France Telecom has a powerful new ally - Microsoft. Watch out...

July 3, 2008

3 Min Read
FT's Notable New Friend

12:55 PM -- Orange (NYSE: FTE) may have missed out on buying Telia Company as a way to further its international ambitions, but in the wake of that disappointment it's brokered a new partnership with a significant new ally, Middle East powerhouse Etisalat . (See FT Drops $42B Bid and Etisalat, FT Team Up.)

FT and the United Arab Emirates (UAE) carrier have struck a partnership "covering strategic technological and marketing fields," including home networking, content acquisition and distribution, international roaming, and joint investments in submarine cables.

Big deal, you might say -- the UAE has a population of only 4.6 million, about half the number of people that live in Paris and its suburbs, so doing stuff with Etisalat isn't that important in the grand scheme of things, is it?

Think again. Etisalat is one of the biggest emerging markets players, with operations in Africa, the Middle East, and Asia/Pacific. At the end of last year it had 56 million mobile subscribers and 7 million fixed line customers globally, and generated revenues in 2007 of 21.34 billion United Arab Emirates dirhams (AED) ($5.8 billion), and net income of AED7 billion ($2 billion). (See Etisalat Reports 2007, Who Does What: Middle East Carriers, and Etisalat Buys Excelcomindo Stake.)

Its domestic mobile network, which serves 6.3 million customers (yes, a 140 percent penetration rate), is 97 percent HSPA (high speed packet access). It has built a new optical backbone and IP/MPLS data core, and is rolling out GPON for high-speed access throughout the UAE, as well as deploying WiMax to provide an alternative access infrastructure. Its capital expenditure in 2007 was AED3.46 billion ($942 million). (See Huawei Wins FTTH Deal and Etisalat Touts FTTH.)

And it's a fully subscribed member of the NGN fan club. Its 2007 annual report noted: "The migration to Next Generation Networks (NGN) and subsequently to Internet Multimedia Subsystems (IMS) will provide a wide range of value-added services from a single network, enabling video, voice, and data on a single network with a single connection."

And it's doing R&D with some other notable telecom players. (See BT, Etisalat Do R&D.)

Now, here's one of the really interesting things about the partnership with FT: Etisalat says it "intends to become shareholder of SoftAtHome."

Qu'est que c'est? Well, SoftAtHome is the joint venture set up by FT and fellow French firms Thomson S.A. (NYSE: TMS; Euronext Paris: 18453) and Sagem Télécommunications SA to develop a software that can connect digital devices and content in the home, and effectively pose a direct challenge to Microsoft Corp. (Nasdaq: MSFT)'s MediaRoom initiative. And that's a big deal. (See French Firms Take On Microsoft.)

According to the new partners, "Etisalat is planning to use SoftAtHome solutions to launch multiple-play offers in their markets... It is the intention of both France Telecom and Etisalat that Etisalat will become a shareholder of SoftAtHome to get an ability to shape future home networking technology developments."

This is a relationship worth watching closely.

— Ray Le Maistre, International News Editor, Light Reading

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