Orange sees solid growth in subs, but revenues stay flat

Orange saw solid growth in TV, mobile and fixed broadband in the quarter to March, but this did not translate into strong revenue growth in what CEO Stéphane Richard described as a “particularly challenging competitive context, notably in our two principal countries of France and Spain”.

Stéphane Richard

Orange had 9.658 million TV customers at the end of March, up from 9.097 a year earlier.

In France, the operator had 7.103 million, up from 6.867 million, while in Spain, Orange’s TV subscriber base grew from 641,000 to 705,000. Elsewhere in Europe, the operator’s TV base grew from 1.589 million to 1.85 million year-on-year.

Richard said that convergence “continues to be an engine for growth and loyalty for the Group” and highlighted the strong performance of Orange France in signing up customers to its fibre broadband service, with 168,000 new customers taking fibre in the quarter.

Given the competitive environment, Orange is increasingly focusing on ways to mitigate costs. Last week the operator signed up to a network-sharing agreement with Vodafone in Spain, covering fibre and 5G. The group expects this project to generate savings of about €800 million over four years, including €100 million this year.

Orange posted revenues of €10.2 billion for the quarter, down 0.1% on a comparable basis, with adjusted EBITDA standing at €2.6 billion.

“Orange reported Q1 results this morning which were very much in line with our expectations and those of consensus. The outlook for French telco companies has improved recently as we’ve seen nascent signs of a ceasefire in the price war which began five years ago. Given the recurring nature of revenue at Telcos the industry has assumed high levels of debts over recent years. This means that if we see positive inflections in pricing which may have a small effect on revenues this will translate to a large effect on profits,” said Freddie Lait of Latitude Investment Management.

“Orange as the market leader will need to maintain price discipline in order for pricing power to return to the market, and we will be interested to hear management comments on this during the call. Convergence continues to be a strong point of differentiation for Orange customer retention rates. For investors one of the key benefits of investing in Orange compared to incumbent peers is that during this phase of industry turnaround Orange are decreasing capex while others continue to need to spend more. All in all we believe Orange is incredibly well positioned to benefit from renewed pricing power and any possible consolidation in the French market, all while their investments in customer service and their network continue to bear fruit.”