Orange Wholesale targets data centers and cloud as legacy strugglesOrange Wholesale targets data centers and cloud as legacy struggles

While Orange Wholesale is poised to seize many of the opportunities arising from AI's surge, the growth of Internet traffic and the cloud, it is facing a decline in legacy services, Michaël Trabbia, its CEO, told Light Reading in an interview that took place during the recent Network X event in Paris. 

At the moment, Wholesale represents about 15% of the group's revenues at around €6 billion (US$6.53 billion) to €7 billion ($7.62 billion) within Orange, Trabbia said. He added, however, that parts of the business are based on legacy technologies, notably copper, which is set to be decommissioned by 2030. International voice is another diminishing area. 

As a result, he said, "the wholesale revenue split will be very, very different from what it is today. So it will probably decrease a little bit." He added, nevertheless that "at the end of the day, from a margin perspective, EBITDAaL [earnings before interest, taxes, depreciation and amortization, after leases] perspective, we should limit the impact."

In the first half of 2024, revenues from wholesale services fell by 6.1%, or €190 million ($206.9 million), at Orange Wholesale, mainly because of a decline in France.

Meanwhile, Trabbia said "the biggest opportunity is about, first, the Internet growth, which is the basis of demand for us, because this is not only Internet growth, this is also GenAI." This drives demand growth in the backbone, he added, including international and long-distance connectivity as well as backbone data centers. 

Growing demand for data centers will also generate more business for Orange because of the resiliency requirements, according to Trabbia. When a company invests billions in data centers, he said, it wants "to make sure that it's connected all the time so you are going to require three different routes that are completely separate to connect this data center."

Going green

Asked how this growth in Internet traffic and advances in AI can be reconciled with sustainability commitments – at group level Orange seeks to achieve net-zero by 2040 – he acknowledged that technology will need to evolve in order to sustainably support GenAI in future.

Targeted use of GenAI will also be important, said Trabbia. "For instance, you don't need a big model with billions of parameters to answer a simple question. So you will need to move towards architecture that is able to differentiate the complexity depending on the request and this is perfectly possible."

Nevertheless, Trabbia also argued that sometimes GenAI can also lead to carbon savings overall. "Everything is consuming carbon. At the end of the day, what you need to understand is whether […] the use case you are developing is better or worse for the environment than what was done before," he said. Orange remains committed to its targets, he said.

Cloud opportunities

Another big opportunity for Orange Wholesale is softwarization, which could allow Orange to provide some services more easily on its telco cloud, said Trabbia. For example, the company has worked with a partner to start offering a content delivery solution (CDN), a technology that allows popular content to be hosted inside the network, making its delivery more efficient.

The operator is deploying CDN across its geographical footprint, which stretches across Europe and Asia. The technology is especially helpful in Africa due to infrastructure challenges, said Trabbia.

That update comes after Orange was previously revealed to have partnered with CDN company Akamai, alongside other telcos including AT&T, KT and Telefónica.

Meanwhile, the ability to build cloud-based solutions should also create value for the company, said Trabbia. During his fireside chat at the show – moderated by Omdia's senior analyst for telco cloud, Inderpreet Kaur – he highlighted Orange's ongoing push to convert network functions into services that can be deployed anywhere in the network.

Orange Wholesale is also building a cloud-based core network as a service solution. This is targeting Tier 2 and Tier 3 telcos that don't want to invest into their own core network, which has become more complex with 5G. 

This is part of a broader effort by Orange to build its own solutions rather than buying them, Trabbia stressed during the fireside chat. Orange Wholesale has disaggregated routers and switches and been developing its own based on the open source ecosystem. 

"We have a product team of ten engineers who are dedicated to develop these routers for our international network and then we're going to leverage this at the group level. And this, for instance, will bring us as much as 20% TCO [total cost of ownership] savings just for our own footprint within Orange," he said.

There is a virtuous cycle for Orange in building its own solutions, according to Trabbia. Each project attracts talent, which then gains further competencies and can build more complex things in future, he said.

eSIM implications for wholesale

Meanwhile, eSIMs are subtly changing the telecom landscape. Asked how they affect the wholesale business, Trabbia highlighted the implications for roaming.

Orange needs to make sure it is providing travelers with attractive offers so they are not lured by other deals, he said. The group is moving to a different set-up in Europe and will allow customers traveling outside the continent to access better deals at per-day prices, he said. 

Trabbia also noted that Orange's strategy partly involves teaming up with eSIM specialists like Airalo or Holafly as a wholesaler: "At the end of the day, we prefer them to be on our network and to take revenue from this." In addition to this, Orange has also launched its own travel eSIM solution. "So basically, we are covering every part of the of the value chain," Trabbia said.

He disputed the idea that eSIMs will lead to decreasing revenues. With the number of people traveling, and strong demand for data, he sees an opportunity to grow sales.

Trabbia also pointed to "silent roamers," a market that is not well served by current offers: "When you have offers that are not attractive enough, not simple enough, people just simply don't use your service." It's an opportunity Orange would like to tap into. "We believe there is a lot of value," said Trabbia, arguing that some roaming revenue is "bad" revenue. "If you reach the limit of your anti-bill shock protection with almost no data used, this is not a good customer experience." 

MVNO conditions getting more challenging

Conditions for MVNOs in Europe are becoming more and more difficult, Trabbia acknowledged, although this depends on the specific market and the number of networks, he said.

Price wars can prove hard for MVNOs to resist, said Trabbia, but they are often better than network operators, in his view, at targeting specific groups of customers. Even in challenging markets, for example, MVNOs have enjoyed success when targeting certain ethnic communities, he said.