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Tuesday, July 23, 2013

Pourquoi le PDG d'Orange a tort (Why the CEO of Orange is wrong)

In the news: The last telegraph services in the world came to a halt last week. Who would have though this can happen, less than 40 years ago?  Where the EU telecom operators will be in 40 years?
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It is a rare occasion to see the president of such a big EU company, such as Orange, getting so angry on the European Commission but these are, definitely, times of big stress for the EU telecom companies.

In an interview to the French press published yesterday, Mr.Richard is demonizing the European Commission as the source of all the bad things that happen to this industry from 20 years to day.  Mr.Richard is clearly upset and many things may be said whilst anger is high.  See here some of these statements:
The Commission is the accomplice of an American player against the European operators which employ and invest considerably in this industry. This would not happen in US!” What ?
And further on :
Brussels played largely in favor of the Asians by implementing a regulation which aims solely to reduce the prices and putting under pressure the Europeans equipment manufacturers, such as Alcatel and Nokia”.  

I could understand when such statements were made by a minister in a Socialist government but I find it difficult for me to understand how such accusations can be made by the head of a (largely) private undertaking. 

Let’s think a little:  The European Commission should be complacent and support EU companies on the simple reason that they fight with an US corporation? Failure to do this makes the European Commission “an accomplice” of a complainant (tough words – “accomplice” is coming from the criminal law and means someone is involved in a crime!).   Or should the Commission close its eyes on the mere reason that the investigated companies create jobs and invest in Europe.  I doubt that they are doing this as “Good Samaritans” – they do it for profit.  This is absolutely normal but no company should claim a more favorable position because of just doing its job.  
Besides, Mr.Richard is wrong – antitrust authorities in US do not use to grant a privileged status to US Corporations – this is the country where giants such as Standard Oil and AT&T/Bell Systems were dismantled following decisions of the antitrust authorities.  By the way, the two giants that Mr.Richard mentions in his interview as dominating in the US market – AT&T and Verizon – are the results of the dismantling of the former incumbent in 1984 and their force today, including the capacity to take over any EU mobile operator, including Orange, is the result of pure competition, the very policy that the European Commission promotes from 20 years and that Mr.Richard is blaming!
I doubt that such divestitures would have happened in France and in most of the EU Member States, where the national champions are praised but, of course, less efficient that competitors in US or in Asia.

What about the reduction of the prices and the fall of telecom manufacturers, such as Alcatel and Nokia?  Both the Alcatel chagrin and Nokia imbroglio originate inside these two companies and have nothing to do with the companies from Asia. Nokia, for instance, missed the trend towards smartphones and was overtaken with ease by the new tigers from Asia which flooded the market with modern, good looking and (yes!) cheap smartphones coming from Asia + not so cheap but desired smartphones coming from US (also produced in Asia). Nokia, Alcatel and the like failed to notice the wave of change even until this well above them. Most importantly, they failed to innovate and thought that they can glide in the market. 

I can agree that the European Commission is sometimes too rigid and tends to overlook certain basic problems, for instance in respect of ensuring a coordinated management of the spectrum in the Member States or offering a clear roadmap for the telecom operators.  The European Commission is not perfect but did and is doing lot of good, from which the EU mobile operators also benefit. 


If Orange and other telecom operators from EU will continue to have a stance such the one expressed yesterday by Mr.Richard, their future looks bleak - rather like Nokia’s than the future of Verizon or that of Wutchison Wampoa.  A softer hand from the European Commission would do more harm than good and would just postpone this unhappy end for the EU mobile operators. What is necessary, instead, is more dialogue between the operators and the regulators, in order to conciliate the various goals followed by the Commission with the possibilities of the market players.