Orange's Sales Beat Expectations

Orange's Sales Beat Expectations

The FINANCIAL -- Orange SA on Tuesday said first-half sales fell less than expected, as more customers in France opted for premium offers and the effects of a brutal price war in the country's mobile market showed signs of easing.

The former French telecom monopoly said sales declined 0.6% to EUR19.56 billion ($21.6 billion) in the first half, topping analysts' expectations of EUR19.39 billion as the company moved to revive profitability after years of decline. Sales in France--its largest market--were down 1.3%, but analysts had expected a steeper decline, according to Nasdaq.

Net income for the period was EUR1.27 billion, up 75%, buoyed by the sale of its stake in its joint venture EE in the U.K. and a decrease in corporate income tax. Earnings before interest, taxes, depreciation and amortization fell slightly to EUR5.81 billion in the first six months of the year from EUR5.88 billion last year. Excluding exceptional items, Ebitda was flat compared with the same period last year.

Orange faces fierce competition in many of its markets, particularly in Europe, where telecom firms are competing hard for market share by cutting prices for mobile and broadband services. Along with its rivals, Orange in France has been hurt by a mobile-service price war sparked by the arrival of a new competitor in 2012, Iliad SA, although the situation has improved in recent months as prices stabilized.

"We are particularly pleased with these results which mark a return to revenue growth in the second quarter, excluding regulation, for the first time since 2011," chief executive Stephane Richard said.

Orange shares were up 1.3% in early Paris trading, outpacing the benchmark CAC-40 index which was up 0.4%.

Earlier this year, Orange said it would aim for sales in 2018 to be higher than in 2014. The company said Tuesday it had signed up 76,000 new customers in France in the second quarter, with more customers opting for premium offers and using 4G wireless technologies.

Continued cost-cutting and a better-than-expected performance by Orange in France pointed to an "inflection point" back to earnings growth in the second half, according to analysts at Goldman Sachs.

Outside France, the company has been busy reviewing its portfolio of assets and is in exclusive talks to buy four Bharti Airtel Ltd. subsidiaries in Africa, pushing further into a region it has looked to for growth in recent years. Orange said it would pursue a policy of "selective acquisitions" by concentrating on markets in which it is already present.

In Spain, where Orange completed the acquisition of Spanish broadband provider Jazztel, the company said revenue declined 2.5% in the second quarter, an improvement on the 5% drop registered in the first three months of the year.

Orange confirmed its full-year guidance of achieving earnings before taxes, depreciation and amortization of between EUR11.9 billion and EUR12.1 billion.