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 As France's largest carrier reported second-quarter results in line
with forecasts on Tuesday, it said that some 60 percent of new
mobile customers were signing up for high-end plans that include 4G
and that 50,000 new customers had signed up to its fiber broadband
offers, taking the total to 415,000.
Orange shares are up about 30 percent so far this year, the biggest
gainers among Europe's large-cap telecom firms, as investors bet on
its recovery from a French price war touched off by low-cost player
Iliad's entry to the mobile market in 2012 as well as possible
consolidation.
Bouygues took the price battle to the fixed broadband market this
March with a TV, Internet and fixed-line phone bundle at 19.99 euros
($26.9) a month, a move that analysts said risked hurting Orange
since it has the largest fixed client base.
"Our strategy is to migrate people to fiber broadband since
afterwards they will not want to downgrade to a slower service even
it costs a few euros less per month," Orange Chief Financial Officer
Gervais said on Tuesday. Asked about the effect of Bouygues' cheaper
broadband offers, Pellissier said Orange had not lost any customers
and that the market was polarizing into high- and low-end services,
much like what has already happened in mobile.
"We have the best mobile network in France and that attracts the
premium customers," Pellissier said.
Investment in networks rose to 1.34 billion euros in the second
quarter, or 13.7 percent of revenue compared with 12.7 percent a
year earlier.
To cope with tough competition and falling prices across its major
markets of France, Spain and Poland, Orange has been cutting costs
on everything from marketing to office space. It pledged to keep up
the effort and upped its annual cost-cutting target to 300 million
euros from an earlier goal of 250 million euros.
"Overall Orange figures for Q2 look solid and performance from the
cost-cutting side enabled the company to offset what are still quite
tough conditions in some of the markets where it operates," Espirito
Santo analysts wrote in a note to clients.
Shares in Orange, a former monopoly which is 27 percent owned by the
state, rose 1.6 percent when the market opened before falling back
to be flat in mid-morning trade.
CONSOLIDATION STILL POSSIBLE
Orange called off talks toward a possible bid for third-place mobile
operator Bouygues in early July, saying the conditions were not met
for a deal.
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But Chief Executive Stephane Richard told BFM Radio that mobile
consolidation in France was still possible down the road.
"It's not because the talks did not work out this time that they
cannot work out in six months or a year's time," he said.
After the Bouygues deal fell through, Richard told Reuters Orange
sees possible acquisition targets in Spain.
Orange said it had "very limited" interest in Yoigo, the smallest
mobile operator in Spain that owner Teliasonera recently said it
would consider selling.
"Things have changed in the market since two years ago when Yoigo
was last up for sale," said Pellissier, referring to a 2012 sale
process that saw Orange and Vodafone submit offers that Teliasonera
rejected.
"Yoigo's market share has not grown since then; its customer churn
is high," said Pellissier.
Orange reiterated its annual profit and debt targets on Tuesday
after it stabilized its margins in the second quarter, helped by
cost cuts and smaller sales declines in France and Poland than a
year ago.
It posted second-quarter sales of 9.79 billion euros and restated
earnings before interest, tax, depreciation and amortization (EBITDA)
of 3.12 billion.
($1 = 0.7443 Euros)
(Editing by James Regan and Andrew Callus)
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