News
Telco’s home market affected by decline in mobile service revenues; group reaffirms full-year outlook.
Orange posted flat revenues and earnings in the second quarter of 2016 as despite growth from certain key markets – Spain, and Africa and the Middle East in particular – France continued to be a challenge.
At group level the operator generated revenues of €10.07 billion in the three months to the end of June, flat compared with the same quarter a year earlier, while restated EBITDA came in at €3.34 billion, up by 0.1% on a comparable basis.
Revenues reached €20.1 billion in the first half, up 0.3%, and EBITDA slid by 0.6% to €5.91 billion.
France was key to Orange’s performance. Revenues in its home market fell by 1.7% in Q2 to €4.69 billion, leading to a 1.2% decline in 1H. The decline came from its mobile services business, where revenues dropped by 5.2% in Q2, having fallen by 2.1% in Q1.
"Mobile services were impacted by the stronger decline in revenues from the national roaming contract, the effect of roaming price reductions in Europe, and the rapid growth of SIM-only offers, which represented 58% of retail contracts at 30 June (up 14 percentage points year-on-year)," Orange said in the notes accompanying its numbers.
The revenue decline hit earnings. Orange generated EBITDA of €3.24 billion in France in the first half of the year, down by 2.6%. It did not provide a Q2 figure.
France is Orange’s biggest business unit by some margin, followed by its European operation, where revenues grew by 1.9% in Q2 to €2.59 billion, buoyed by a strong performance in Spain. The Spanish unit generated turnover of €1.23 billion, up by 6.2% year-on-year, on the back of new mobile packages, 4G rollout and an increased number of contract customers, Orange said.
The telco’s growth engine, its Africa and Middle East business posted a 2.3% Q2 revenue hike to €1.25 billion, having reported on-year growth of 4.4% in the previous quarter.
"The slowing of growth was due in particular to a strengthened requirement to verify the identities of prepaid customers in most countries and to the reduction in services to international carriers," Orange said.
"The main contributors to revenue growth in the second quarter were Mali, Cote d’Ivoire, Egypt and Guinea," it added.
Last week Orange added a 21st market to its Africa and Middle East operations, completing the acquisition of Airtel Sierra Leone from Bharti Airtel.
"The first half results again confirm the group’s positive momentum, enabling us to reaffirm our objective of growth in restated EBITDA for the year 2016," Orange CEO Stephane Richard said.
In addition to confirming its earnings outlook, Orange stuck by its medium-term objective of a 2x debt-to-EBITDA ratio to preserve its financial strength and investment capacity.
"Within this framework, the group maintains a policy of selective acquisition and value creation by concentrating on markets in which it is already present," it said.
