Orange's Weakness in Spain Is Offset by African Markets, France Remains Stable; Maintaining FVE

Once again, no-moat Orange´s first-quarter results were penalized by weak performance in Spain, reflecting the challenging competitive environment this geography faces. Although the overall revenue decline in Spain softened compared with the last quarter, this was mainly explained by higher equipment sales but not from a turnaround in fixed or mobile offerings. Management announced a 12% headcount reduction in the country that we look favorably upon. Not surprisingly, the company took a goodwill impairment of EUR 3.7 billion due to the bleak outlook for the next couple of years. We are adjusting our forecasts for 2021 and 2022 but are maintaining our EUR 13.90 fair value estimate.