February 13, 2020 / 6:51 AM / 2 months ago

Orange strikes confident tone for French market after sales rise

PARIS (Reuters) - France’s biggest telecoms operator Orange (ORAN.PA) said on Thursday it saw potential for revenue growth in its competitive home market after a good fourth quarter there offset a downturn in Spain, helping lift its shares.

FILE PHOTO: The logo of French telecoms operator Orange is pictured in a retail store in Bordeaux, France, October 29, 2019. REUTERS/Regis Duvignau/File Photo

Orange, led by Chief Executive Stéphane Richard, has for years faced a squeeze on revenues and margins as it fights a domestic price war with smaller French rivals Altice Europe’s (ATCA.AS) SFR, Bouygues Telecom (BOUY.PA) and Iliad (ILD.PA).

The Paris-based company said its fourth-quarter core operating profits rose 1.3% from a year earlier to 3.29 billion euros ($3.58 billion), as sales returned to growth in France and rose sharply in Africa and the Middle East.

Group sales advanced by 1.1% to 11.1 billion euros. Sales in Spain, Orange’s second-biggest market after France, fell 2.3% as a flow of low-cost offers in the country dented demand for some its services.

Group results were in line with the average of analysts’ expectations compiled by the company.

The good commercial performance in France would help boost group cash flow from telecom activities in 2020 as operators increase prices, Chief Financial Officer Ramon Fernandez said.

“The French market supports this perspective, as we’ve seen a gradual, slow improvement,” he told reporters, pointing to improved cash flow that was expected to exceed 2.3 billion euros this year.

CAPITAL SPENDING

Orange’s shares were up by about 1.4% in early trading, valuing the group at 34.3 billion euros.

Investments on equipment and other fixed assets rose last year as it upgraded broadband networks, prompting analysts to question Orange’s ability to keep debt at current levels.

“We know that there’s not always a lot of enthusiasm around capex (capital expenditure),” Fernandez said, adding deploying the fiber broadband technology was vital to differentiate the company from its rivals.

Orange said last year it would not cut back capital spending until 2022, after initially aiming for spending to peak in 2018.

The group did not provide details on announcement last year that it planned to carve out its mobile and fixed networks into a separate unit, although it said the processes was ongoing.

Plans to split off mobile towers in most European countries continued, particularly in France and Spain, Fernandez said.

The tower assets, valued around 10 billion euros by several analysts, could help raise fresh cash for investment.

Fernandez said a formal process had been launched to find a financial partner for Orange Concessions, a dedicated vehicle that will include some of its fixed fiber assets in France.

Reporting by Mathieu Rosemain; Editing by Christian Lowe and John Stonestreet

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