Jérôme Hénique (Orange): “In Africa, FinTech encourages us to open up our ecosystems”

“It’s the first time that we know clearly where we’re going,” said a manager of the Orange group in Africa (OMEA) as the company unveiled its new three-year strategy in Paris on 16 February. One can spot a sense of pride that Africa is now – alongside networks, cybersecurity and business services – of the group’s four pillars of development.

Giving a place to Africa and the Middle East, which now account for 16% of the €43.5bn ($46.2bn) in turnover achieved by the operator in 2022, seems essential in the eyes of Orange’s leadership, particularly its new managing director, Christel Heydemann.

They admit that they have trouble making investors understand that the region is, like Europe, a space of opportunity and not of risk, as analysts based in London, Madrid, or Paris are too often tempted to think. This is a paradox for a region growing by 6.4% and with 143 million customers in 2022.

Impacted (but not sunk) by the price war on mobile money in West Africa, OMEA seems to have learned some lessons from the showdown imposed by Wave for more than a year. After MTN, Airtel, or Vodacom, OMEA is opening up and thus yielding in turn to the temptation of the platform economy while seeking to enhance some of its assets, all while maintaining a more traditional investment plan devoted to the development and modernization of networks.

To reveal the details of this plan, Jérôme Hénique, the former right-hand man of Alioune Ndiaye, who ceded his place as general manager on 1 July to focus more on chairman duties, agreed to sit with us for an exclusive conversation.

Question: During the presentation of Orange’s 2022 results and the new 2025 strategy, your CEO indicated that the drop in investments allocated so far in Europe should benefit the continent. How will this translate?

Jérôme Hénique: In Africa, we are facing mobile-based problems, such as rural coverage, which we no longer have in Europe, where the peak of infrastructure investment has been reached with, in particular, the effort to deploy fibre in France in the past years.

The challenge is therefore to continue to develop the coverage and modernise our network, which is currently at 66% 4G [with the objective of reaching 85% by 2025]. For this, we invest directly or with partners. We will also build about 3,000 sites in ultra-rural localities under the same plan, which will bring the total number of this type of infrastructure to 5,000.

We have also bet on fibre, starting with Jordan and Morocco in 2015 and continuing with Senegal, Côte d’Ivoire, Burkina Faso, Mali and the Democratic Republic of Congo (DRC) that we launched in early February of this year.

Finally, 5G networks are on the way. We have created the first network in Botswana, and at least three additional markets see launches this year. From an annual average of €1bn [$1bn] invested in our infrastructures until 2021, we have increased to €1.2bn in 2022, with this acceleration set to continue.

What have been the consequences of inflation on your African activities?

We are seeing an increase in a number of costs. Energy is one of them, even if this has a different impact in Africa than in Europe [Editor’s Note: 5% of costs on average] thanks to our solarisation programs, which allow our networks to be relatively independent of the electricity networks. nationals.

On the other hand, we are closely monitoring the impact on demand in countries where inflation is highest, and we are committed to preserving the purchasing power of our customers and employees, which is reflected in wage discussions on a country-by-country basis. We have also implemented measures to limit the impact of travel costs by promoting telework.

We must also reflect the impact of the inflation of our costs on our prices, which involves country-by-country discussions with regulators so as to maintain prices that are acceptable to the populations but which remain consistent with production costs.

In countries with higher inflation, such as Sierra Leone, the telecom sector has been able to obtain regulatory or government decisions establishing a floor price for gigabytes of data or communication by-the-minute.

You want to make Orange Money a multi-service platform. What is your strategy?

The challenge is to pivot Orange Money towards a multi-service digital platform model based on our connectivity and payment layers. Our objective is for it to be open to all customers, Orange or not, and for it to be able to accommodate third-party services, in particular content and other digital services offered by partners.

Orange Money must become a multi-service application for all customers within the markets where we operate. We will continue to explore fields of services in which we could be legitimate, such as our Orange Smart Energy platform, which has around 160,000 customers and offers partners, whoever they may be, solar kit suppliers, mini-grid managers or national energy companies, energy management solutions adapted to African contexts.

Why was this application shift not made sooner?

We already have more than 18 million active users on Orange & Me and Orange Money. We are now accelerating because the increased penetration of smartphones and 4G makes it all relevant.

In sub-Saharan Africa, we have just over one in two customers who use data. A lower threshold made it difficult to develop sustainable applications on smartphones before, so services have mainly developed using USSD [interactive SMS].

We have successfully focused on mobile financial services for fifteen years. Today, this activity represents nearly 30 million active customers per month and just over 80 million customers on a commercial basis for nearly half of €1bn in turnover and 700,000 points of sale.

We first built it as a complement to the telecom operator business by focusing on deposits, withdrawals, and transfers, all in an exclusive environment; but fintech players have shown us that it is now in our interest to open up these services as much as possible, to make them accessible to users outside our ecosystem and to third-party partners.

This is already the case, especially on payment and merchant payment. We have gone from 20,000 merchants in 2021 to 100,000 in 2022, and aim to triple this figure in 2023. This ranges from informal merchants to large distributors. In addition, we also want to develop credit and savings via Orange Bank Africa or partner banks.

You are convinced that the network is one of your main strengths, especially in the face of Big Tech. However, the latter own all or part of the new submarine backbones and therefore control part of the capacity pricing. Is the balance of power really what you claim?

Big Tech has only slightly invested in network infrastructure, which remains the prerogative of operators. There have been initiatives on submarine cables in which operators are generally partners. In terms of land, we have deployed Djoliba in West Africa, the only pan-African backbone of this scale in the region.

We have no reason to be ashamed of the investments we have made so far, including on the backbone. There have been big tech initiatives on terrestrial backbones, but they are quite limited. On submarine cables, we are alongside Meta, among others, for the deployment of the 2Africa cable, but previously we were partners of all the main cables that served West Africa in particular.

We are now looking at other cables on the Mediterranean coast to better serve Morocco and Tunisia, in particular via a cable known as Medusa. We need to put the pedal to the metal now because we have before us an exponential growth in data usage by customers on the continent, which also involves the need to modernise mobile networks while continuing the mesh that we have started to create on the fibre network. and in rural areas.

“We have an interest in pooling infrastructures.”

In Africa, is this balance of power different from the one you know in Europe where the regulations in favour of a fair contribution from each to the infrastructures are rather on your side?

In any case, we want the same debate in Africa as in Europe on the subject of the fair contribution of platforms to infrastructure investment. They are currently supported 100% by the operators. This will be part of the discussions we will have with regulators across our markets on the continent.

In this context, is investing in network infrastructure still a profitable long-term strategy?

Especially in the long term. Networks are the heart of everything else. Whoever controls the network controls the quality of service, customer access, and, above all, the security of data transport. All of this has unimaginable value for the customer. It is a key asset in our role as the continent’s digital inclusion partner.

Why didn’t you start thinking about the valuation of your telecom towers earlier?

For a long time, the fact of not sharing this type of infrastructure was considered a lever to build a local competitive advantage. Today, with the maturity of the sector, all operators will cover more or less the same areas. We therefore rather have an interest in pooling infrastructures.

However, we use 39,000 towers, 30,000 of which belong to Orange subsidiaries in various countries. We must now create more value around these assets, which does not imply selling them because we consider them to be strategic assets. We must seek to better monetise them by agreeing to share them and manage them in a more industrial way.

This will take various forms because regulations, taxation, and the nature of holding these towers differ between countries. The reflections range from the simple creation of a management service on a countrywide scale, to the creation of a tower management company grouping together one or more countries like what Orange has done with Totem in Europe; but, in any case, we will retain control of this strategic asset.

Between a 45% stake in the incumbent operator Ethio Telecom or the awarding of a private operator license, which opportunity interests you the most in Ethiopia?

We are obviously looking at this market, among others, since it is the second most populated country in Africa; and we analyse according to three criteria: being number one or two on the target market, guaranteeing the level of investment we want to inject in the long term, and controlling our operation at the capital level.

The results of Orange Côte d’Ivoire have been slightly down since the third quarter of 2022. Is this only due to the price war on mobile money?

Yes, it is primarily for this reason, even if it has enabled Orange Côte d’Ivoire to remain the market share leader. [Additionally], we have returned to growth in the fourth quarter.

[However], generally speaking, Côte d’Ivoire is a bear market. Regulatory decisions have lowered the face value of the market without necessarily impacting profitability.

In particular, there was a decision to lower the prices for incoming call terminations between operators, which led to a drop in revenue for this activity. A decision prohibiting those without proper identification prior to 2009 from subscribing also had the effect of slowing down commercial activity.

With these elements now behind us, Orange Cote d’Ivoire is back on the path to growth after a successful listing on the Abidjan regional stock exchange last December.

To support Orange’s rise in cybersecurity, AI and data, Christel Heydeman has announced a vast team training plan. To what extent are African workforces affected?

We must ensure that our 18,000 employees in Africa and the Middle East are trained in the jobs of tomorrow. To do this, we have defined seven priority skills in which we want to invest, including digital, data, AI and cybersecurity, for which we have designed training courses that ensure that we have these skills in our countries.

The Orange Digital Centre system, present in 16 countries and which has trained 700,000 young people in digital technology, also allows us to have a recruitment pool for these professions.