Orange forecasts stable core profits as market turmoil continues

Orange impressed the markets on Thursday with better than expected forecasts for its margin and core profits in 2014, although the French operator emphasised the figures will partly be achieved through continued cost cutting.

Stephane Richard, France Telecom Orange

Stephane Richard

The operator expects restated EBITDA for 2014 to be between €12.1 billion ($16.7 billion) and €12.6 billion, taking into account the efforts to cut costs and excluding the impact of the disposal of operations in the Dominican Republic.

"We're in a landing phase that will allow us to stabilise EBITDA in 2014," said Orange chairman and CEO Stéphane Richard in a conference call to discuss 2013 results, Bloomberg reported. "We'll continue our efforts on costs in the coming months."

Orange added the objective corresponds to a stabilisation in the restated EBITDA margin compared to 2013. It also said it will maintain its ambitious investment programme in very high-speed fixed and mobile networks this year.

"Orange is determined to remain a leader both in terms of its networks and the creativity of its offers, in fixed as well as mobile," said Richard. "All this combined will enable us to stabilise our EBITDA margin."

Restated EBITDA was €12.6 billion in 2013, and the restated EBITDA margin (30.9 per cent) decrease was limited to 1 percentage point on a comparable basis to 2012. The operator also said it was able to cut costs by €929 million, offsetting almost half of a €1.9 billion decline in revenue during 2013.

Commenting on the results, Richard said the company had proved to be resilient in difficult times.

"In a European market focused on convergence and SIM-only offers, our segmented approach to the market and our investment in high-speed fibre and 4G have proved compelling, with excellent commercial results in terms of both volume and value, particularly in France," he said.

The mobile market in France has proved particularly challenging in the last two years, after sub-€20 mobile plans from Iliad's Free Mobile forced Orange, SFR and Bouygues Telecom to introduce their own low-cost offers. Orange made use of a new secondary brand, Sosh, to introduce cheaper price plans.

According to Reuters, chief financial officer Gervais Pellissier said by the end of 2013 the group had returned to levels of commercial activity not seen since 2009, particularly in France, although he said he did not want to predict when things would start to improve in France.

The market is also set to change again: both Bouygues and Numericable parent Altice have submitted bids for Vivendi-owned operator SFR. If Bouygues succeeds in its plan to merge its French telecoms unit with SFR, Orange would no longer be the largest mobile operator in the country, but the market would again have three mobile operators rather than the current four.

"Everything that is happening today in France around the possible consolidation of companies in the sector shows that we may be approaching the bottom," Pellissier told Reuters.

Orange has also been focusing on building up its businesses in Africa and the Middle East, and is reportedly interested in expanding in Spain, with Jazztel named as one potential target.

For more:
- see this Orange results statement
- see this Reuters article
- see this Bloomberg article

Related Articles:
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Orange aims to meet mobile broadband demand in Africa
Orange European exec sees opportunity in IoT, OTT security
Reports: Orange eyes Jazztel, as Vodafone weighs raising Hellas stake
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