Orange Earnings: We Like How Orange Is Holding Up; Stable Q2 With Strong Growth in Europe and Africa

Orange ORA continues delivering through 2023 and reached a 2.6% organic growth in revenue and a 1.0% organic growth in EBITDA after leases, or EBITDAaL, in the second quarter. Performance during the first half of the year is aligned with our forecasts and we believe Orange should not have trouble reaching its conservative guidance of slight EBITDAaL growth for the year. We like how Orange is performing during 2023, managing to defend its profits in a tough environment coupled with reduced capital intensity until 2025 as the bulk of fiber-to-the-home, or FTTH, investments in France is already done. We are maintaining our EUR 13.40 fair value estimate and see the shares undervalued at this point.

Performance in Europe and Africa was very strong both for revenue and EBITDAaL. In Europe, Orange has introduced price increases in all regions without any effect on subscriber numbers, which have even grown slightly. During the first half of the year, retail revenues have grown by 3.9% in Europe, resulting in a solid 7.1% EBITDAaL growth also helped by cost containment measures. Spain also grew nicely, albeit starting from a low base given years of strong revenue and profitability pressures. In Africa, organic growth of 10.5% resulted in a 12% EBITDAaL growth in the first half, and the division continues its stellar performance of double-digit growth. Results in France offset this performance, with EBITDAaL declining by an expected 5.1% given the reduction in wholesale revenues that management has long been anticipating. Retail service revenues performed well though, up 1.3% in the first six months. Orange price increases in France have been more shy than in other geographies. We believe this is explained by fears of losing share to Iliad, which has a competitive policy of transparency and not raising prices.