French telecom giant eyes entry into Canadian market

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A subsidiary of French telecom giant Orange SA is examining a potential entry into Canada's $20-billion wireless market as it scours the globe for new revenue streams.

Representatives from Orange Horizons, a new growth vehicle for the Paris-based company, recently held "exploratory talks" with the Canadian Radio-television and Telecommunications Commission, Industry Canada and Canada's Trade Commissioner Service about wireless opportunities.

But unlike U.S. behemoth Verizon Communications Inc., which flirted with a Canadian expansion earlier this year, Orange Horizons is not interested in making big investments to purchase spectrum, sources say. Rather, it is considering less costly options including launching a "mobile virtual network operator," or MVNO, which does not require the company to own its own spectrum or cell towers. Instead, it would lease space on an existing carrier's network to offer a wireless service. (Companies like Petro-Canada Mobility and PC Mobile operate under MVNO deals.)

Canada is among a number of different markets that Orange Horizons is considering for future growth. Although the company has not made any firm decisions, it is assessing whether the potential exists here to leverage the Orange brand. Its interest, still in early stages, comes at a time when the federal government is making a concerted effort to increase competition and lower prices in the wireless market.

A spokesperson for Paris-based Orange played down the company's potential interest in Canada: "Orange's overall M&A strategy is focused on consolidation and the development of areas of strategic interest, particularly in Africa. This prudent and selective strategy precludes any major investments."

Even so, sources say Orange is closely monitoring developments in various countries to assesses new opportunities for revenue growth. Its Orange Horizons subsidiary was launched in January to find "new business opportunities" in markets where it does not provide telecom services. "Such projects could include the launch of online stores selling telecoms-related equipment or airtime; the introduction of flexible travel solutions [roaming packages]; or the launch of a virtual mobile operator (MVNO) activity," states a press release from earlier this year.

In July, Orange Horizons announced it had moved into seven countries including South Africa, Italy, Portugal, Germany, the Netherlands, Sweden and Denmark.

"They came to see us," Barbara Motzney, the CRTC's chief consumer officer, said in an interview last week, noting that the company was seeking clarity from her staff about Canada's "regulatory landscape."

"I think they were in town about a month or so ago," she said, adding: "We meet with all kinds of folks and it is a case of explaining the rules."

When asked if Orange also met with Industry Canada's staff, a spokeswoman stated: "The government routinely meets with stakeholders in the wireless telecommunications sector."

Caitlin Workman, a spokeswoman with Foreign Affairs, Trade and Development Canada, said Canada's Trade Commissioner Service "routinely meets with a wide variety of businesses, especially those who express interest in bringing prosperity-generating and job-creating investment to Canada. I can confirm that Orange has had meetings with our Paris-based trade commissioners. With over 400 employees in Montreal, Orange is already taking advantage of Canada's world-leading investment advantages."

Orange SA, formerly France Télécom, has 232.5 million customers in 32 countries. In addition to wireless, its offers high-speed Internet, television, home phone and business IT services. It recorded annual revenue of €43.5-billion ($62-billion) in 2012 and employs roughly 170,000 people.

On the wireless front, Orange has 174.7 million mobile customers and ranks as the world's eighth-largest mobile carrier. Still, it is facing stiffer competition and tumbling prices in its home market of France following the launch of startup carrier Free Mobile by Iliad SA in 2012. Iliad now controls 11 per cent of France's mobile market thanks to its cut-rate plans, allowing it to poach share from established carriers like Orange, Bouygues Telecom and SFR.