Orange says towers high on agenda as Totem takes shape

Orange is moving ahead with plans to spin out its mobile towers into a towerco, and indicated that the new legal entity called Totem should be up and running in the coming weeks, starting in France and Spain.

Speaking during the presentation of the France-based operator’s third-quarter (Q3) results to the end of September 2021, Ramon Fernandez, deputy CEO, finance, performance and development, Europe at Orange, also said that Totem will be "walking on two legs. The organic leg and the inorganic leg."

Fernandez insisted that Orange intends to play an active and proactive role in the tower sector.

Spinning towers: Orange is the latest telco to spin out their tower network, with Totem almost ready to begin operations in France and Spain.  (Source: Pixabay)
Spinning towers: Orange is the latest telco to spin out their tower network, with Totem almost ready to begin operations in France and Spain.
(Source: Pixabay)

"There is no way that we would leave this part of the market to the pure towercos. As an MNO, we don't want to see this happening," he said. "In terms of value creation, we … are also extremely keen to take our own part of this market. So, this is high on our agenda."

He also indicated that the European approach to towers could potentially be extended to Orange markets in Africa and the Middle East.

Added fiber

Meanwhile, fiber buildout remains a strong focus area for Orange Group, particularly in Europe. The Orange Concessions fiber unit in France is set to be in operation before the end of the year, while Orange Poland has already formed a partnership with Dutch pension fund APG that aims to speed the rollout and reduce the cost of its fiber-to-the-home (FTTH) network throughout the country.

Fabienne Dulac, deputy CEO of Orange Group and CEO of Orange France, said fiber momentum is very strong in France, with 27.6 million connected homes and 5.6 million customers.

Orange has also signed co-financing deals with French rivals such as Bouygues Telecom, Iliad's Free and Altice Europe-owned SFR to help it to deploy fiber networks. Fernandez added: "The short story here is that those operators who were active on cable are switching to fiber as fast as they can. And the name of the game is FTTH … in France, but not only in France."

However, Orange Group Q3 earnings before interest, tax, depreciation and amortisation after leases (EBITDAaL) dropped by 0.7% from a year earlier to €3.55 billion (US$4.13 billion) because of lower returns from these co-financing deals, while group revenue was 0.4% lower at €10.5 billion ($12.2 billion). Group capex reached €1.7 billion ($1.97 billion) in Q3, falling 1% compared to Q3 2020. Capex nevertheless rose by 14.3% over the first nine months of the year.

Orange confirmed its full-year targets, including a slight decline in core operating profit and underlying cash flow from telecoms activities of more than €2.2 billion ($2.55 billion). It also reiterated its targets for 2023, which include underlying cash flow from telecom activities of €3.5 billion ($4 billion) to €4 billion ($4.64 billion).

Beyond France

In Spain, the situation is showing some signs of improvement as Orange continues to implement measures to simplify the business. For example, it is reducing its portfolio from five to three brands, moving Republica Movil customers to Simyo and Amena customers to Orange.

Although total revenue fell 4.4% in Spain, the trend in retail services showed a slight improvement, falling 7.9% compared to minus 8.3% in Q2 and minus 10.2% in Q1.

Africa & Middle East continued to post very strong revenue growth of 12% in Q3, particularly owing to the performance of retail mobile services. All countries recorded growth in the third quarter, ten of which delivered double-digit growth, Orange said.

Stéphane Richard, chairman and CEO of the Orange Group, was not present during the analyst call but prepared a statement saying that Orange’s sustained commercial performance in the third quarter "allows us to confirm all of our financial commitments. In an economy still showing the effects of the health crisis, including the acceleration of the digital transformation, our customers' appetite for very high-speed access is evidenced in their take up of fiber and 5G, and of our convergent offers."

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Richard's mandate comes to an end in May 2022. However, the French national has previously said he is keen to retain at least one of his two positions.

In the meantime, Richard is still awaiting the ruling in the long-running "affaire Bernard Tapie." The Court of Appeal in Paris postponed its decision from October 6 to November 24 2021 following the death of Bernard Tapie on October 3, 2021.

Richard is accused of "complicity in fraud" and "complicity in embezzlement of public funds." The allegations dated back to 2008, when Richard was accused of helping Tapie cheat the French government out of around €403 million ($468 million). He was working as chief of staff to then-finance minister Christine Lagarde at the time.

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— Anne Morris, contributing editor, special to Light Reading

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