Orange Earnings: No Surprises, in Line With Full-Year Guidance

Orange’s ORAN first-quarter results did not bring any surprises as management reiterated its 2023 targets. EBITDA after leases grew by 0.5% in the quarter, in line with management’s 2023 guidance of “slight growth.” Capital expenditures excluding spectrum fell 4.9% in the quarter, also in line with company targets. We believe Orange is well positioned to meet its guidance given the relatively stable development in France, strong growth in African markets, and cost-containment measures. We are maintaining our EUR 13.40 fair value estimate.

In France, revenue declined by 1.8% year over year as retail services remained stable and grew 0.6%. Wholesale revenue continued declining as expected, falling 7.8%. In Spain, sales grew by 2.8% as promotional activity continues to be intense. One million mobile lines were ported in Spain in January and February (of a total of 57.8 million), with Vodafone and Orange both having shed lines to mobile-virtual-network-operators (Orange shed 34,000 mobile lines in the first two months). The European Commission launched an in-depth investigation of the Orange-MasMovil merger in March this year, and a final decision should be made before Aug. 21.

In Africa and Middle East, organic growth continued to be strong. Organic growth was 9.1% for the quarter (compared with 6.4% in 2022) aided by a mobile customer base increase of 5.1%. We remind investors that continued growth in Africa and Middle East is one of Orange’s key levers to achieve its dividend growth ambitions until 2025. Totem, Orange’s tower division, grew 8.1% organically, while the enterprise segment saw a 0.7% decline.