Orange aims for pole with Totem on back of ‘solid’ fiscal year

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Despite the global pandemic, global telco Orange is claiming to have generated “excellent” commercial results in its 2020 financial year with organic cash flow of €2.5bn from telecoms activities, and a nod to the future has announced the setting up of a European communications tower company, Totem, which it says will be a value-creating entity.

Despite a slight dip in the fourth quarter ended 31 December 2020, the telco said it had enjoyed moderate overall revenue growth, with “excellent” performance in Africa and the Middle East, up 5.2% annually, and solid results in France, up 1.6% on a yearly basis, offsetting a 3.5% decline in Europe and a 1.4% drop in enterprise.

For the year, the Orange group posted 2020 revenues of €42.3bn, up 0.3% year-on-year on a comparable basis, with growth driven by a strong trend in wholesale services thanks to the co-financing of the fibre network in France and to convergent services, which posted respective growth rates of 4.4% and 2.1%.

France and Africa & Middle East made a positive revenue contribution, posting respective growth rates of 1.6% and 5.2% in 2020. Europe, including Spain, remained under pressure, as did enterprise, although the latter segment showed some improvement in the fourth quarter.

EBITDAaL was down slightly, heavily impacted Orange revealed by a decline in roaming and additional costs resulting from the health crisis, as much as €545m, and a fall in Spain, down 13.0%, and from the enterprise segment which was down 14.9%. EBITDAaL in Africa & Middle East rose 10.0%, and results in Europe were up 2.3% excluding Spain.

French EBITDAaL crept up by 0.2%. eCAPEX fell by €124m, absorbing the decline in EBITDAaL, despite the accelerated roll-out of fixed and mobile broadband networks, due to the contributions from co-financing and the discipline shown by the group, particularly in Europe. Group operating income totalled €5.521bn for 2020, down €409m, 6.9%, on a historical basis.

In terms of subscribers, Orange ended the year with 11.06 million convergent customers group-wide up 2.7% year-on-year driven by continuing strong growth in Europe. The company had 214.1 million access lines for mobile services up 3.3% on an annual basis, including 77.4 million contracts, up 4.3%. Fixed services totalled 45.1 million access lines at 31 December 2020, slipping back 0.7% on an annual basis primarily due to a sharp 12.4% fall in fixed narrowband access lines. Very high-speed fixed broadband access lines showed continuing strong growth (23.7%).

Assessing the annual results, Orange group chairman and chief executive officer Stéphane Richard described 2020 as an extraordinary year, marked by a crisis of unprecedented scale. Yet in this context, with networks showing just how vital they were to society, he said Orange had proved able to adapt and meet these challenges.

“First, in fixed, we continued to connect our clients to fibre. In France, 6.5 million more households were made connectable during 2020. This was an unprecedented performance and a tremendous feat given the context. Worldwide, we now have over 47 million connectable households. In numerous countries, the transition to fibre is accelerating and this is a trend that the health crisis has only increased. Our record commercial performance, for example in France and in Poland, are proof in point.”

In mobile, Orange launched 5G in five countries in 2020 and Richard said the operator would continue the deployment of what he called a disruptive technology in 2021.

The mobile play will include Totem which is intended to capitalise on its passive mobile infrastructure assets, focusing on revenue growth and optimising operational efficiency, delivering both organic and inorganic growth. Totem will be run by a fully independent and dedicated management team that will be appointed in the first half of 2021 with a view to launching operations by the end of the year.

At the outset the portfolio of premium towers will consist of around 25,500 sites in France and Spain, the two largest countries where Orange is present. Beyond France and Spain, the group will explore the possibility of integrating other passive mobile infrastructure assets from within Orange’s European footprint that could create value for the firm.

In France, Totem will operate around 17 thousand macro sites with a mix of approximately 55% towers and 45% rooftops. Orange noted that given a strong co-location demand, which has been constant for several years, and the high proportion of towers in the portfolio, there was clear potential to increase co-location rates. In Spain, the operation will be based around 8,000 macro sites, split equally between towers and rooftops.

The Spanish operations will benefit from a network sharing agreement between Orange and Vodafone.


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