Orange Sp/Adr

Good morning, ladies and gentlemen, and welcome to Orange's Q1 2024 results conference call. The call today will be hosted by Ms. Christelle Heydman, CEO, and Mr. Laurent Martinez, Chief Financial Officer, with other members of the Orange's Executive Committee for the Q&A session that will start after the presentation. With that, let me hand over the floor to Ms. Christelle Heydman. Please go ahead, ma'am.

Good morning, and welcome to our Q1 2024 results presentation that I will comment together with Laurent. Let's move to slide four, which presents the key highlights of the quarter. We began this year with the launch of our new brand signature, Orange is Here, already launched in a dozen of countries and which has been positively received for its innovative and credible approach. The main achievement this quarter, as expected, was the completion of the transaction with Masmovil to form a leading operator in Spain. This is a decisive step forward in our overall vision for a strong and thriving telecoms industry in Europe. As a consequence, from now on, we fully deconsolidate Spain from our group KPIs. Overall, we are very pleased by our Q1 operating results, excluding Spain, with revenues up by 2.1% and EBITDA growth of 2.3%, consistent with our full year guidance. In terms of innovation, we launched this quarter new offers, notably on GenAI for B2B customers in France. We also expanded our partnership with Google Cloud to leverage AI and GenAI across our work streams and geographies. Through this partnership, we will accelerate on AI with a focus on operating smarter and more efficient networks while improving customer experience. Coming back to Mass Orange on slide five, This business combination creates the leading telecom operator in Spain with more than 40% customer market share, an extensive network coverage, and undisputed NPS leadership. We benefit from strong financials that will enable us to win in this market, which has not been structurally changed by remedies. The new joint management team is in place and their top priority is executing the synergies and deleveraging to 3.5 times to focus on cash generation. The JV's financing package was obtained at competitive conditions thanks to our solid credit ratings. Run rate synergies amount to about 490 million euros with, in addition, a potential of commercial synergies of around 100 million euros based on past transactions. These significant synergies compare to moderate net integration costs estimated at less than half a year of run rate synergies. This flagship transaction with our 50% ownership of the JV is clearly creating value for Orange, taking into account the synergies and the 4.4 billion cash upstream received at closing. keeping in mind that we have a path to control. Now let's have a closer look at our main financial KPIs on slide 6. In the first quarter, the group delivered revenues of €9.9 billion, up by 2.1% year-on-year, driven by solid retail services up more than 3%, while wholesale declines slowed down this quarter, notably thanks to the unbundling tariff increase in France. From a segment perspective, Middle Eastern Africa contributed most to group revenue growth with double-digit growth, and France grew by almost 1% with retail services growth offsetting wholesale decline while orange business remained flat. Europe revenue slight decrease was due to low-margin activities decrease while retail services grew by almost 1%. Group EBITDA at 2.4 billion euros accelerated in Q124 up by 2.3%, notably fueled by retail services performance, paving the way to our full year guidance. Finally, CAPEX is at 14% of sales, consistent with our around 15% full year ambition. I will now hand over to Laurent for the review by business.

Thank you, Christelle. Good morning, everyone. So let's start with our segment overview with France on slide 8. In France, revenues are back to growth this quarter with retail services growth offsetting wholesale decline. Retail services excluding PSTN is up 3% year-on-year, fully in line with our 2% to 4% ambition, driven by our value strategy with ARPO up year-on-year. Wholesale revenues fell by less than previous quarters, benefiting from the unbounding tariff increase as of Jan 24. We are pleased with ARPO evolution as a result of our value strategy. Moreover, with 5G and FTTH penetration at 35 and 70% of our customer base, there is still potential to drive value. Regarding the commercial performance, we delivered a solid performance on mobile and continued solid momentum in FTTH, despite slow market, while FBB performance continued the trend of recent quarters. Finally, based on this Q1 solid financial performance, we fully confirm our global target to grow retail services, excluding PSTN, between 2% to 4%, as expected and targeted in our capital market day, and our target to stabilize EBITDA in France in 2024. Moving to Europe, with results which now are excluding Spain, as Christelle explained, revenues were down 2% these quarters, with a solid performance on retail at almost plus 1%. and decrease on low-margin activities such as equipment sales, IT and IS, and wholesale impacted by the new regulatory decrease of termination rate as anticipated. On the retail side, growth in the quarters was driven by a balanced volume and value strategy with convergent services with a solid momentum of plus 7%. Finally, after in-market consolidation, integration in Belgium and Romania is on track. Overall, we expect Europe to deliver a low single-digit EBITDA growth in 2024, consistent with our group guidance. Moving to Spain on the next page, so even if Spain is no longer included in our group KPI, wants to highlight the continued strong performance of Foreign Spain, firmly putting Mass Orange on the value creation path. With retail services, which continue to grow in these quarters, fueled by convergent ARPO up 4.5%, including as well wholesale and equipment sales, revenue are slightly down in the wake of regulated decrease of mobile termination rate. Consistent with last year, churn improved as well year on year, And finally, both FTTH and post-paid mobile customer base increase in the quarters. Overall, we are very pleased by the Spanish performance over the last two years, a strong platform for mass orange performance ahead. Moving to MIA, which again demonstrated its extremely strong performance fully in line with our targets. with a Q1 up double digit for the fourth consecutive quarters, over 11% fueled by our four strong drivers. A clear illustration, growth in mobile revenues, driven by both volume and value, with average mobile up 5.4% and an acceleration in mobile customer base growth. 9 out of our 16 countries posted a double-digit growth this quarter. In Egypt, devaluation was fully anticipated in our forecast and is offset by a very positive operational performance at 35% revenue growth, allowing on historic figures double-digit growth in Egypt and close to 9% in Mea. Looking ahead to 2024, we confirm at least high single-digit EBITDA growth for this region. Lastly, turning to orange business, revenues are stable while IT and IS is up 7.5% in Q1, improving by two points compared to the previous year. This growth was driven by orange cyber defense, double-digit growth, and by solid performance as well on digital services. Looking at our turnaround, we successfully passed two key milestones. Number one, we streamlined our product and services sales portfolio and reduced it by more than half to better focus on profitable offers as targeted. Number two, the voluntary departure plan in France is now under execution with corresponding departures starting in the second half of 2024. Finally, we are pleased and proud that Gartner ranked Orange Business as the number one connectivity providers in terms of ability to execute above all our peers, including, to name a few, BT, Vodafone, DT, and AT&T. Market recognition and customer satisfaction, as demonstrated by this solid NPS, will foster our business growth looking forward. These are all key steps to achieving our target to half the EBITDA decrease this year, before being back to growth in 2025. Now, Christelle, back to you for the closing comments.