Francis Gelibter: Competition will soon become tougher on Armenia’s telecom market

In late July, it was announced that Orange and Ucom are negotiating around purchase of 100% of shares of Orange Armenia.

Itel.am has talked to Orange Armenia CEO Francis Gelibter who has disclosed some details about the deal and the future Orange Armenia.

-Mr. Gelibter, your announcement in late July on the sale of 100% of Orange Armenia shares to UCOM raised many questions. There is a big question mark, if not a concern, about Orange Armenia’s leaving the country. What will follow after the deal is signed?

-In fact, we are not speaking about somebody’s disappearing. Orange Armenia has a network, a number of licenses, 500 people, 650 000 clients – all this remains and will be remaining. What is changing is the shareholder of Orange Armenia which will happen after the deal is signed and authorized by Armenian authorities.

So, there are two steps which need to happen. The deal will be signed in the upcoming days and this will be followed by authorization. We – Ucom and the Group Orange – will deposit a demand for authorization after signing the contract and then it is up to the Regulator and the State Commission for the Protection of Economic Competition to review the documents which we will provide and as a result to authorize or not authorize the deal. In general, it takes 1- 3 months, so between September and November.

At the same time, we are continuing to offer our services. The sales of Orange Armenia are super over the past day and I hope it will continue. We also have some surprises for our customers in terms of innovation, and we will present them in the near future.

I would like to stress that once the deal is authorized, the Orange brand will remain for a year.

-Did you propose this deal to Ucom this deal, or did Ucom initiate it? When was it? 

- From time to time Orange is reviewing the situation in its investment committee where top people of the Group are included, together with the general managers of the companies in different countries. These are the people who are thinking about the future of the Group and its affiliates. We were asking ourselves the question - is it better to be alone in the Armenian market or is it better to partner with someone else? Then there was this opportunity to discuss this with Ucom. I think they had the same thoughts in the same time as well- is it better to go alone and start a mobile network company from the very beginning or to partner? So, this was the conjunction of those discussions.

More than a year ago, we started speaking with Ucom as well as other companies about the possibility to have commercial contracts to be able to offer convergent offers – fixed and mobile – to our customers, but that was not successful with any of the partners, for different reasons. Beginning of 2015 different kinds of discussions with Ucom about partnership started which was followed by 22 July announcement.

-Orange Armenia has been an important employer in Armenia with around 500 employees. What will happen to these people?

-What I understand from the intention of the potential new shareholder is that they aim to enlarge their services. The idea is not to get people out or to reduce costs.

At the moment we can say that Orange Armenia and Ucom together would represent 20% of the market which is already a relatively significant position. What is interesting is that Orange and Ucom together will be able to provide all types of telecommunication services both to business and individual costumers. If you enlarge services it’s also good for jobs and specialists which currently exist in both companies.

-Why has Orange decided to leave Armenia?

- First of all, strategy of the Group in all countries is to offer convergent services and to answer to all communication needs of our customers in the wide term - so-called “4 in 1” packages, (mobile, fixed telephone, fixed internet and TV) which are very convenient for costumers, as they can get these 4 services in one package at a very good price. The question was: are we able to propose this kind of services to our customers if we stay alone in the market? It would require even more investments from Orange in order to be able to offer these and other innovative services so we decided to partner with another company. We have thoughts about discussing commercial deals with partners who are in the fixed domain, but it didn’t work. So, the major outcome of the deal is having a new operator which will provide all these services to Armenian costumers in one package.

And second,  we know that we need to be stronger in the market to allow developing investments in Armenia for new innovative services that are coming, as LTE for example.

- How did customers respond to the deal announcement?

- We have of course monitored closely their feedbacks because we wanted to make sure that our customers understand that Orange Armenia exists and will continue existing. After the announcement about entering into negotiations with Ucom, in 3 days we have had 45 calls in our offices which is not a that much for existing 650.000 customers. But it doesn’t mean that people don’t have questions. We are responding to any questions. Orange Armenia is here and will continue its existence and there is a chance to enlarge and offer new and more innovative services.

-Isn’t there any disappointment?

- Probably there is disappointment based on the fact that in one year Orange brand will not be in Armenian market anymore. We have taken this decision not with light heart but we think that with Ucom the enterprise and its staff will be stronger and have a good prospective of growth. 

-Over this time, many people have expressed the opinion that political reasons such as Armenia’s membership in the Customs Union have shaped the decision of the Orange Group. Orange Armenia’s “bad management” was also indicated as a reason. Could you please comment on this?

- About the so- called “bad management” I think everyone can have their own opinion and we should listen to people. My impression is that some people think that if they don’t speak about bad management, the deal may be considered in the political context. I want to remind a few things: we are number one in internet mobile with 62% mobile market share and we are increasing this market share, in the voice domain we are number 2 in the postpaid market since the end of 2013 and we are continuing to increase our market share in postpaid, then, after 4 years of operation on the Armenian market the company has become operational profit-positive, which is very rare for a third operator in a relatively small country, and finally, already for the 6th time in a row the independent German audit company P3 recognized the Orange Armenia data network the best in Armenia.

Talking about week points, it concerts mainly the prepaid voice domain.

Those people talking about bad results may not understand the telecommunication industry and in the same time they are maybe afraid that the decision of our shareholder can be treated as a political decision.

I confirm that there has not been any political pressure on Orange Group while taking this decision.

- Do you think that the decision of France Telecom to enter the Armenian market was justified taking into account that the market was rather saturated at that moment?

- In fact, it was saturated in terms of volume and number of customers in voice services. The decision to invest in Armenia was made by Orange Group based on 2 ideas. First of all, the development of mobile internet in Armenia, because  in 2009 internet was nearly not existing, The penetration level was very low and prices were very high. We have brought our contribution to the market so that it develops based on more affordable offers. And second, we introduced several innovations in Armenia in marketing, customer service, shop culture etc., this is what Orange wanted when entering the market. Nowadays, nobody is surprised when you speak about unlimited proposals. We were the ones who introduced those elements some years ago. Nobody was speaking about roaming prices in Russia at 29 AMD, when made our agreement with MegaFon. The decision of the Orange Group to invest in Armenia was made based on the analysis that there was a room to offer these services. It is true that the market is very competitive. Vis-à-vis this situation, that’s why we are now taking this second decision, which is to assemble the company with another company and give better chance of becoming a major player in the market. I think it’s not bad for the market.

- Should your competitors be concerned about the establishment of a new entity that has a mobile and fiber-optic network and will in a sense merge the two companies?

- I have the impression that our competitors are relatively alerted to see what this new “Orange Armenia”, together with Ucom, is going to do. Before the deal announcement, I talked to top managers of our competitors and told them about our decision.

Once the deal is authorized the competition will go higher because there will be lots of innovative solutions, convergent services, which will be good for the consumers.

- Would you recommend foreigners to make investments in Armenia in the future?

- It depends on the area of investment. You know how Armenia is close to France, and it’s not only on the level of officials, but on the level of people. This creates one favorable condition for investing in Armenia. Then, if you invest 100 you want to know if you will have 101 or 98? All depends on the project itself. What I think really needs to be improved in Armenia in order to attract investments is stability and possibility to forecast. Risk is everywhere but what is important for the investor is to be able to measure the risk. Most important thing is to have of course a legal system, so that I can measure the risk and  when I have a difficulty, I can apply and get an impartial decision. I know that public authorities are also working on improvement of tax and custom aspects, which I think is very important for increasing the investment flow. We have brought a very important expertise in the country. Today, with these 500 people working in Orange Armenia, with their 5-years experience, the company with the new shareholder will be able to deliver the second step of innovation in the market.

- At the press conference in July, you said the sale of Orange Armenia shares was a business deal and not a financial decision. What’s the difference for you?

-I think financial deal means that you don’t care whether the deal is good or bad from the standpoint of the company development but you care only about money. So, the decision of this deal was made based on this analysis- what we can offer alone and what will be Orange Armenia able to offer if we partner. Armenia is a relatively small country and it’s not the fact that Orange is receiving money that will make the Group poorer or richer.  This is really a business decision made by business people. Once again – are we able to offer all the spectrum of services? We have tried with commercial agreements and the answer was no. If we want to invest more in new services, are we able to ensure that it will have a certain return on the investment if we are alone compared with if we partner and the answer is: better partner.

- In you opinion, which your biggest omission as Orange Armenia CEO?

- During a certain amount of time, we’ve paid a lot of attention to the internet and mobile postpaid services and not enough time to prepaid offers. We have corrected this situation step by step from 2013. But we didn’t do a big reshuffle, so it was not perceived by the Armenian costumers. I think on the business side it was my biggest omission.

-You are leaving for France in late August. What would you like to say to your customers before leaving Armenia?

- In any case due to personal reasons I had to go back to France at the end of the month and give the lead of the company to another person. I am leaving Armenian with full and positive emotions. Those 3 years were probably the most passionate and interesting in my professional career. My family also enjoyed a lot being in Armenia. My kids have learnt Armenian.

As I told Orange Armenia staff, I will personally do everything so that this transition period is a success and I am pretty sure that the new Orange Armenia will be delivering its promises as soon as the deal is authorized, so those convergent services that are now the main offer in Western Europe will also become main offer for Armenian costumers in next 2-3 years.

Narine Daneghyan talked to Francis Gelibter