takeover of TeliaSonera, the Nordic telecoms company, Mr Lombard said the French group would return to its strategy of small deals in high-growth emerging markets.

Mr Lombard sounded an upbeat note about the prospects for France’s leading telecoms company this year, saying it would be largely unaffected by the economic slowdown, and suggesting it could increase its payout to shareholders.

Free cash flow generated in 2008 would probably be “a little bit better” than the €7.8bn ($11.07bn) the company had forecast, said Mr Lombard. He also hinted that France Telecom could raise the ratio of free cash flow it returns to investors above its target of 45 per cent, while insisting that no decision would be taken by the board until next year.

France Telecom, which operates under the Orange brand, last week paid out an interim dividend to shareholders for the first time in its history, and Mr Lombard said: “It’s a kind of friendly attitude towards our investors and I am sure that the board will want to continue in the same way.”

France Telecom is present in 13 African countries, mostly in French-speaking western parts of the continent, but last year made one of its most significant acquisitions by purchasing a controlling stake in Telkom Kenya, Kenya’s leading telecoms company, for $390m.

“Now we are looking at all the African territories and probably we will discover that we continue in the same direction,” said Mr Lombard.

He did not specify any targets. France Telecom faces stiff competition in Africa from MTN, the Johannesburg-listed mobile phone group that has businesses in 15 countries on the continent, and Vodafone, which two months ago beat France Telecom to a controlling stake in Ghana Telecom.

Mr Lombard ruled out acquiring a large pan-African mobile operator, such as MTN or Orascom of Egypt, “because the value is already in the price”.

France Telecom would focus on building new infrastructure and offering new services as it had done – albeit on a small scale – in Niger. “It’s a very profitable situation, but we created value ourselves . . . We are not a bank. We are a telco.”

Mr Lombard ruled out selling Orange UK’s underperforming fixed-line broadband business, saying it was important to retain it if France Telecom were to compete against BT in providing telecoms services to companies.