France Telecom set for Mideast, Africa investment

Paris: France Telecom may invest as much as seven billion euros (Dh34 billion) in deals focused on Africa and the Middle East in the next five years, Chief Executive Officer Stephane Richard said.

The investment would be part of a plan to double revenue from emerging markets, Richard said in an interview in Paris. Emerging markets currently account for about 3.3 billion euros of revenue at France's largest phone company, or about seven per cent of total sales of about 46 billion euros.

Portfolio of assets

"If we can buy a portfolio of assets to arrive more rapidly, that's very good," Richard said. "If it's necessary to buy licences country by country, that works also."

Some of the world's biggest mobile-phone operators are looking for growth in Africa as revenue gains from their home markets slow. Last month, India's Bharti Airtel agreed to buy assets in 15 African countries from Zain, Kuwait's largest operator, for $9 billion.

"A doubling of activity in five years supposes that we find two billion euros more in revenue, through new licences or asset acquisitions, with another billion euros coming from internal growth by the end of the period," Richard said.

For the acquisitions, paying multiples similar to the transaction between Zain and Bharti would be about two and a half times or even three times revenue, he said. "Therefore we have about five or six billion euros, or even seven billion euros that could be invested," he added.

External growth in Africa and the Middle East will come from the purchase of licences or of assets including some that could cover multiple countries, Richard said.

"It's definitely welcome news for the new CEO to reiterate that growth outside of France and in Africa is still a priority," said Michael Kovacocy, an analyst at Daiwa Capital Markets in London.

Richard took over as CEO on March 1, replacing Didier Lombard, who remains the company's chairman.

France Telecom is focused on filling gaps in West Africa, where it has operations in countries including Cameroon, Senegal and Niger, he said. "All of the countries in this zone where we aren't at present interest us," Richard said. "There's logic in having a regional cluster."

Richard said he would consider any operations Bharti might choose to sell from the portfolio of assets it has just acquired from Zain.

"It's certain we'll look at it," Richard said, adding that "the ink on the deal is barely dry, so it's not the moment for discussions."

France Telecom had free cash flow of 8.3 billion euros at the end of last year. The company also has projected cash flow of eight billion euros for this year and next and plans to use some of that on acquisitions, Richard said.