Customer Centricity

Is Orange’s bank a better investment than pay-TV?

Orange Bank has finally launched in mainland France, on the day BT’s figures show its TV revenues have “imploded”. Here we compare different operators’ strategies for generating new revenues as their core services become less profitable.

The Orange Bank deal

Orange is offering a gift of €120 to its broadband and mobile customers if they decide to bank with it too. Today the only products on offer are chequing and savings accounts, but others including loans and mortgages are promised.

Banking customer who do not already take communications services from Orange will be given €80 for joining the bank. According to the company, anyone can open an account. Orange’s stated aim is to offer the service in other European countries in the coming months and years: Its wants to attract 2 million customers to its mobile-based bank over the next decade.

The group’s goal is to reach €400 million in financial services revenues in 2018 across all its operating companies. Already, through Orange Money, the group has 34 million banking customers in Africa and the Middle East. Orange Cash has 500,000 users in France after it bought a majority stake in Groupama Banque in 2016, which became Orange Bank in 2017.

Stéphane Richard, CEO, Orange Group, promised, “a 100 percent mobile-based bank that is dedicated to providing an incomparable user experience…a bank with the customer at its heart.”

The services have not simply been transferred from traditional banking onto a mobile interface, but designed for use exclusively on mobile. This goes some way to explaining why Orange Bank was set to launch in France in July, but was postponed due to reliability and quality issues.

Orange’s banking customers will also be able to seek help from 890 specially trained staff at the 140 authorized Orange stores.

Better than football rights?

Whether Orange achieves its European goals remains to be seen – if it does, it will be the first telco to pull off such a success in a western market, after a decade of hype and speculation. If Orange’s communications customers opt to bank with it too, they have a very strong reason to stay with the brand.

It will be interesting to see if banking customers who are not Orange customers when they switch choose to buy communications services too from Orange over time. The execution and experience will indeed be critical. In both scenarios, Orange might well benefit mightily from first-mover advantage.

Orange’s move into banking in France was announced on the same day as BT’s quarterly results, and the coincidence provides an interesting comparison of strategies.

BT’s quarterly figures have suffered because of the accounting scandal at its Global Services’ unit, but, also because in the second quarter, its TV service added only a net 7,000 customers, down from 63,000 for the corresponding quarter last year. As one pundit put it, it’s TV business “has imploded”. Although BT has 1.8 million pay-TV customers and is paying £700 million for its football broadcasting rights with the auction keep those rights looming next year. Ouch.

Don’t bank in pay-TV long term

TM Forum published its first Digital Transformation Tracker in September. It is the largest global survey that monitors the industry’s progress to build a deep and wide picture of telecoms’ transformation. We surveyed 185 executives from 93 unique CSPs operating in 64 countries, and 175 executives from 75 unique supplier companies. Check out the two lots of results on the left. Clearly a lot of store is being set on TV services, which needs some serious thinking.

We think pay-TV is a short- to medium-term defensive measure that, as BT’s results seem to indicate, is just not sustainable. In the longer term, the likes of Netflix and other OTT service providers will force them out. (Check out this discussion about the findings of the DTT between me and our chief analyst, Mark Newman).

Leveraging customer relationships and billing platforms to bundle third-parties services – effectively acting as s distributor – looks more likely to be a winner at the moment. In mid-October, when Netflix announced impressive quarterly results, the company stated it was very pleased with its telco partners as it added over 5 million subscribers. When Disney removes its content from Netflix early next year, surely it will be making overtures to telcos too?

Yet another approach, which will be launched by Verizon tomorrow, is to charge customers with unlimited bundles another $10 a month to remove the cap on video resolution, allowing viewers to stream 4K videos to their hearts’ content.



    About The Author

    Snr Director, Research & Media

    Annie Turner has been researching and writing about the communications industry since the 1980s, editing magazines dedicated to the subject including titles published by Thomson International and The Economist Group. She has contributed articles to many publications, including national and international newspapers such as the Financial Times and International Herald Tribune, and a multitude of business-to-business titles. She joined the TM Forum in 2010 and is responsible for overseeing the content of the Research and Publications portfolio.

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