registration document France Telecom 2009 - Orange.com

4 OPERATIONAL
risk factors
RISKS
In 2008 and 2009, France Telecom reduced the level of its
capital expenditure, thereby enabling it to maintain the level of
its organic cash fl ow. The Group now believes that it enjoys
a certain freedom to adjust the level and timing of its capital
expenditure programs. If France Telecom were unable to
continue readjusting its capital expenditure levels in the event
of a prolonged economic crisis, it may not prove possible to
maintain organic cash fl ow levels. Conversely, were such a
reduction of capital expenditure levels to continue for more than
a certain period of time it could affect France Telecom’s ability
to benefi t from any upswing in economic activity. In both events
France Telecom’s business activities and future performance
would be adversely affected.
6. A saturation of the collection and transfer networks
resulting from the development of new usages could
force access providers and mobile network operators
to invest heavily in the networks over the medium-term,
something that may prove difficult or even impossible to
make pay.
The current expansion in broadband usages such as TV as part
of triple-play, or Internet streaming, fi xed-line and mobile, has
already on occasion resulted and could more generally result
in the future in the saturation of existing collection and transfer
networks, leading to customer dissatisfaction in the shortterm.
To meet customer demand, or pressure from service
providers or regulatory authorities in the countries in question,
France Telecom may over the medium-term be required to
undertake massive capital expenditure programs designed to
increase the capacity of its networks. There is no guarantee
that any such necessary or mandatory capital expenditure
programs carried out more specifi cally in the countries in
which France Telecom is the incumbent operator will pay for
themselves. If it is not possible to assure returns on such capital
expenditure, France Telecom’s fi nancial position could be
adversely affected as a result.
For further information on the regulatory environment and the
legal risks, please see Section 4.2 Legal Risks.
7. France Telecom has opted for a strategy aimed at
developing new growth business es in order to respond
to the rapid and profound transformation of the
telecommunications sector. However, this strategy may
prove expensive and/or ineffective, notably as a result of
the economic crisis or the regulatory framework.
In order to respond to the rapid changes to its business sector,
France Telecom has opted for a strategy that is notably based
on the development of convergent services and on the growth
of new business es such as content, audience or e-health, under
the single Orange brand. The pursuit of these goals requires
substantial resources, in particular for service integration and
content development, without any guarantees that usage of
these services and content will grow and provide a return on
the corresponding costs. Furthermore, the development of
these new services could be hampered by regulatory changes
or the economic crisis, with content-related services possibly
being considered discretionary by some customers. Lastly, the
content and convergent services offered by France Telecom
may not meet customer expectations or may prove impossible
to acquire or produce at a reasonable price. The revenue growth
expected from new business activities could thus be hampered
and France Telecom’s growth outlook, fi nancial position and
results adversely affected.
8. Inter-operator competition is played out, and will be
further played out in the future, on the ability of operators
to offer increasingly improving performance, innovation,
user friendliness and competitive services. Shortcomings
in France Telecom’s ability to provide such services
could lead to a loss of customers and market share, and
impact its revenues, margins and results.
Intensifi ed competition is leading France Telecom to develop
ever more high-performance, innovative and competitive
service offers, targeted at an ever more demanding public.
The development and offering of such services requires
signifi cant efforts in research and innovation, expertise in
complex technologies, very early launch decisions that
presuppose a good understanding of changing needs. Should
France Telecom not manage to control the complexity of the
networks, technologies (including technologies acquired from
third parties under patents, licenses and partnerships) and
processes necessary to meet the expectations of its customers
as regards simplicity, it might lose (or not gain) market share or
be required to cut its margins on the major innovations central
to the development of the market, and its fi nancial position and
results could be adversely affected as a result.
For further information on France Telecom’s revenue performance
and a breakdown thereof in 2009 see Section 9.1.2.1.1
Revenues.
9. France Telecom has adopted a single- brand (Orange)
strategy that may in certain circumstances not be
as successful as anticipated and result in any image
problem being amplified.
France Telecom has adopted a single- brand strategy notably
based on:
■ the placing of the Group’s services and products under the
Orange brand, and the use of the brand for new offers such
as multi-play or content;
■ the development of the attractiveness of the Orange brand in
all the countries in which the Group operates;
■ paying particular attention to the satisfaction of the brand’s
customers by ensuring that the services offered respond to
the customer’s needs, are simple to use and of a high quality.
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2009 REGISTRATION DOCUMENT / FRANCE TELECOM