registration document France Telecom 2009 - Orange.com

isk factors
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OPERATIONAL RISKS
4.1 OPERATIONAL RISKS
Risks associated with the sector, the
economic environment and the strategy
1. The strong competition in the telecommunications sector
could result in a decline in France Telecom’s market
share or in the profitability of its business activities.
France Telecom faces intense competition in the main markets
in which it operates. In light of this competition and with a
view to increasing or maintaining its market shares (particularly
in Spain and the United Kingdom), the Group was forced to
increase its customer retention spend, cut its rates (initially in
the fi xed-line telephony market and more recently in the mobile
market) and to trim its sales margins, as well as to carry out
major capital expenditure programs. These developments
could intensify or over time spread to other markets, such as
Poland, or the mobile market in France, where competition is
anticipated to intensify following the awarding of a 4 th 3G license
in December 2009.
Heightened competition in the core services (fi xed-line
and mobile telephony, Internet access) could result in
France Telecom losing market share or seeing its margins
tighten signifi cantly, and its revenues and profi tability could then
be adversely affected.
For further information on the competition faced by the
France Telecom Group in the business segments in which it
operates, see Chapter 6 Overview of the Group’s business.
2. A major portion of France Telecom’s revenues is
generated in mature countries and business activities.
France Telecom must thus identify growth drivers in new
countries or new business activities. This search may
prove difficult or fruitless and the Group’s revenues and
results could be affected as a result.
At constant exchange rates and scope of consolidation, the
increase in France Telecom’s revenues in recent years has been
primarily due to the rapid growth in its mobile communications
and Internet businesses, driven in Europe by the upswing in
the corresponding markets. Where these markets mature and
in certain instances show signs of saturation, France Telecom
is required to seek out growth drivers in new business activities
and new countries. However, this development exposes the
Group to major new risks such as those associated with the
development of non-core business activities or activities located
in regions that are relatively instable or poorly governed. Should
France Telecom not satisfactorily manage to develop new
business activities to provide growth, its revenues could be
affected .
3. The development strategy implemented by
France Telecom in fast-growing regions could be
significantly adversely affected by the political, economic
and legal situation in those countries.
The Group’s growth largely depends on its presence in fastgrowing
regions. For that reason, France Telecom has invested
in telecommunications operators in Eastern Europe, the Middle
East, Asia and Africa, and could make further investments in
other fast-growing regions.
The political, economic, legal or labour situations in certain of
these countries may change negatively , as happened in the Ivory
Coast. Furthermore, the growth outlook used when making
these investments may materialize , in particular as a result of the
impact of the current economic crisis. Finally, certain planned
changes, which might have a positive or stabilizing infl uence on
France Telecom’s business activities and results, such as the
adoption of the euro by Poland and Romania, could be delayed.
Such circumstances might impact the business activities and
companies in which France Telecom has invested or may invest
in the future, and could adversely affect the expected return on
these investments along with France Telecom’s results.
4. The current economic crisis could significantly adversely
affect France Telecom’s business activities, in particular
through its impact on the Group’s revenues or the
development of new services.
The economic crisis led to a pronounced slowdown in the global
economy in 2008 and 2009, something that may persist or get
worse. The deterioration in economic activity and its impact on
household and corporate spending, as well as a possible return
to infl ationary conditions are all factors that could signifi cantly
adversely affect France Telecom’s business activities, revenues
and results.
In addition, the economic crisis is generating risks to trade
receivables, including the lengthening of customer payment
terms with an impact on working capital, and an increase in
the amount of uncollected debts impacting both revenues and
margin.
5. In 2008 and 2009, France Telecom reduced its level of
capital expenditure in order to adjust to the slowdown
in economic activity. If this optimization of capital
expenditure were to continue or prove to be out of line
with the growth outlook for the telecommunications
sector, it could adversely impact France Telecom’s
business activities and future performance.
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2009 REGISTRATION DOCUMENT / FRANCE TELECOM
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