Deutsche Telekom, France Telecom-Orange joint venture targets procurement efficiencies

Deutsche Telekom AG and France Telecom-Orange have formed a joint venture designed to streamline the procurement of customer equipment, network equipment, service platforms and IT infrastructure. The two carriers believe the move will create combined savings of 1.3 billion Euros annually in three years.

The carriers signed a non-binding term sheet that will be the basis for final contracts that have yet to be negotiated. The 50/50 joint venture will first tackle four pilot-projects in the IT infrastructure arena.

The venture will benefit the two partners via the sharing of best practices, leveraging global scale, and harmonizing technology processes. France Telecom-Orange expects to receive the majority of the planned savings, as much as 900 million Euros by the third year of the venture’s operation.

“I am very excited to announce this new project with Deutsche Telekom. By combining our procurement activities, our customers will benefit from the best networks, improved services, and the widest choice of devices across our footprint,” said Olaf Swantee, executive vice president Europe and sourcing at France Telecom-Orange. “The new joint venture will offer a more efficient sourcing organization that will lead to more effective partnerships with suppliers. This will enable us to drive innovation and shape the development of technology in a way that meets customers’ needs.”

“Operators are expected to invest more than ever in networks and infrastructure as data usage increases exponentially and efforts to reduce the digital divide are being ramped-up,” said Edward R. Kozel, chief technology and innovation officer of Deutsche Telekom. “With France Telecom-Orange we have an experienced and trusted partner who shares the same approach regarding economies of scale as well as customer benefits in technology harmonization.”

The joint venture will see operational units in Paris and Bonn staffed by employees from the respective procurement departments of both groups already responsible for purchasing customer equipment, network technology, service platforms, IT infrastructure, and procurement engineering. The final agreement is expected to be signed within weeks but remains subject to the necessary board approvals at Deutsche Telekom and France Telecom-Orange. The creation of the procurement joint venture also requires antitrust clearance.