Orange's Bet on Spain Pays Off With Quarterly Earnings Beat
(Bloomberg) -- Orange SA is taking lessons from a price war in France beyond its home market to Spain, where a push to win subscribers paid off with a second-quarter earnings beat.
The French telecom carrier is winning phone, internet and TV customers to the detriment of rivals in Spain, where the entrance of Masmovil Ibercom SA as a fourth operator in 2016 added competitive pressure. Comparable sales rose 1.8 percent for Orange in Spain, where it now has 2.6 million fiber broadband customers, compared with a 0.6 percent gain in France.
It’s a “beautiful dynamic” in Spain, Chief Financial Officer Ramon Fernandez said on a call with reporters. The telecom carrier, No. 2 overall after former monopoly Telefonica SA, is now the top provider of 4G mobile services, he said.
The shares rose 1 percent to 14.12 euros at 9:18 a.m. in Paris.
The focus on Spain is part of the French incumbent’s ambition to become a bigger carrier in Europe and beyond. Orange Chief Executive Officer Stephane Richard has prioritized growth in French-speaking African markets and recently said he could expand into Portugal, telling Le Monde newspaper that the operations of Altice Europe NV’s local unit could interest Orange, though Altice said this month it isn’t for sale.
Orange has succeeded in luring subscribers to take bundles of services in Spain and in building out its fiber network in part through deals with Telefonica and Masmovil. In Spain, 86 percent of customers take both fixed and mobile services, Fernandez said. The carrier has gradually expanded in the country first through fixed phone lines in 2005, then mobile services when it bought Amena and fiber through the acquisition of Jazztel in 2015.
The Spanish effort has forced rivals to respond: Vodafone on Wednesday reported slower sales growth on rising competition in Southern Europe and has been offering steep discounts to retain subscribers.
Adjusted earnings before interest, taxes, depreciation and amortization increased 3 percent to 3.38 billion euros ($3.96 billion) for Orange, higher than the 3.35 billion average of four analysts’ estimates compiled by Bloomberg. The company reiterated plans for 7.4 billion euros of capital spending this year.
It was “another positive set of results predominantly driven by convergence,” Paolo Pescatore, an independent analyst who was formerly at CCS Insight, said by email. He said Orange needs to make acquisitions to gain scale if it wants to be a “serious European player.”
©2018 Bloomberg L.P.