Orange: 'Wi-Fi first' strong tool in emerging economies April 01 2014

By Caroline Gabriel, Research Director, Maravedis-Rethink

Caroline Gabriel

'Wi-Fi first' has become a fashionable discussion point for many operators – could the normal order of events be reversed and licensed cellcos direct most of their customers first onto Wi-Fi, with its free spectrum and relatively low cost per Gbyte, and keep their precious LTE networks for premium quality services, and to provide ubiquitous access?

This reverses the usual idea of Wi-Fi offload – keep most traffic on the main network and push the most greedy or low value users off. It has gained high profile because of several MVNOs, mainly in the US, which run most of their traffic over Wi-Fi in order to reduce their bills to their host cellco (Republic Wireless is one example); and also because of cablecos looking to offer full mobile and wireless services over hotspots and homespots.

But it has mainly been seen as a developed market issue. Wrongly perhaps – several carriers are playing with strategies to use Wi-Fi to enter markets where they do not own spectrum, etiher as a first step to test out a new territory, or as an alternative to investing in licensed frequencies and networks where this might have an uncertain return.

This goes hand-in-hand with a similar move by some carriers to enter new markets at relatively low cost and risk, by launching over-the-top services that can run on any network. Both approaches have been tested out by Orange via its Horizons unit, which was set up in early 2013, initially targeting South Africa. Although Orange is one of the biggest international cellcos in Africa, it does not operate directly in South Africa – where Vodafone's Vodacom venture is a powerful force. So it plans to offer a new range of products powered by Wi-Fi in the country this year, and is also opening stores. Services will include internet TV, travel applications and mobile payments.

Horizons was set up specifically to develop opportunities in countries where the group is not present as a major telco – a strategy mirrored at other carriers including Telstra of Australia and SK Telecom of Korea. Horizons has a heavy focus on Africa, already the primary target area for Orange's mobile network expansions. The first projects in South Africa were an ecommerce service to sell communications devices, and an online content portal tailored for the country's local audiences, both initially tied into last year's Africa Cup of Nations soccer tournament.

The aim of such launches, Orange says, is to leverage its brand and expand awareness and customer loyalty, as well as generating new revenue streams - all without the need for significant investment and risk. As well as ecommerce services, other ideas include flexible solutions for travel or payments, or even full MVNOs (Orange now has a limited MVNO deal with South Africa's Nashua Mobile).

Orange has piloted some of these online activities in Italy, where it already has a mobile network, but is broadening its appeal to customers by building a web store and portal. Further ventures in Africa and Europe will follow this year, either to strengthen an existing operation or to establish the brand for the first time.

The carrier said the opportunity is huge if a firm does not have to invest in a full network operation in each country. Its footprint covers 10% of the world's population, "leaving 6.2bn people who could potentially become customers through Orange Horizons activities", as the official line went. As well as the online stores (and Orange is even embarking on bricks-and-mortar shops for devices too), likely projects include over-the-top country websites that harness existing assets. These include the group's two pan-continental portals StarAfrica and, in Latin America, StarMedia, as well as content provider partners such as Deezer (the French music streaming service in which FT holds an 11% stake).

Such strategies will become increasingly common among large operators, aiming to generate more revenue and reach from existing assets as well as make sense of a stream of purchases of digital assets over recent years. They could even ease an exit from providing full mobile networks in an unprofitable market. Orange is reported to be looking for buyers for its Ugandan, and possibly its Kenyan, operations because these have small market share in very competitive countries.