Jean-François Fallacher: Revenue has been shrinking
after year, our margins, our profit and our shareholder
returns as well
The industry is facing decreasing margins with pressure from
OTT players impacting top-line figures, while the need to
invest in ever-faster and more advanced infrastructure has
become a real pressure from governments and customers
For incumbents, the situation can be even more challenging as
they try to leverage legacy products and wring the last drop of
life out of them.
For Orange Polska, the former incumbent in Poland, the
challenge is dealing with the shrinking conventional market.
CEO Jean-François Fallacher says new lines of business
and investing in infrastructure are its best routes to
"The challenge we have is a big part of our business is legacy
voice. This is a shrinking business and the reality is that it
is past the maturity curve. You can take marketing action and
remind them they have a line, but that is a fact of life. The
churn will happen. If we want to grow as a company we need to
replace this legacy business by upscaling other business
In its financial results for 2015, Orange Polska saw revenues
fall 2.9% to 11.8 billion Polish zloty (€2.66 billion)
while its fixed voice business lost 7% of its customers and its
fixed broadband business lost 6.1% of its base. This highlights
some of the challenges it is facing, and why the CEO is looking
at other channels.
The business units Fallacher identifies as providing the best
opportunities are in mobile, fixed line – through
fibre – and pay TV, all markets that telecoms
providers are familiar with. But Orange Polska has reached
beyond these, having launched both a mobile banking arm and gas
and electric services in the last few years.
The banking arm, called Orange Finanse, was launched two years
ago in partnership with Poland’s mBank. It was the
Orange group’s first foray into the banking
sector, and was deemed a success by deputy CEO Gervais
Pellissier at the group’s Orange in Europe event
In 2016, Orange bought a 65% stake in Groupama Banque in its
home French market, though Fallacher denies that Polska had
been used as a test bed for this model.
"When we rolled out banking services it wasn’t a
trial – it was a real launch with a real mobile bank,
with real customers," he tells Global Telecoms Business.
"Orange group looked at the model, but in France they are
approaching it slightly differently as they’ve
acquired a bank. But the idea is similar, so in a sense
we’ve been the first mover – the
With 345,000 customers signed up so far, the numbers have been
relatively small compared with Orange Polska’s
core business – 16.4 million mobile and four million
fixed voice customers. But they have grown steadily, and
Fallacher believes Orange moving in to banking is a success in
"It was an achievement just to set up the deal we have with a
bank and our relationship with mBank has been positive," he
adds. "Customer ramp-up has been good. Perhaps the numbers
appear small, but it depends what you are comparing it to.
Compared with our core business, the numbers maybe
aren’t that impressive. But it is young, it is
fragile, and it is new. We are convincing people to open up a
bank account – that is different."
Finance isn’t the only new market that Fallacher
and his team have turned to as a possible new revenue stream.
In 2014, it launched Orange Energia (Orange energy) for both
business-to-business and business-to-consumer markets. It is
available for 95% of households in Poland, and offers a minimum
10% discount on energy bills as part of a bundle, the operator
claims. So far, it has amassed 15,000 billed customers.
Fallacher says this could be tied in to Orange
Polska’s future smart home strategy, which will
see it sell internet of things devices, such as Nest smart
thermostats, in its stores. But he admits this
hasn’t started, nor has Orange Polska bundled in
energy or banking with its convergent telecoms products.
"We are not trying to bundle it as one big package as it would
not be reasonable," he explains. "If you only had one big
package, and switching all your products to one bank is perhaps
not reasonable. We will look at bundling but across fixed line,
TV and mobile, while the others might be options with some
benefits. For example if you’re an Orange banking
customer and you take out another product, you might see some
"With smart homes, we have devices we are selling in our shops
and doing them in instalments, which link up to our mobile
services. We believe it is a very nice and positive part of the
"We have not tied it in to our energy strategy but it is an
idea we are looking at launching in the future. There are good
products that can tie in to energy and work well together so we
are looking at that."
Transforming to an all-IP network
The transformation for Orange Polska is not just found in an
expansion of its product set, but also in changes to its core
telecoms business. In September, it announced plans to
transform its entire operation to an all-IP network.
Nokia has carried out a pilot with the carrier in Warsaw which
saw 4,000 subscribers moved from traditional telecoms services
to a fully IP operation.
Fallacher is reluctant to discuss the plans, saying they were
still in the early development stages, but he admits it will
play a key role in transforming its fixed business.
He says: "Moving to all-IP is a major transformation for us,
but we can’t talk about it much as we are
currently experimenting with it. We have taken some
geographical zones and we are looking there at what we can do,
and there are many ways to do it.
"It is a very important transformation for us as a former
incumbent because obviously copper is beautiful, it is there
and in the ground, but it is expensive to maintain."
The number of traditional fixed lines is decreasing year on
year "and we might not have enough customers any more to
justify the maintenance of those lines", he warns.
"We may have copper in the last mile for a long time, but going
as far as possible with IP will save us a lot of costs. So this
is the whole IP transformation we are trialling and testing at
the moment. Hopefully we will go into more serious developments
in the coming years as I see it as a major transformation for
our fixed business."
This transformation is coupled with the deployment of a
fibre-to-the-home network, currently available in 35 cities and
offering speeds up to 600Mbps. At the end of September, 57,000
subscribers had signed up to use it, compared with 38,000 in
the three months before. "There are sources of confidence in
the fact that we are going to turn things around," he says,
admitting "on fixed broadband we are not doing that well in the
Polish market – we could do better".
He explains: "We are relying on DSL, and used to only rely on
it. That was tough because Poland is a cable market and, with
DSL, we could not compete in terms of speeds.
We’ve started a fibre investment one year ago, so
that is over now. Where we have deployed fibre, it is obvious
we are extremely completive because the cable guys
can’t compete on speeds.
"Because we are in an investment period, the numbers are
ramping up, but they are still very modest," he adds. "What I
do like is that it is going up and net adds quarter-on-quarter
are 60% higher, so the direction is good."
But the investment is not just in building the fibre network,
he says. "There is a big investment to be made in explaining
what fibre is to the buyers, and get the right experience for
the right communities. Gamers for example – they
should want fibre, but we need to create this snowball
"Right now, the snowball is not rolling on its own.
We’re still pushing it, but at some point it will
be carried by its own momentum. We’ve seen the
same effect in France and Spain. We will invest 600 million
zloty (€135 million) – and this is the plan for
the coming years up until 2018. It is a third of our total
capex," he says.
Quarter of households by 2018
"We will be close to 1.5 million households by end of ,
and by end of 2018, we will be close to 3.5 million –
a quarter of households.
"It is one of the key elements of our strategy. In the
situation we are in, it is not about protecting a dominant
position. Just look at our numbers. Revenue has been shrinking
year after year; our margins, our profit and our shareholder
returns as well," says Fallacher.
"We want to reach the bottom of that pool as a business. We are
aiming to turn around the business, which is why we are going
for this transformation.
"Convergence is one, investment in mobile is another, and the
IP transformation is key as well. There are in the company all
kinds of projects for efficiency and cost reduction, but we
have transformation projects as well which are fundamental to
our business model."