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Orange Westbound for Wireless Scope

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Orange (ORAN - Free Report) , the erstwhile France Telecom S.A. is considering entry into Canadian wireless market as it pursues global opportunities to compensate for increased competition in its home market. Though Orange is already present in Canada through its business service unit, entry into the country’s wireless market will bring a much wider business scope for the carrier.  

Orange Horizons, a new growth vehicle of the French telecom operator is reportedly in talks with Canadian Radio-television and Telecommunications Commission (CRTC) and is accessing the possibility of an MVNO (mobile virtual network operator) launch in the country.

Necessarily, a MVNO does not require huge start-up investments in spectrum acquisition and installation of cell towers. Instead an MVNO leases tower space from existing service providers and offers communication services.   

The Canadian government has been trying hard to reduce rates and increase competition thereby making it difficult for the large incumbents like Rogers Communications Inc. (RCI - Free Report) and BCE Inc. (BCE - Free Report) to move ahead of others by leaps and bounds. This opportunity urged the U.S. telecom giant Verizon Communications Inc. (VZ - Free Report) to make a big ticket investment in Canada earlier in the year.  

Although the discussion is at a nascent stage, Orange’s interest in the Canadian wireless market does not come as a surprise. The company has been considering all business opportunities including the launch of online mobile stores or MVNOs in various countries to boost its revenue growth.

Orange has been reeling under pressure in the domestic market with the entry of start-up carrier Free Mobile in 2012 by Iliad AS. The low cost rate of Iliad has been able to lure French customers and eat up market share of all the big operators in France, including Orange.

Entry in Canada’s $20 billion wireless market could yield meaningful results for Orange if it manages to trap customers with attractive rates. However, we remain sceptical about the success of an MVNO in a market, where there are some established industry players with significant market share.

Orange currently carries a Zacks Rank #3 (Hold).

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