“Orange is the French operator that has the least need of consolidation,” likes to repeat its CEO Stéphane Richard. The 2015 results tend to agree with him, while discussions for a possible merger with Bouygues Telecom continued and “could take several weeks.”
In this context, Orange reassures its ability to recover its margins. The group released a steady turnover in 2015 year on year to 40.2 billion euros, a gross operating profit (Ebitda (12.4 billion euros, also stable. In the third and fourth quarter, the group’s Ebitda is even growing, which had not happened since 2009. the consolidated net profit tripled to $ 2.9 billion. for comparison, Deutesche Telekom, the European leader in setting an EBITDA of € 18.3 billion in 2015, € 4.3 billion of free cash flow for a turnover of around 60 billion euros.
in France, Orange has launched a customer winback period, especially in the very high speed fixed and mobile. Its foundations of fiber and 4G subscribers continue to grow. the group now has over one million subscriber the fiber in France. This is a market where margins are waiting for you and especially, which allows customer loyalty (churn in the fixed customer base is much smaller than the mobile). This also allows the operator to push its logical enrichment of its services. The group’s ability to strengthen its position in its home market is a key point. Its major European competitors all have a strong foundation.
In addition, Orange has announced the end of 2015 the acquisition of Groupama Banque demonstrating its commitment to growth through an expansion of its services. He also continued to expand in Africa, where it has 110 million mobile subscribers, with the acquisition of four operators since the beginning of the year. Average revenue per subscriber is generally low, between 3 and 4 euros, but the growth potential is significant. Orange is developing a range of financial services that enable them to increase revenue per subscriber.
The group continues its dividend distribution policy. Of the 60 cents per share expected for the year 2015, an intermediate coupon of 20 cents was paid in December 2015, the balance of 40 cents will be seconded in June.
The group also continued to clear its balance sheet with a net debt / EBITDA ratio reduced to 2.01 times in 2015, against 2.37 times two years ago. A possible takeover by Bouygues Telecom Orange should have a broadly neutral impact on the debt ratio of the group, even if the total amount of the transaction may be between 9.5 and 10 billion euros. Part of the acquisition will be financed through a share swap. It would be accompanied by a capital increase, the scope will be limited to avoid too dilutive effect on the participation of the state capital of the incumbent. The cash payment should be offset by the divestments of Free and SFR.
The recommendation of Figaro Exchange in the Telecom sector : we renew our board of yesterday. There is no doubt that reducing the number of operators from four to three on the French market remaining players will benefit, because the pressure on prices should fall. Keep Orange, with a target price maintained at 18.50 euros. The title has successfully weathered the decline in the CAC 40 occurred since the beginning of the year. Orange is in the portfolio “Defensive” Figaro Exchange. Same for Bouygues, with a target price of 44 euros to 12 months. We were gone for purchase on Iliad, with a target of 270 euros to 12 months. The title has successfully weathered the decline in the last two months. Keep positions. Given the debts accumulated by Numericable and SFR parent company Altice, we prefer to stay out of the group title.