Orange to sell 50% stake in rural areas FTTH networks

Orange has agreed to sell a 50% stake in its rural fibre infrastructure arm, creating a new company, Orange Concessions, that will serve over 4.5 million homes.

Orange said the best offer it received for the 50% stake came from La Banque des Territoires (Caisse des Dépôts), CNP Assurances and EDF Invest.

Orange said that with 23 public initiative networks (PIN) representing over 4.5 million built or to-be-built plugs, Orange Concessions will be France’s leading fibre-to-the-home (FTTH) operator of networks rolled out and operated on behalf of local public authorities.

The company said the deal would allow it to  support its ambitions in public initiative networks while sharing required investment.

The networks operated by Orange Concessions on behalf of local public authorities are open to all operators. Fibre roll-out and maintenance will continue to be performed by Orange

This transaction, which is expected to close by the end of this year, values Orange Concessions at €2.675 billion. Orange will hold a call option that will enable it to take control and consolidate Orange Concessions in the future.

Stéphane Richard, Chairman & CEO of Orange stated:

“I am delighted that Orange, Europe’s leader in fibre roll-out, is now set to establish this partnership in its domestic market with recognized investors who share our vision of digital communication infrastructure development.

“Through this partnership, Orange holds the means to pursue the development of fibre in rural areas, by winning new public initiative networks or by participating in market consolidation. This is a key milestone in the delivery of our Engage 2025 strategic plan.

“As to its financial merits, the achieved valuation reveals the value of Orange’s investments in fibre as well as the relevance of such strategic move.”

Analysts from Jefferies said that the deal would give a visible valuation that an asset that may have not been fully valued in Orange’s share price and would bring experience of funding and managing infrastructure projects as well as sharing the commercial and financing risks associated with these.

Jeffferies noted that Orange would deconsolidate Concessions after the deal closes removing public infrastructure networks and associated capex costs from its headline financials.

Public infrastructure networks are networks covering areas that the French state has said would not support commercial FTTH builds. Private operators are granted the licence to build open access networks and then operate them as a concession.

Orange continues to own FTTH networks in more densely populated areas. Jefferies estimates it could receive up to €3.5 billion from co-investment partners in the 2021-23 financial year to help with its rollout in these areas.