Orange rallies in Q3, calls for rivals to lead France's mobile consolidation

Orange produced better-than-expected results in the third quarter of 2014 as the France-based operator halted the pace of revenue decline and made progress with cost cutting.

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Orange CEO Stephane Richard

The company also made use of its third-quarter results presentation to reiterate calls for a further consolidation of the French mobile market, but again made it clear that it would not take the lead here. The company currently competes with SFR, Bouygues Telecom and Iliad's Free Mobile on the mobile market.

"We are not the ones suffering the most from the absence of consolidation," CFO Ramon Fernandez told investors on a conference call, Reuters reported. "We are not going to lead on this, we will be looking at evolutions."

The company reported revenue of €9.8 billion ($12.4 billion) in the third quarter, which was down 2.3 per cent year-on-year on a comparable basis. Excluding the impact of regulatory measures, revenue fell by 1.4 per cent in the third quarter after declines of 2.3 per cent in the second quarter, 3 per cent in the first quarter and 3.8 per cent in the fourth quarter of 2013. Revenue in France was 3.1 per cent lower at €4.8 billion, while in the first nine months revenue dropped 3.2 per cent to €29.3 billion.

Jefferies analysts noted that the third-quarter revenue was 1.2 per cent above consensus estimates, and said the EBITDA margin was stable at 33.1 per cent for the third successive quarter.

Restated third-quarter EBITDA was down 2.3 per cent year-on-year at €3.2 billion, which Jefferies said was 1 per cent above consensus. In the first nine months of the year, EBITDA declined 3.2 per cent to €9.3 billion, which Orange said was in line with the target of restated EBITDA in the range of €12 billion to €12.5 billion for full-year 2014.

Operating costs were reduced by €660 million on a comparable basis (-3.2 per cent), offsetting 69 per cent of the decline in revenues. Direct costs fell 4.3 per cent to €328 million while indirect costs declined 2.5 per cent to €333 million. The target of reducing indirect costs by at least €300 million by the end of 2014 had already been achieved at 30 September 2014, Orange confirmed.

"Orange's commercial momentum remained high in the third quarter of 2014 across all our operations, fuelled by our ongoing investment efforts, particularly in very high speed fixed and mobile broadband," said Orange chairman and CEO Stephane Richard.

Less positive was a warning that average revenue per user for mobile and fixed services would continue to decline in 2015, although at a slower pace than in 2014, Reuters reported.

Orange added 65,000 new fibre customers in the third quarter and said it expects to exceed 3 million LTE customers in 2014 with network coverage now reaching 71 per cent of the population. Capex increased by 2.9 per cent in the first nine months to €3.8 billion. Network capex grew by 6.5 per cent, primarily due to investments in fibre and LTE in Europe, particularly in France.

"I would also like to highlight both the solid performance in Spain, where convergent customers represent a growing share of the total customer base, and the notable and ongoing revenue growth in the Africa and Middle East region, which had a mobile customer base of 94 million at the end of September, an increase of nearly 10 million customers in one year," Richard added.

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

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