Orange Earnings: Steady Performance; On Track to Achieve 2023 Guidance

No-moat Orange ORA continued its steady performance in the third quarter of the year. Revenue and EBITDA after leases were up by 1.8% and 1.4%, reaching EUR 11 billion and EUR 3.6 billion, respectively. Management reaffirmed its 2023 guidance, which now seems easily achievable. Capital expenditure was down by 7%, in line with the previous two quarters, thanks to the reduced capital intensity in France. We maintain our EUR 13.40 fair value estimate.

In France revenue was flat organically as wholesale revenue kept decreasing as expected. Retail revenue fared well though, with a 2.1% growth during the quarter. Revenue in Europe and Spain was flat. Orange struggled to grow revenue in Spain despite the high-single-digit declines over the past three years. We believe it will be very difficult to go back to the pre-2020 revenue base due to intense competitive pressures in this market. Once again, Africa and Middle East was Orange’s sweet spot with 12% organic growth.

In Spain, Orange is still awaiting a decision from the European Commission about its potential merger with MasMovil, which management expects by the end of 2023. The attractiveness of the deal will depend a lot on the remedies imposed by the regulator.