Orange Quarterly Sales Rise 0.6% as Growth Resumes in Spain

  • Phone carrier trying to recover after major merger collapses
  • Former monopoly faces price competition in home market

Orange SA, the French phone company whose plan to buy a rival collapsed this month, reported a slight increase in first-quarter sales as growth resumed in Spain and more customers signed up for faster broadband services in France.

Revenue rose 0.6 percent to 10.01 billion euros ($11.3 billion), the Paris-based company said in a statement Tuesday. Adjusted earnings before interest, taxes, depreciation and amortization declined 1.6 percent to 2.57 billion euros on a comparable basis. The results were in line with the average analyst estimates compiled by Bloomberg.

The results encouraged investors who had been concerned that price-cutting would hurt sales in Orange’s home country. Revenue in Spain climbed 1.8 percent after nine straight quarters of declines, while the company added 96,000 fixed broadband customers in France. Orange reiterated its target, announced in February, for 2016 restated Ebitda to be higher than in 2015 on a comparable basis.

“Market concerns about high promotional activity in France have been dispelled, and most other markets show decent growth, providing strong visibility to the target of 2016 Ebitda growth,” Javier Borrachero, an analyst at Kepler Cheuvreux, said in a research note.

Orange shares gained 0.7 percent to 14.90 euros at 9:20 a.m. in Paris.

Competitive Market

The failure to buy the phone business of Bouygues SA after months of discussions leaves Orange fighting with three major rivals in one of Europe’s most competitive markets. To counter discount offerings from rivals, Orange Chief Executive Officer Stephane Richard is seeking to compete on service, network quality and innovation, while also looking for potential deals to expand in Europe as well as the Middle East and Africa.

The attempted purchase, which valued Bouygues’s phone unit at about 10 billion euros, would have allowed Orange to save on costs such as equipment purchases and customer service, while potentially reducing competitive pressure. The two companies abandoned the deal amid disagreements over valuation and execution risk.

"We will pursue a policy of selective acquisition, privileging our existing geographical areas and value creation," Orange Chief Financial Officer Ramon Fernandez said during a conference call with journalists. Asked about potential deals involving Dutch phone company Royal KPN NV or Kuwait’s Zain, he said there are no discussions with either company.

While Orange, France’s former phone monopoly, still makes about half of its revenue at home, it has expanded into markets including Belgium, Spain, Africa and Middle East to boost growth.

The company plans to pay a dividend of 60 cents a share for 2016.

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