Orange raises EBITDA target following return to growth in Q3

Orange upgraded its core profit forecast for 2015 after it reported higher third-quarter sales and EBITDA for the first time since 2009.

The company said restated EBITDA would reach at least €12.3 billion ($13.6 billion) this year, compared with an earlier target of €11.9 billion to €12.1 billion. In the third quarter, restated EBITDA increased 1.1 per cent on a comparable basis to €3.5 billion while the restated EBITDA margin was up 0.2 percentage points year-on-year at 34.6 per cent.

The France-based operator said group revenue in the third quarter also increased by 0.5 per cent year-on-year on an organic basis to €10.2 billion, following revenue declines of 0.2 per cent in the second quarter and 0.9 per cent in the first.

Citi analysts told Reuters that this was Orange's first quarter with positive top-line growth since the first quarter of 2009, noting that the results were positive compared to expectations

Orange group CFO Ramon Fernandez told Bloomberg the company believes that 2015 "is a low point" for EBITDA.

"Next year will be better," he said, noting that Orange expects to benefit from growing consumer demand for data services and faster connections, and win a larger share of the high-end market as the situation on the French market continues to improve.

The company also said recent acquisitions in Spain (Jazztel) and Morocco (Meditel) had helped towards boosting the full-year target.

Jefferies International analysts further noted that Orange had appeared to hold back from recent "intense promotional activity" by French operators, particularly Numericable-SFR, and instead had focused on "mobile quality, using FTTH [fibre-to-the-home] to win back FBB [fixed broadband] market share. [The Q3] figures confirm strong subs intake for Orange in France. Spanish broadband looks the main area of weakness," Jefferies added.

Orange CEO Stéphane Richard said the return to growth in revenue and restated EBITDA "validates our strategy of differentiation through quality and investment and confirms the positive momentum generated over almost two years."

Richard said group businesses performed particularly well in France, Spain, Belgium, Central Europe, Africa & Middle East and the enterprise market.

"This commercial momentum is supported by high levels of investment in very high-speed fixed and mobile broadband, in line with our Essentiels2020 strategic plan," he said.

Jefferies also noted there is a statement that Orange will pursue a policy of selective acquisitions in markets where it is already present.

"Nothing new, but investors might wonder if Orange thinks it could play a role in finally facilitating French consolidation post the November spectrum auction," the analysts said.

Like rivals Bouygues Telecom, SFR and Free Mobile, Orange is taking part in the auction of 700 MHz frequencies that starts on Nov. 16.

For more:
- see the Orange Q3 results
- see this Reuters article
- see this Bloomberg article

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