By akademiotoelektronik, 06/04/2023

Spain takes Orange into the red in the first half

Orange's black spot - Spain - has this time become a red alert. The telecom operator led by Stéphane Richard recorded a net loss of 2.6 billion euros in the first half, according to the latest results published Thursday morning. Its difficulties on the other side of the Pyrenees forced it to carry out a significant depreciation of assets (3.7 billion euros) in the country to take into account the downward revision of its objectives, burdening the accounts.

Second market for Orange after France, Spain was nevertheless considered an Eldorado a few years ago. The country has now become a competitive jungle. The prices of packages there are among the lowest in Europe while, as elsewhere, the group must pull fiber and deploy 5G to better serve its subscribers.

“The Spanish market accelerated its low cost, while Orange was rather positioned at the top of the market. Vodafone also had to make a depreciation last year in Spain, recalls Stéphane Richard. “The Spanish market is not a market with four operators but with 15! It's unique in Europe,” explains the CEO, referring to the multiple MVNOs (operators without their own networks) who cut prices.

As a result, his income has been falling for two years. Orange responded by removing some of its Spanish brands, being more aggressive on pricing and reorganizing. A new management team has been appointed. And 485 positions, or 15% of its workforce in Spain, could be cut.

Shock treatment

This shock treatment is starting to pay off. In the second quarter, sales in Spain certainly fell again (-2.7%) but less than in the first quarter (-7.4%). Above all, "the commercial performance is positive", explains Stéphane Richard, CEO of Orange. For a year, the operator has been garnering customers. Over the quarter, 36,000 new subscribers joined on mobile and 28,000 on fiber. And smartphone sales are picking up very strongly (+35.6%) thanks to 5G. The group expects a return to growth in Ebitdaal in 2023 and in organic cash flow from 2022.

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In France, another very competitive market, Orange, on the other hand, is doing better. Turnover certainly posted a slight drop (-0.7% over the quarter), to 4.5 billion euros. But this decline is explained by co-financing income on fiber (paid by other operators to Orange) lower than usual. This same phenomenon penalizes the Ebitdaal (after rent) which fell by 2.2% over the half-year, to 3.1 billion euros.

In the retail market, on the other hand, “Orange has been very resilient,” note analysts at Jefferies. The operator has won 142,000 mobile subscribers and 353,000 on fiber optics, a source of stable and long-term income. As in Spain, smartphone sales are exploding (23.4%) thanks to the reopening of shops and 5G which is pushing consumers to change phones.

Growth of 14% in Africa

But if overall Orange manages to post growth of 2.6% over the quarter and a turnover of 10.5 billion euros, c t is again and above all… thanks to Africa and the Middle East. The area posted “exceptional performance” according to Stéphane Richard with sales up 14.4% – twice as much as in the first quarter.

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Orange shows its expansionist ambitions in Africa

Orange is present in 18 countries in the region, its main source of growth for years. And the operator could soon land in Ethiopia by taking up to 40% of the capital of Ethio Telecom, the incumbent operator in the process of being privatized.

Similarly, Orange is also surfing on its Business branch (cybersecurity, cloud, etc.), in good shape. These other driving forces allow it to cushion the shock of Spain year after year. The operator has also maintained all of its financial objectives for 2021.