Orange Sp/Adr

Hello to all of you. Welcome to Orange First Half 2026 Results Conference. For your information, this conference is being recorded. The call today will be hosted by Christel Heydemann, our CEO, and Laurent Martinez, our CFO, with other members of Orange Executive Committee for the Q&A session that will start just after the presentation. Let me hand over the floor to Christel Heydemann.

Good morning, thank you for joining our H1 Results presentation. This semester we achieved record revenue and EBITDA growth thanks to very robust retail performance across the board and continued efficiency efforts fueling both top-line and EBITDA uplift. Besides strong execution, we achieved key strategic steps in Q2. We acquired the full ownership of Mass Orange, the leading operator in Spain, now fully consolidated in our group's results from early June. And we reached a historic milestone for Orange and for the French telecom market, signing a memorandum of understanding alongside Bouygues Telecom and the Free Iliad Group for the acquisition of SSR, reinforcing our leadership in France. We delivered strong retail services performance at plus 3.3%, fueled by Europe 6, Africa-Middle East and France. Based on these excellent results, we're increasing our full year EBITDA guidance from above 3% to above 4% driven by a solid performance in France and impressive Europe 6 and record Africa-Middle East results. This, combined with their creative cash contribution from Las Orange consolidation, allows us to upgrade as well our full year 26 organic cash flow guidance from circa 4 billion euros to circa 4.3 billion euros. On the financial side, we delivered record revenues of 20.9 billion euros up plus 3.5% driven by strong services growth of plus 3.3% and exceptional performance in Africa Middle East. EBITDA reached 6.1 billion euros up plus 5% with a margin improvement of 0.4 points. This performance was driven by Millet, remarkable double-digit growth, Europe 6 solid growth, and France supported by positive non-recurring wholesale items. We maintained our disciplined capex policy with an e-capex sales ratio of 15.2% in line with our full-year target. Organic cash flow reached 2.2 billion euros, up by 0.5 billion euros year-on-year. Our net debt to EBITDA ratio stands at 2.4, reflecting the impact of the full acquisition of Mass Orange with an unchanged medium term target of circa 2 times. Let's focus on some of the strategic initiatives launched in Q2 to foster our future ambitions. First on customer intimacy. In six months, Middle East and Africa gained 10 million new mobile data customers. In France, we achieved a record loyalty rate since 2020, further strengthening our leadership in customer satisfaction. In Europe 6, we now exceed 3 million FTTH customers, and we launched Orange Marketplace in Poland. On innovative growth, Orange Cyber Defense expanded into Spain in collaboration with MassOrange, and we announced yesterday a project to develop a sovereign data center platform in France. Third, on excellence at scale, On satellites, in addition to our first service launched in France and our trial in Spain, we started in Europe a partnership on direct-to-device connectivity with AST. We see satellite connectivity as a core complement to our terrestrial network to provide coverage, completeness and resilience. We are running tests to develop a seamless customer experience between satellites and terrestrial networks and we are developing multiple partnerships as part of this strategy. Finally, we are fully on track with our efficiency program powered by AI. In June, we announced the signing of the MOU to acquire SFR along with Bouygues and Iliad. This deal will strengthen our network and customer relationship in France through the acquisition of approximately 5 million subscribers, which represents 1.7 billion euros of revenues in 2025. and 47 MHz spectrum which represents 31% of SFR spectrum. What are the next steps? The antitrust process laid by the French Authority is expected to run through the second half of 2026 and into 2027. Consultation phase with employee representative bodies has started and we expect to sign the Share Purchase Agreement in the second half of 2026. Closing is expected in the second half of 2027. We will keep you updated as we progress through each of these milestones. As part of our Trust the Future execution, we are unlocking the full potential of our five major data centers in France by creating a co-controlled joint venture with Morrison, as announced yesterday. This project aims at developing a sovereign data center platform in France with the ambition to reach 400 megawatts of capacity combining Morrison track record in strategic infrastructure investments and Orange expertise and market reach to secure sovereign data center capacity for our customers. The deconsolidated entity would invest around 3 billion euros leveraging Orange existing assets, Morrison equity contribution and debt. Orange Business will leverage this platform for its customers to accelerate its trusted AI and trusted cloud business ambitions. The value creation for Orange will therefore materialize through revenues upsides and dividend inflows. Closing, subject to relevant approvals, is expected in Q1 2027. Regarding our sustainable performance, we are accelerating. On digital trust, we now offer digital usage protection in more than 70% of our countries. On digital inclusion, we extended Middle East and Africa 4G coverage by 2 points, reaching 80% of the population. To develop international connectivity, we signed an MOU alongside an investor consortium to deploy a new subsea cable between Europe and Africa. We also made progress on our net zero carbon ambition by 2040, Decreasing our greenhouse gas emissions on Scope 1, 2 and 3 by 32% in H1 compared with 2020, in line with our roadmap, with a continuous acceleration in site solarization in Africa, reaching 31% of total sites in H1 2026. I now leave the floor to Laurent for the financial overview.

Thank you, Christel, and good morning everyone. Let's start with revenues up to 3.5% in the first half, fueled by strong services growth of 3.3%, along with wool steaks benefiting from non-recurring items in Q1. From a division perspective, revenue growth is driven by continued double-digit momentum in Africa and the Middle East, as well as a solid performance in our European countries and in France. Orange Business is still in transition from legacy business in a challenging market. Moving to Edigdal, the growth is fueled by a record double-digit growth of Africa Middle East, the highest semester since 2021. Europe 6 is also demonstrating a strong performance with 6% year-on-year. France is up 2%, including wholesale positive non-recurring items. Excluding the positive impact of Ruhlster in France, the total group EBITDA growth is around 3.7%. Overall EBITDA margin is up by 40 bits, notably led by continued efficiency initiatives. This very strong result gives us confidence in upgrading our full year 26 EBITDA guidance to above 4%. Let's continue with adjusted net income, growing by 12% at 1.3 billion euros in H1. This, in line with our 25-28 CAGR ambition, and is mainly driven by EBITDA growth and improvement of income tax, notably due to run-off, partly offset by an increase in our financial interest. Net income amounts and is primarily adjusted for the revaluation of mass orange participation at fair value and the expected depreciation of copper dismantling assets in France. Let's move to E-CAPEX with our discipline policy reflecting into a 15% E-CAPEX to sterling ratio in line with our full year guidance. We pursue our investment in Africa Middle East to support our strong revenues and decrease CAPEX in all other divisions. Exceeding Netrica Middle East, our group e-CAPEX decreased by 2.4% year-on-year, reaching 14% of e-CAPEX to sales. On cash, H1 organic cash flow is strong at 2.2 billion euros, up 0.5 billion euros year-on-year, manipulated by our sound EBITDA minus e-CAPEX uplift. Three cash flows all in reached 1.9 billion euros, up 800 million euros versus last year. Moving to the net debt, our net debt increased in H1 by 13.2 billion euros, essentially due to mass orange acquisition price and net debt reconsolidation leading to a leverage ratio of 2.4 times. Our circa 2 times median target remains unchanged. supported by our strong cash flow growth target, notably thanks to Masorange cash accretion. Rating agencies reaffirmed in June our credit rating post-Masorange closing and SFR announcements among the best in the sector. Let's get into the business review and starting with France. Over the second quarters, as we see, we continue to see a very positive market momentum. Thanks to our targeted commercial strategy, we delivered solid commercial performance. Our effective retention program, boosted with AI, are now running at full industrial pace, resulting in best-in-class churn rate, well below our competitors and at historical lows since more than five years. Six broadband NetAds have reached their highest levels since 2021 at 62K. On FTTH, our acquisition market share has remained the best of the market and is well above 40%. And once again, we stand out for the remarkable results in FTTH deployment quality as per the recent RCEP survey outcome. Mobile Net Add is up to 84K, driven by a positive mix, both on Orange and Soch, along with positive portability activity against all operators. Supported by our multi-services strategy, Convergent ARPO is up by €0.2 EUR and Fixed Broadband ARPO returns to growth at €0.6 EUR. Stabilized on a quarter over quarters, but continue to decrease on a year-on-year basis by 0.90, still reflecting competition on low end. Let's turn to the financial results for France in the first half of 2026, with revenues up by 1.2%. Retail, excluding PSTN, is up 1.2%, reflecting our solid commercial momentum, with robust trend on convergence and fixed broadband. Supported by multi-services momentum compensating PSTN decline. Looking ahead, we are confident in achieving stable plus retail revenues exceeding PSTN for the full year 2026. Customer satisfaction remains a key differentiator. NTS increased by almost 2.25% well above our closest competitors, confirming our leadership position. EBITDA is up 2.4% year-on-year, sustained by retail services, the positive impact of 75 million euros wholesale non-recurring anticipated co-financing items booting Q1, and our continued focus on operational efficiency programs. These strong results give us confidence to confirm our target of stable-plus EBITDA growth in 2026. Let's turn to Mass Orange results, fully consolidated since June 1st. In H126, revenues is up 1.3% year-on-year, supported by solid growth in B2B and wholesale, which more than offset the decline in B2C retail services revenue, resulting from the highly competitive Spanish market environment, particularly in the entry-level and mid-market segments. The trajectories improved progressively through the first half. Service revenues are now stabilizing in June, demonstrating a continuously improving trend. We also delivered positive net-add editions in second quarters, while materially expanding our customer base across new services and adjacent growth verticals. Moving to H2, our priority is to further stabilize retail services revenues. through disciplined value management and selective pricing action while accelerating on B2B and new business. Overall, EBITDA-eCAPEX is growing at 1.8% as the reduction in capital expenditures more than offset the 3.1% decline in EBITDA. EBITDA evolution was impacted by the anticipated non-cash ISRS headwinds associated with the price purchase allocation expected to amount to 200 million euros over 2026-2028 as we indicated in our capital market day. Within 2026, this impact is expected to be front-loaded in the first half. Looking ahead, we expect EBITDA to reach low single digit in the second half 2026 and to deliver over 430 million euros of cumulative synergies. Let's turn to Africa and Middle East with double digit Thank you very much. Thank you. on the strong growth potential level. This performance enables us to upgrade our EBITDA guidance to a comfortable double digit growth in the second half. Let's turn to Europe 6, with very positive revenue up by 4%, reaching 3.6 billion euros in the first half. This growth is driven by services up by 1.3%. reflecting our effective volume and value strategy across the region. This quarter we achieved a key milestone reaching an FTTH customer base above 3 million. IT and IS surged by 25% driven by exceptional performance in Poland and in Romania. EBITDA growth of 6% outpaced revenue growth demonstrating operational efficiencies improvement. Additionally, we maintain our disciplined e-CAPEX strategy, leading to an impressive EBITDA-CAPEX growth of close to 16%. Based on this strong H1 performance, we have upgraded our 2026 growth outlook for Euro 6 to meet similar digits in H2. Let's move to conclude on Orange Business. reached 1.8 billion euros in the quarters, reflecting a decline of minus 3.5% year over year, primarily impacted by legacy technology transition and competitive market dynamics. Despite this, we sequentially improved the EBITDA trend thanks to cost efficiency. Orange Cyber Defense delivered double-digit revenues and order intake growth in H126, and expanded into Spain with the creation of Orange Cyber Defense Spain with MassOrange. Orange business transformation remains a strategic priority for the group and we are making progress towards greater operational efficiency, notably with the partnership differently closed with Techmindra. Looking ahead, our ambition is to continue EBITDA trend improvement for full year in a challenging market. With this, I turn back to you, Christel, for the conclusion.