France's telcos take sober approach to energy crisis

France's famous tradition of the two-hour lunch break could face an existential crisis this winter as the government takes the unusual measure of calling for more sobriety among its compatriots – although here it is referring to their energy use rather than their lunchtime consumption of red wine.

Indeed, Prime Minister Elisabeth Borne recently announced an objective to reduce energy consumption by 10% by 2024 (compared to 2019) through an "energy sobriety" plan, amid growing fears that rolling two-hour power cuts could become unavoidable as the weather grows colder.

France is largely reliant on nuclear power, but at one point this year, a total of 32 of its 56 nuclear reactors were closed for maintenance. The nuclear power woes in France have also created uncertainty in the European energy sector, which is already reeling under the Ukraine crisis, impacting both supply and prices.

The French working lunch. (Source: Pxhere)
The French working lunch.
(Source: Pxhere)

Earlier this year, GlobalData forecast that low nuclear power output in France will continue to affect electricity prices in the region this year. The research firm also noted that the largest exporter of electricity in Europe has been turned into a net importer.

Steps are now being taken to bring all of France's nuclear plants back online this winter. In the meantime, businesses and consumers are under pressure to slash their energy use in the coming months.

Telecom operators are certainly not exempt from this requirement. In recent days, Orange, Bouygues Telecom, Altice France (SFR) and Iliad (Free) have outlined how they plan to support the country's energy-saving plan this winter, while also ensuring that customers experience no deterioration in service.

Power play

For example, Orange has said it will cut 5% to 10% of its instantaneous electricity consumption for one hour per day at peak times. "Switching to electric battery for several thousand fixed network installations will help save up to 20 MW," the operator said, noting that this equates to the "instantaneous consumption of a medium-sized city with 40,000 inhabitants."

Other measures include setting maximum office temperatures at 19°C and switching off store window lighting at night. Operators are encouraging employees and customers to adopt energy-saving habits in terms of how they use their home broadband and TV equipment.

Want to know more about 5G? Check out our dedicated 5G content channel here on Light Reading.

All four operators have also signed up to the "EcoWatt commitment charter," implemented by RTE (French national power supply grid) and ADEME (environmental and energy control agency).

EcoWatt is a citizen-based program that provides the French public, companies and local authorities with an "electricity forecast." It indicates in real time the level of electricity available to supply consumers and provides four-day outlooks. Altice also signed up to a similar initiative for gas, called EcoGaz.

Of course, many of these measures are relatively short-term efforts to get through the winter. It has already been well documented how operators throughout Europe are implementing longer-term plans to reduce energy usage and carbon emissions to achieve sustainability goals.

Inflationary pressures

In terms of the wider impact of higher energy costs, a recent report from Moody's also highlights how rising energy and commodity prices are driving up inflation, which is particularly worrisome for European operators. According to the report, persistently high inflation is especially damaging to European telecom operators "because intense competition in Europe hampers their ability to pass through rising costs to final customers through price increases."

Moody's notes that operators' exposure to rising energy costs is in fact relatively low because energy represents some 5% of operating expenses. "However, the increase could still be substantial after companies' hedging arrangements expire," the company warned. "Most operators are well hedged in 2022, with around two thirds of costs hedged on average, but this starts to unwind progressively from 2023."

Labor, meanwhile, is a key element of the cost base for European operators. Indeed, Moody's estimates that staffing costs account for 25% on average of total operating expenses.

In terms of France's operators, Moody's says staff costs for Iliad are lower than many of its European peers, at just 11% of its total 2021 operating spending or 6% of revenue. However, labor costs are relatively high for Orange. At the same time, some 31% of Orange's workers are in the public sector, "making managing labor costs a more complex process," as Moody's delicately puts it.

Related posts:

— Anne Morris, contributing editor, special to Light Reading

Sign In