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.

Thank you, Laurent. I would like to conclude this presentation simply by emphasizing that this first quarter's results underpin our confidence in achieving our full year guidance, which remains unchanged. We are more than ever laser-focused on executing our Live the Future plan and on delivering sustainable value. Thank you for your attention. The floor is now open for questions.

Thank you very much for the presentation. We'll now be moving to the Q&A part of the call. If you have any questions, please press star 2 on your keypad. That's star 2 on your keypad, and wait for your name to be called. We acknowledge the questions that already have been asked. Okay, our first question comes from Mr. Nikola Kotkolesin from HSBC. Please go ahead, sir. Your line is open.

Oh, hi, everyone. I have got one question on France. Essentially, it's quite a fact that fixed and mobile subscribers are not that strong. So what does it say about the change in competition pattern? Do you think it's a matter of pricing or it's just a one-off, maybe driven by the new offers at Iliad, for example? I'm just trying to assess what's going on and what price action are maybe enriching your offers. Can you really consider in such context to drive your value growth? Thank you.

Thank you, Nicolas. I will let Jean-Francois comment on the market conditions in France.

Hello, sir. So, talking about the conditions of the market in France, actually, since last quarter, not much news, I mean, in terms of the way the French market is behaving. On the A brands, I mean, I think actors are rather reasonable, and there is still a fight on the B brand markets and the lower segments of the market. So as you have seen, we have been behaving extremely strongly and we are posting positive net ads on mobile slightly better than Q1 last year. On the broadband, what we can say is that the churn is slightly better and that our FTTH sales are very strong if you look at 247K net ads. Nonetheless, it's true that We have been extremely strong on working on the value equation. As you will remember, last year we have cut the promotions from 12 months to 6 months. We have been doing a lot of price increases in our customer base, which are actually leading to this pretty strong 3% retail services increase in Q1. So we are pretty happy with the results. We are going to fine-tune this in the coming quarters in order to balance a little bit more the volume price equation of our business. That's, I think, what I can comment on the French market. Yes, the last point, because you were referring to the launch of the Iliad offers two months before. What we can say, although I am not very keen on commenting on our competitors' launches, What we can say is, as I was saying, we don't see actually any effect on our broadband base. Again, I mean, our broadband churn, if we compare to Q1 last year, is slightly decreasing. So that's the only thing I can say about that. So no impact on our broadband base of this move.

Okay, sorry, if I may add one thing. So you mentioned price increases in the customer base. Are you referring to price increases from last year feeding into 2024, or have you also increased prices in the last few months?

Last year, if you remember, we have done two things. In the beginning of last year, we have done, let's say, a price increase of 1 euro for each of our mobile subscribers and 2 euros for each of our broadband subscriber that was announced actually in the Q1 of 2023. And actually in the second half of the year, we did more moves, more tactical moves, let's say on half of the customer base that were not so massively communicated at the first move at the beginning of last year. But nonetheless, they are definitely delivering the growth you are seeing this quarter. And amongst this move was also the reduction of the promotions from 12 months to six months. So that's the two things we have been doing last year. One has been obviously less obvious and less communicated, but nonetheless very strong as well.

And anything so far in Q1?

I mean, the tactical moves are still going on in Q1.

Okay, got it. Thank you.

Okay, thank you very much. We'll be moving to the next question. The next question comes from Mr. Nick Lyle from Bernstein. Please go ahead, sir, your line is open.

Yeah, morning, everybody. It was a quick question, firstly, on labour expenses. I think for the first quarter, they were up about 5% after flat last year. Could you maybe just explain why? I think, Lauren, you mentioned maybe some second-half departures via the early leaving plan, so maybe it's timing, but could you help us with the outlook for labour expenses, please? And then the second one was on Spain. I think also in the presentation you mentioned not structurally changed by remedies, which seems fair, but could you tell us what you're imagining for price competition as we sort of get into the new sort of mass orange year, please? Thank you.

I will hand over to Laurent then to comment on the labor expenses. When it comes to Spain, it's, I mean, It's difficult to comment on what's going to happen in the market in the future, but as you know, the Spanish market has been going through many changes. Very, very aggressive market on the low-cost brands for the past years, but also very disciplined in driving value in the high-end part of the market. As you know, the remedies, we don't expect them to bring structural change. As you know, Vodafone is exiting the market. We are combining with MassMobile and the rest of the market remains smaller players. So we do expect the market to improve at least. We will drive our part in making sure we drive value in this market. But as I said, even more focused on delivering the synergies and also continuing to work on leading from a customer experience. We have the leading NPS when we combine Masmovil and Orange in Spain. So we will absolutely focus on this. Orange, on its side, has been communicating on price increases into one to customers that will impact our P&L starting April, with some plus one to plus three euros increase, depending on football packages, but it's all on premium. And we also know that Movistar and Vodafone have also increased their ARPUs in the same range. So we do expect similar behavior, a premium market very solid and focused on value, and a low-cost market, very aggressive as always.

On the labor expenses, Nick, two factors into it. Number one, of course, global inflation and salary increase. We have completed the salary increase negotiation in France specifically, which is impacting, of course, our quarters to quarter labor expenses. We need to bear in mind as well that we are expanding our labor costs on growing markets, specifically in Maya. So there is a volume game into this, and there is some phasing as well into this, which is inherent to the labor expenses. So nothing to be concerned about.

That's great. Thank you.

Okay. Thank you very much. Next question comes from Mr. Roshan Ranjit from Deutsche Bank. Please go ahead, sir.

Great. Morning, everyone. Thanks for the questions. I've got two, please. Firstly, on CapEx, we saw an increase for the first time in a while this quarter, I guess in line with your 15% CapEx sale guidance, but it's supposed to get a sense of the kind of, I guess, approximate split of the cap spend, I imagine. Most of it will be dedicated towards AME, but just to get the sense of how the, I guess, fibre... Investment in France continues to trend down. Any call you could give will be super helpful. And secondly, on the enterprise business, you mentioned the voluntary departure plan. How far are you through that? And again, in terms of the road to EBITDA recovery in 2025, what is the kind of mix between the product shift and the underlying cost cuts which you can implement in there? Thank you.

Thank you, Rochelle. So on CAPEX, the Q1 figures are really, there's a phasing impact in the year, but nothing to be worried about. And we are fully aligned with our ambition at group level to be at around 15% e-CAPEX to sales. So no concern. And when it comes to the rollout of fiber in France, We are fully under control. We've signed an agreement with the French government to clarify a number of regulatory constraints that we had, but as we've said already in the past, this was planned, fully included in our budget and forecasts. So absolutely no change and we continue to be focused on connecting customers to our fiber network. On the enterprise recovery, So the voluntary departure plan was officially validated early April. So it's now in motion with discussion and open to employees for volunteers. So this has started and will impact our financials in the second half of the year. When it comes to the recovery towards the stable EBITDA in 2025, or EBITDA back to growth in 2025, it's, of course, the cost-cutting plan, which is not just about the headcount in France and the voluntary departure plan. This is something that, of course, we drive not just in France, also at the worldwide level, but it's really a lot of actions around execution excellence, Of course, the portfolio pruning, but it's also the growth of our cybersecurity business and really driving growth margin improvement in all our digital services. So I won't give you a number, but it's really a full comprehensive plan where, of course, cost-cutting, including the headcount, but not just the headcount, is a key element.

Great. That's helpful. Thank you.

Okay. Thank you very much. Our next question comes from Mr. Matthew Robileas from Barclays. Please go ahead, sir.

Yes. Good morning, and thank you for the presentation. First, I had a question around Mass Orange, so congratulations on getting the deal closed. I wanted to know what you meant in your slide deck presentation about the contract, the wholesale contract you signed with DG when you talk about capacity-based fee. I wanted to understand if possible whether DG is paying a certain amount for a certain percentage of your network capacity, or is it based on the volume that they use and ask you? And the second question was around networks. Clearly, it seems to me at least that the decision by the EC to not impose structural remedy is a positive. And I was wondering if there was scope for more network consolidation in Spain. As you flagged, Zegona is buying Vodafone and Zegona has made it very clear that they would like to enter into some deal on network sharing on the fixed side. So I would be curious to understand whether that is something you're hoping to theoretically And then the last question was on Totem. I realize that the growth is not very strong at the moment, and I was wondering what was driving that. Are you seeing a slower growth in towers over your footprint? And then if I may follow up, You had said in the past that you would consider strategic options around Totem, but certainly after the deal closed in Spain, it's now closed. So I don't know if you have any updates you want to share with us in terms of how you view Totem. Lots of questions. Sorry. Thanks.

Thank you. So on the Spanish market, the remedy is first to remind that the wholesale agreement that that we have signed with DG is optional. So it's for DG to decide whether or not they want to activate it knowing that today they are working on the Telefonica network and remind you that this is an agreement that is at market conditions from a pricing standpoint. So at least, I mean, no impact of course on our financials and again, they have the option to exercise this wholesale agreement until 2025 or 2026. So it's not short-term, and they cannot exercise it after 2026. And it's indeed capacity-based fee pricing, but again, at market conditions. So this would not, we believe, have impact on the retail market prices. When it comes to networks in Spain, you're absolutely right that the Spanish market is somehow overbuilt. And we do plan, of course, to create synergies between Orange and Masmoville to start with. And that's part of the synergies that we expect. And we will, of course, be very focused on making sure that we increase the network the usage of our networks also through wholesale or any type of schemes and symmetrically we will also make sure that we are very focused when we invest in capex in Spain on avoiding overbuilt and so we will also have a role as a leading player in Spain to drive as much as possible network efficiency across the market but I don't have any anything else to comment at this stage, but you can be reassured that this will be a key focus of the management team in Spain. When it comes to Totem, nothing to comment from a strategic standpoint, and maybe I will hand over to Nicolas, the CEO of Totem, to comment on the performance and the market environment.

Yes, good morning. So regarding the revenue of Totem, as you said, overall revenue are stable. Now when it comes to recurring revenue, posting revenue, they are growing by 2.6% year-on-year, which is online with our budget. And the rest of it are revenues of low margins that are compensating this overall recurring revenue. So we are on a good train regarding Totem. And when it comes to external revenues, I mean revenues that are made with other customers than Orange, we are growing by 4.6%. And if I exclude Mass Orange, I'm talking of 11.6%. So we are on a good train for external revenues.

Thank you. Sorry, it's probably down to my English. But, Christian, when you say capacity-based, again, if you can maybe be more precise, is that a percentage of the network at a certain price, or is it? a volume commitment, as in they buy X megabytes or gigabytes per month or per quarter, and they pay based on that, and it varies according to the volume they purchase from you, e.g., that is.

Yeah, no, it's a consumption-based price, so it's price per gigabyte used on the network.

That's very clear. Thank you so much.

Okay, thank you very much. Our next question comes from Mr. Jacob Bluestone, BNP Paribas Exxon. Please go ahead, sir. Your line is open.

Hi. Thanks for taking the question. Just hoping if we could turn back to the soft KPIs in the French business. And I guess just if you could maybe help us understand why you're not really benefiting from the large customer losses at SFR. We obviously saw in Q4, I think it was 80,000 subs lost in fixed and over 200,000 in mobile. But that doesn't sort of seem to be, you know, it doesn't seem like the weakness at SFR is really helping your business. So if you can maybe just help us understand that. And then just more broadly on fixed line, I mean, you've lost almost 150,000 broadband subs over the last year. Your article growth does seem to be slowing a little bit now, I guess, as you annualize some of your price hikes. I mean, should we be expecting a slowdown going forward in that business, or how do you sort of think about this rebalancing of volume versus value that you mentioned?

Thank you. I will let Jean-Francois comment.

So, first of all, hello. Good morning. Please be reassured. I mean, we are benefiting. from losses of customers from SFR. I mean, again, we are posting, as you see, positive net ads, 6K mobile, and very strong net ads on fiber, 247K net ads on fiber this quarter. So obviously, this is not only coming from customers from orange migrating from copper to fiber, but we are getting customers from the entire market and from all the operators, by the way. And indeed, you're right. especially uh from uh from sfr i mean uh once more uh and you're right to stress that uh if you look at our arpus year-on-year they have been increasing very strongly i mean when we look at the fixed broadband arpus they've been increasing by more than five percent if you look at the convergent arpus they've been increasing by more than four percent uh so uh basically uh What we can say is that, again, I mean, we are going to work on fine tuning in the coming quarters. Let's say the volume slash what we call value price increases. But we believe this is quite a strong quarter from this point of view. Okay. Thank you. And I remind that we have a broadband customer base of 12.7 million customers in France. So please refer with the numbers you see. with this 12.7 million customer base.

Okay, thank you very much. Our next question comes from Mr. George Serviajano from Citi.

Please go ahead, sir. Good morning, and thank you for taking my questions. Maybe a couple of follow-ups on France, and I think Nikola and Jacob focused a bit on the pricing side. I just wanted to understand, you made a comment earlier that the churn on broadband is coming down in Q1, yet it looks like overall the KPIs are a bit weaker. So I'm just curious if there is a market problem beyond what we saw last year, if there's a further slowdown in market growth or whether it's just one player being a bit more active than the others in the past quarter. And going forward, you are going to pass the anniversary of public price increases last year. So is that a risk that we see actually some of this growth slowing down quite materially from the second quarter? And then the second question is more strategic. And I think Matthew earlier asked about consolidation of networks. in Spain, I guess in France they're not parallel, but I'm just curious whether there's been a lot of reports about networks being available for sale, whether it's something of interest for Orange from an antitrust perspective, whether you believe that's doable. Any comments on that would be highly appreciated. Thank you.

Thank you. I will also hand over to Jean-Francois, but maybe to comment on the overall market. We indeed see, and that's not just for Q1, we already saw that second half of last year, a slowdown in the market dynamic. with less net ads, and this is, you look at the report from 2023, there have been less net ads compared to the year before. So there's definitely a market slowdown, and in that environment, indeed, we had a lower churn broadband in Q1, but you're right, there's overall a market slowdown in terms of net ads in the market. When it comes to consolidation of networks, there have been indeed a number of deals. As you know, TDF or XP Fiber are very often communicated. It's, of course, for those players to comment. What we see, at least what we hear, is that the number of investment, private equity firms or investment funds are looking at it. When it comes to XP fiber, our analysis is that there are some antitrust complexities that would make it a possibility for us to position ourselves, knowing that, of course, we have agreements already with XP fiber, and we definitely benefit from their networks in our retail business in France. Jean-Francois, nothing more to add on the broadband? Yeah.

Can we move to the next question?

Yes, absolutely. The next question comes from Stefan Bayazian from Odo. Please go ahead, sir. The line is open.

Thank you. I've got three, if that's possible. Sorry to push a little more on the commercial performance in France to start with. Is it just possible to have a sense of whether that weakness we're seeing is a little more on the orange brand or on the soft brand because you mentioned more competition or, you know, still the market, but the soft brand looks quite well-priced to me, so I was just wondering whether you can give us some flavor of how the two brands are behaving. My second question is on AI. I mean, we've seen Digital Telecom in that joint venture with some international techos, and I think they're working especially on chatbots, so I was just wondering And I guess you're probably working also on those topics. If you can give us an idea of what sort of savings you think are possible in your customer relationship center and how much today you are doing internally versus outsourcing that customer relationship. And finally, just on probably a smaller topic, But can you tell us a little more about what could cost the Olympics for you and what you've projected on that? Thank you.

So on the French commercial performance, I will let Jean-Francois comment. Go ahead, Jean-Francois.

Yes. Your question about Soch versus Orange. So when we look at both, I mean, indeed, I mean, both are performing pretty well. I mean, obviously, Soch is a brand that is destined to, I would say, the segment of consumers that are eventually more interested in, let's say, lower prices segments. This is performing well. Again, I mean, on the broadband, churn is really under control. It's slightly decreasing. So as Christelle was explaining to you, we see indeed an overall decrease on the French market, certainly due to the fact that we are post-COVID. So in COVID, we had huge appetite for broadband. Second, I mean, it's true that with the inflation, I mean, the French population purchasing power is under pressure. So this is probably also explaining the overall slowdown of the market. So when I said that churn is really under control on the base of 12.3 million broadband customers, I mean, you understood it clearly. I mean... These minus 43K net ads on broadband are simply explained by the fact that we are slightly missing some sales, and that's what I was explaining. We are in the coming quarters not only going to pursue the price and value strategy like we did. Again, our ARPOS on fixed broadband have been growing 5% year on year. Our convergent ARPOS more than 4.5% growing. So we are going to fine tune a little bit and put some more, a little bit some more pressure on the volumes. But again, we are going to do that on a very disciplined way. I remind we are the leader of the French market and we are going to behave as such.

When it comes to a question on AI, so like similar to our peers in industry, we have Three main focus as a company, focus on driving smarter networks, of course, focus on improving our customer experience, and especially when it comes to our customer relationship centers and call centers, and last but not least, augmenting our employees to be more efficient. We do not have a strategy to invest in equity and to invest directly, I would say, on language models, which I think you are referring to the Dutch Telecom Agreement, which they've done with a South Korean operator. We are working with several partners, so I commented this morning on our announcement with Google Cloud and especially adding AI capabilities on top of our existing Google Cloud partnership. But we are also working with Mistral, for instance, for our internal efficiency and for our customer relationship management. And we have many, many initiatives, very early to put some numbers on it. As every company, we are testing and really making sure we focus on what we should scale to drive indeed some material But really too early to make any comment, and today this is part of our overall financial guidance, so included in our investment plans when it comes to, of course, investing in technology. On the Olympics, I don't know, Laurent, if you want to comment.

Yes. Good morning, Stéphane. So in terms of cost, we are talking about a few tenths of million euros, so not very large amounts. Of course, there is in front of this a lot of motivation for all of our employees and something which is very strong in terms of the image of the group because we will be, as you know, the unique partners when it comes to telecom on this event, which is now, I think, day minus 93 as we speak.

Thank you. Very clear.

Thank you very much. Our next question comes from Mr. Andrew Lee from Goldman Sachs. Please go ahead, sir.

Good morning, everyone. So just at risk of asking too many questions on a couple of things, I just wanted to just come back to the Digi wholesale offer. It's really clear your explanation, Christelle, in terms of market conditions and that they've got the option until 2026. Could you just explain to us when was the first time Digi was able to take advantage of the wholesale deal? I'm just trying to work out how much we should read into the fact that they haven't so far. And if you could give us any kind of insight into what the deliberation is on TEP's existing deal versus yours and try and help us understand if it hasn't taken the wholesale deal yet. what would have to change for it to take that deal, because obviously that's a key insight into whether there'll be market repair or whether that deal truly is no better than the TEF one that it already has. Any help on that would be really useful. And then just a second, just a quick follow-up on the French competition side. Just your bigger picture, obviously you're driving for value over volume in France. and you have used headline price rises and now using tactical moves, as you put it. Are you surprised or disappointed by the response of your competitors to you trying to lead those prices higher? Any kind of reflection on how competitors are responding to what you're trying to do might be helpful. Thank you.

Thank you, Andrew. So on the Spanish dynamic and the DG wholesale agreement, I believe we have Ludovic Pech on the call, and Ludovic was the CEO of Orange Pain until the end of March. He's now the CFO of our JV, and so I will let him comment. But as I said earlier, the wholesale agreement today, I mean, we cannot comment, of course, on the Telefonica agreement. We don't know it, and as you mentioned, As you can expect, we don't have the details, but today they have this agreement, and with us, it's not a smooth process to migrate your, I would say, roaming agreement in such a market. And I believe they can activate our contract until September 25, but I will hand over to Ludovic to provide you more colors.

Thank you, Christelle, and I think very much to the point as a follow-up to the information which was already shared. I think it's important to remind that the remedy package is not focusing on providing efficiency increase to DG, but rather to provide continuity to DG. That's the reason why, as Christelle was mentioning, this is an optional NRA at market condition, and in the event that they would not continue using the network of the incumbent and or they would not be successful, I would say, in rolling their own network or for whatever reason, they would have this fallback solution that they can exercise no later than 2026, so end of 2025, and for a period of 23 to 2038 if they were to activate it. We consider that at market condition and standard, and I think importantly, we have not factored in MassArange any revenues coming from this wholesale agreement, putting that in other words, if they were to choose to activate this option, obviously that would be incremental to the revenue and EBITDA of MassArange. But I think it's important to remind that this is not to provide additional efficiencies, but to provide continuity to DG. Thank you.

Thank you, Ludovic, very clear. On your question on the French market and the dynamic, I will again pass the floor to you.

Thank you, Christelle. Yes, on the French market again, I mean, you were asking about how our competitors are reacting uh to the move we've been doing i mean indeed what i can say is that on the a brands we've seen rather disciplined movements of our competitors i mean even free as you have seen in the first quarter has been launching an offer at 60 euros so we saw that rather as a good move going into let's say higher price points it's true that on the b brands so if we talk about red bnu There has been quite some movements. We have seen, let's say, some kind of unrest with telecom because that changed 22 times the prices in Q1. In face of that, we've been, again, I mean, behaving extremely disciplined, keeping our head cool. I mean, we are, again, having positive net ads in Q1. We've been behaving. as the leader with our second brand here in this market, Soch. And, well, this is, I would say, the French market in Q1, rather in continuity with what you've seen happen in the second half of last year, actually.

Can I just have a quick follow-up? Are you in any way worried about kind of spin-down risk increasing given that low-end competition, or do you think it's so removed from the rest of the market that it doesn't drag down elsewhere?

If you look at our customer base, we've seen no spin-down. And again, I mean, look at our customer base. Our ARPUs are growing. Would we have seen some spin-down? You would obviously see that in our ARPUs, and our ARPUs are extremely strong. Our customer base, again, extremely strong. Thank you.

Okay. Thank you very much. Next question comes from Mr. Javier Borrachero from Kepler Chevrolet. Please go ahead, sir.

Good morning. I have a question on Spain. Back to the question of the network, and I appreciate very much your comment that you want to avoid overbearing and make all type of efficiencies. At the same time when the JV was presented a couple of weeks ago, the new CEO mentioned that Haas Orans had committed 4 billion investment over the next three years. If I make this on a linear basis, this is probably more than what the two companies in a standalone basis were investing. And I think also some of the announcement were the idea of passing 6 million new homes, fiber homes in the next year. My question would be how to reconcile these two messages, one about investing more and your comment today about being more selective. And overall, the question would be if your marketing position in Spain is going to be trying to capture customers in the premium segment through this additional investment. Maybe assuming you could lose some customers in the low-end segment, or your strategy is going to be more simply trying to defend your customer base today. Thank you very much.

Thank you. So on the Spanish investment plan, as I said, and of course, Mani and the CEO of the JV is very determined to driving value. I can guarantee you that, of course, we have a business plan. We do plan to increase our 5G coverage, so this is absolutely part of the plan, because we do want to capture the premium market, and we know that network excellence needs to – I mean, we want to stay on top, and we And as Orange, we were lagging behind in terms of capacity of investment compared to Telefonica. But when it comes to the $4 billion, I mean, as you know, we are reviewing budget, approving budget every year, and we have many initiatives. So the $4 billion is not something that is given and that will be invested. We do review every investment plan and approve them, and I can guarantee you that – We have a number of options to optimize this, and we will absolutely drive this. When I say that the team and the management team will be focused on cash flow generation, of course we will make sure that we avoid spending capex when we have alternatives that drive better and earlier cash flow return. So roadshed and cash flow return will be the main focus, and from that standpoint, the 4 billion euro capex investment is probably a maximum. investment plan and we will make sure that we drive uh as i said uh we we drive an improvement in the market environment in spain um when uh when it comes to the to defending i mean the premium and and all the market segments as you know we have many brands when we look at the mass orange and of course we have some premium brands some medium brands some low-end brands, and so we do plan to grow in the B2B segment as well. So it's not just, of course, we do plan to defend our premium brands, and the team is working on the plan to continue to grow both, of course, in premium, but also in the entire market. And I insist on the B2B side because the pro and the And the B2B segment is probably a segment where we are under covered compared to the size that we have today in the market with Mass Orange.

Very good, Christelle. Thank you very much.

Okay. Thank you very much. Just a reminder, star two for any additional questions. That's star two for additional questions. Our next question comes from Mr. Andrei Tebeshek from UBS. Please go ahead, sir. Your line is open.

Hi, everyone. Thank you for the presentation. I had a couple of questions, please. So maybe just one quick follow-up on Spain. So you've obviously upgraded the kind of OPEX and COPEX synergies to 490 million, but then you're talking about the options for further commercial synergies of about 100 million. Can you just talk about, you know, what exactly they are, where they're coming from, and what the likelihood is? Like, what do they depend on their delivery? Just a follow-up on Spain, and then just two quick questions on, you know, OneQ and know how that's kind of using or using that as read across 2024 in terms of first of all the wholesale progression in France we've obviously you know made it in progress on the top line and you're guiding for 100 million monthly decline in wholesale at the Dow in France can you walk us through the kind of dynamics there you know you've mentioned corporate rates obviously having gone up but then for example visible engineering Pricing, is that already in effect and further improvement throughout the year? And then the second follow-up, basically, on our question in terms of trends. So this is specifically on Africa and the Middle East, where people said very strong results. um especially in egypt and and you know we've seen the pounds devalue by quite a bit so can you talk us through some of the contingency measures that you're doing and and what kind of effect this could have on the total uh kind of operation with uh with that in mind in 2024 thank you uh thank you so uh on your first question on the spanish synergies and uh and the extra potential compared to uh what we had in the plan i will uh

I will let Ludovic comment on the wholesale in France before we go back to Spain and then after Jerome will comment on the Middle East and Africa performance and especially what we are driving in Egypt to address the devaluation. So on the wholesale in France, as you know, we've always said that we were expecting a higher impact in 23 compared to the rest, and so indeed, starting in Q1, we have the effect of the unbundling price increase, and we have the civil work engineering increase, which is kicking only in March, so we will get the full effect in the rest of the year, but we didn't have yet the full impact in Q1. So that's absolutely according to plan, and you see that already in the Q1 results. Ludovic, I don't know if you want to comment on the commercial synergies and the potential 100 million increase?

Yes, sure. The current run rate of synergies after year three are 492 million that has been communicated. are excluding commercial synergies. That's mostly cost synergies, as you've understood, who were prevented prior to the closing of the operation to share on commercial items. So, this is why these figures does not include commercial synergies. So, the 492 million basically cover for our network synergy, which comes from the constellation of the network and from the fact that we joined the two customer base on the orange network, to make a long story short. and the rest are basically across all the different cost lines of the company. 64% of those synergies are rather mechanical, putting that in other words, it comes from contractual terms or from just, I would say, migrating one network, two-two network to one network, so that's relatively mechanical. The commercial synergies come from the fact that there is a lot of movement between the companies, intra-brands movements, just to give you a sense of it. Mostly one-third of the customers which were churning from Orange were going to MassMobil and vice versa by just making sure that those customers remain within the same system. Obviously, you avoid expensing on commercial expenses, installation of new customers, and or on sending new installers to the home. So that's the assessment of the commercial synergies. And based on external benchmark, and previous operations, we understand that this could represent roughly 1% of total revenues, and I think we're on good track to deliver this around 100 million additional synergies on top of the 392 we were mentioning.

Thank you, Ludovic. On Middle East and Africa performance and how we compensate or anticipate the devaluation in Egypt, Sharon?

Yes, thank you. Thank you, Christelle. Thank you for your question. And as we said, we posted fiscal order for Middle East and Africa, very strong growth performance led by our four growth engines, double-digit growth on mobile data, fixed broadband, mobile money, and B2B as well. Regarding – and most of our countries, as stated by Laurent, have been – posting a very strong growth, 9 out of 16 posting a double digit growth. Regarding Egypt, first we were expecting a devaluation during this first quarter. It took place in March in magnitude that we were forecasting. It was mostly offset, as stated by Laurent as well, by the organic performance of Orange Egypt, both in volume and value. And by the way, Orange Egypt benefited from a price increase, a price up mechanism agreed with the local regulator for all operators of around 15% and posted a growth of 35.5. And even with the Forex conversational impact, the performance remains excellent with a double digit growth of 12.5% on historic figures. So now we expect the Forex to stabilize till the end of the year but we are monitoring it very carefully of course.

Thank you. That's very interesting. If I may have one quick follow-up on this, please. The 15% agreement with the regulator to increase prices, do you think there's going to be more of that? Because obviously the devaluation was more than three times. Is there a potential for that 15% to grow over the next couple of quarters or in the near term in general?

Is your question, do we expect more devaluation to come?

No, sorry, just because the price increases agreed with the regulation was 15%, you said 1.5%, and then the devaluation was 50%. So I'm just asking if there's potential for more kind of regulated price increases to compensate for the devaluation.

There are always discussions going on with the NTRA. In Egypt, there is no Nothing to announce about a new agreement between the industry and the regulator for a further price increase. But again, we are very confident with our commercial dynamics there and the volume growth as well on top of the value growth. And the RQ growth is not only driven by the price increase, but as well by new services and a very strong performance of Orange Cash, which is the Orange money brand for Orange Egypt in particular. Thank you very much.

Okay, it looks like we have no further questions. I'll pass the line back to Christelle for her concluding remarks.

Thank you. So, as I said earlier, Q1 is a very good start to the year. We have a strong momentum with, of course, the creation of our JV in Spain, Mass Orange, and we are fully confident and committed on our full year guidance, which we are reconfirm and focus on execution of our Lead the Future plan. Thank you all.

Thank you very much. This concludes today's conference call. We'll now be closing our lines. Thank you and goodbye.