Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Orange SA (ORAN, Financial) reported a strong organic cash flow growth of more than 17% year on year.
- The company confirmed its full-year guidance for 2024 and 2025.
- Orange SA (ORAN) has successfully driven in-market consolidation in Belgium, Romania, and Spain, benefiting from synergy potential.
- The African Middle East segment continues to deliver outstanding double-digit growth in both revenues and EBITDaL.
- The company has made significant progress in its ESG strategy, being two years ahead of schedule in reducing greenhouse gas emissions.
Negative Points
- The competitive pricing environment in France, particularly in the mobile entry market, remains challenging.
- Orange Business segment showed a slight negative revenue trend, with a continued need for transformation.
- The European segment experienced a revenue decline due to low-margin activities.
- The Spanish market remains highly competitive, especially on the low-price points, impacting overall performance.
- The company faces ongoing challenges in maintaining ARPU stability in the mobile segment, particularly due to the strong momentum of the Sosh brand.
Q & A Highlights
Q: Christel, I was interested in your comments on the competitive environment and the improvements that you're seeing into July. What are you looking to do to improve the convergent trends in France? And can you provide more details on the JV with Vodafone Spain?
A: On the competitive environment in July, we've observed price moves from the competition. Regarding convergence, we have a slightly negative net ads but are pleased with our commercial performance on mobile and broadband. We are confident in our ability to drive convergent growth due to low churn and ARPO increase. For the JV with Vodafone Spain, it's still in the term sheet phase, and we aim to maximize the use of our infrastructure. We don't comment on the financial structure yet.
Q: Can you provide more details on the Spanish JV and the potential to migrate customers from third-party networks to your own platform? Also, what are your plans regarding AI and its impact on CapEx and revenues?
A: The 4 million customers in the JV include both Orange and Vodafone clients. We are not planning significant greenfield deployment but focusing on network sharing. Regarding AI, we are prioritizing use cases that bring the most benefit, particularly in our B2B business. We are cautious about CapEx investments in AI and are focusing on mid- to long-term opportunities.
Q: Can you elaborate on the trends in France's retail excluding PSTN for H2? Also, why is the Spanish JV limited to 11.5 million homes when Orange and Masmovil have a larger combined footprint?
A: In France, we will continue to drive a mix of value and volume, benefiting from tactical price increases and net ads. The JV in Spain is focused on geographic areas where we see more value due to strict overlap between Vodafone Spain and MASORANGE infrastructure.
Q: On France, can you explain the weakness in mobile ARPU and the impact of Sosh? Also, why did net ads in Spain slow down this quarter?
A: The slight year-on-year decrease in mobile ARPU is due to the strong momentum of Sosh. In Spain, the slowdown in net ads is due to a focus on value creation with the current client base rather than aggressive growth in new clients.
Q: Any exposure to French politics that could delay public sector projects? Also, can you comment on the outlook for minority interests given the growth in Africa?
A: We see no impact from French politics on public sector projects. On minority interests, the increase is driven by success in Middle East and Africa, and we expect this trend to continue in H2.
Q: Given the raised guidance for AME and Europe, do you see any uptake in group expectations? Also, can you provide details on the Sosh subscriber base and any cannibalization with Orange?
A: The upgrade in AME and Europe does not impact the full-year group guidance. We do not see any spin-down effect from the Orange brand to Sosh.
Q: Do you expect more pressure on EBITDA trends in H2 from factors like salary increases or the Olympics? Also, what is your view on using AI for customer service?
A: We do not see any significant cost trend changes between H1 and H2. On AI, we are using it to augment customer service agents and improve efficiency, but it's too early to quantify the financial impact.
Q: Despite the slowdown in the broadband market, your fiber and DSL losses look good this quarter. Any reason for that? Also, can you explain the cost trends in Orange France?
A: The stabilization in broadband is due to a mix of customer retention efforts and new offers. On costs, we continue to drive efficiencies, and there are no significant changes expected between H1 and H2.
Q: What is your perception of the scope for market repair in Spain post-consolidation?
A: The commercial environment in Spain remains competitive, especially on low-price points. However, we are focused on executing our volume-value strategy and delivering synergies.
Q: Can you elaborate on your strategy for FTTH synergies in Spain and the key areas of opportunity in B2B?
A: The FiberCo aims to maximize the use of existing fiber networks. Outside the FiberCo footprint, we are considering co-investment strategies. In B2B, we are leveraging our leadership in 5G and growing in public administration and big accounts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
