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Orange: NFC Won’t Make Us Rich

NICE, France -- Orange (NYSE: FTE)'s Orange is ramping up its Near-Field Communications (NFC) trials and rollouts in Europe, but the operator isn't banking on big revenues from the services.

"We're not going to be made rich by this," said Daniel Gurrola, VP Strategy of Orange Mobile Services, "but it will be a healthy business for us. We see it as strategic."

Gurrola made the comments at an Orange media event in Nice, France, where the operator provided an update on its NFC strategy as well as the Cityzi mobile contactless payments service that was launched in May 2010 in the Côte d'Azur. Cityzi is a collaborative initiative of banks, retailers and mobile operators Orange, SFR and Bouygues Telecom . (See Nice Move for NFC.)

Nice was the first city in Europe to roll out commercial NFC services. A further nine French cities are set to follow suit, with Strasbourg and Marseille expected to launch services before the end of 2011.

Gurrola conceded that NFC is still a nascent service that has been slow to gain traction. A key hold-up has been the lack of NFC-enabled handsets on the market. The Cityzi service currently uses just one handset from Samsung Corp. , but Orange this week announced it will be selling a contactless version of the Samsung Galaxy S II from October, which will be the first NFC-enabled Android phone available in Europe. (See Who's Holding Up NFC?)

By the end of the year, Orange expects to be selling eight NFC-enabled handsets in France, including a BlackBerry from BlackBerry . It is currently selling four NFC phones in France, one from LG Electronics Inc. (London: LGLD; Korea: 6657.KS) and three from Samsung.

"The handset issue maybe has slowed down the deployment of NFC," said Laurent Londeix, who is responsible for Orange mobile services in the Côte d'Azur region. "We expect that now to ramp up."

Londeix added that NFC services are now rich and plentiful enough to encourage phone manufacturers to bring NFC-enabled smartphones onto the market. He also said that Orange is requesting that all of its new SIM cards are NFC compatible.

So far in Nice, 5,000 people are using the Cityzi service, of which 2,000 are Orange customers and the remainder are customers of SFR and Bouygues Telecom. Orange says it has sold around 150,000 NFC-enabled phones in France so far, and the 2011 target is for 500,000 phones.

Challenges ahead for NFC
Despite this optimism from Orange, many industry-watchers believe that mobile operators will struggle to make money from NFC payment and information services -- especially if they are cut out of the value chain with the arrival of an NFC-enabled Apple Inc. (Nasdaq: AAPL) iPhone. Google (Nasdaq: GOOG) has also just launched Google Wallet, which allows users to make payments with their credit cards via an Android phone app. (See Visa Joins Google's Wallet.)

According to Gurrola, Orange "welcomes anything that will spur the market," and conceded that there will be more than one solution on the table.

But he believes that the SIM-based solution is the most secure way to manage NFC services with the greatest level of customer support, and is the solution Orange recommends to merchants and banks, for example. "But we are not preventing any other kind of solution," Gurrola added.

Gurrola said Orange’s business model would primarily be SIM rental, with service providers charged per user per year, for example. The operator will therefore not charge consumers directly for NFC services. Gurrola added that the operator believes increased interest in NFC will also have beneficial knock-on effects, such as driving smartphone take-up and even spurring interest in broadband, which is not required for NFC but would be needed for some value-added services -- for example if a user needed to visit a website.

But Orange is not rushing into anything: "It really is market by market," said Gurrola, adding that a trial in Poland revealed a need for more customer education, while a pilot in Spain has uncovered a new B2B potential for the service: It is helping a city to better manage its garbage collection trucks by monitoring their progress using NFC tags.

— Anne Morris, freelance editor, special to Light Reading

Anne Morris 12/5/2012 | 4:52:51 PM
re: Orange: NFC Won’t Make Us Rich

Orange is really on a mission to make NFC work - so even despite the detractors and the OTT approaches, will the French operator really help make NFC a success across Europe? I saw some of the applications at work in Nice (where all three operators are offering the Cityzi services) and it's compelling when you see it in action. But so much has to come together to create the right basis for services on a market-by-market level.

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