Telecoms convergence took on a new meaning Wednesday as France Telecom announced that it plans to invest in the production of movies beginning next year.

The firm said it will take minority stakes in movies, both home-grown and foreign, and has an investment chest worth around Eur10m (£6.7m) although the group did say that investment could be increased significantly in the future.

France’s incumbent telecommunications firm, which is partly state-owned, has around 50 million fixed-line customers and has setup a dedicated unit to work with the films. Veteran French producer Frederique Dumas has been hired by the company to launch the unit in Q1 2007.

The new unit is part of France Telecom’s CEO Didier Lombard’s strategy to ensure his company takes a full role in the distribution of entertainment content.

France Telecom said it was not getting involved in making films but rather it demonstrated the company’s commitment to French and European cinema. However, observers believe the move could form part of a determined strategy to ensure France Telecoms customers get movies delivered to both fixed-line and mobile destinations.

Chris Wynn, editorial director at Telecoms.com’s parent Informa Telecoms and Media says the move has been coming for some time: “France Telecom has been under pressure to invest in domestic production because its move into IPTV effectively means it has become a broadcaster. The other main broadcasters inn France – such as TF1 and Canal Plus – are required to invest in domestic cinema.” Wynn adds: “France Telecom has previously said that it would be happy to face the same obligations as other broadcasters, so this appears to be in line with that.”

Atte Miettinen, MD at managed services firm End2End says there is more to come. “I’m positive we will see more of this… convergence is forcing operator companies out of their comfort zone… delivering content is becomming extremely important as these businesses consider their future prospects.”

For France Telecom, Miettinen says the move will add “sexiness” to their overall offerings and the association with movies is “perfect for brand recognition”. He also suggests the beleagured mobile company Vodafone would do well to take a leaf out of France Telecom’s book. “I expected something like this from Vodafone this year but nothing happenned. But I really do think that Vodafone will get into this space through partnerships, although it will be a tall order.”