Orange Group posted a modest 0.9 per cent year-on-year decline in Q1 sales, to €9.67 billion. And despite cost-cutting efforts and 2 million 4G sign-ups in Europe during the quarter, which takes its 4G subscriber base in the region to around 10 million, it was not enough to prevent a slight EBITDA margin squeeze.

There were nonetheless encouraging signs, which CEO Stephane Richard (pictured) was only too keen to point out.

“We’ve signed up over 10 million 4G customers Europe-wide and fibre is proving to be a genuine driver of customer acquisition in both France and Spain,” he said. “Globally, we now have 247 million customers, of which over 100 million are in Africa and the Middle East. These achievements have enabled us to effectively stabilise our revenues, excluding the impact of regulation.”

Indeed, with regulatory measures stripped out of the equation, group revenue would have dipped by only a slender 0.3 per cent.

Restated EBITDA for the first three months of 2015 was €2.9 billion, down 1.9 per cent compared with Q1 2014. The restated EBITDA margin was 30.1 per cent, a year-on-year drop of 0.3 percentage points. (No net income figure is given for Q1 results.)

“Our constant close attention to our cost base has allowed us to limit restated EBITDA margin erosion in terms of absolute value and so we are able to confirm our 2015 objectives,” claimed Richard.

The CEO added that Orange was now fully focused on Essentials2020, its strategic plan announced last month. The plan commits Orange to investing more than €15 billion in its networks from 2015 to 2018.

During Q1, year-on-year capex increased 3 per cent (on a comparable basis) and represented 12.3 per cent of revenues (up 0.5 percentage points compared to Q1 2014).

Through heavier network investment, Orange has the aim of tripling average data speeds by the end of 2018 (compared to end 2014), on both fixed and mobile networks.

Domestic issues
In France, Orange’s largest market, there were plenty of positives. Year-on-year revenue decline was no more than the year-on-year fall for Q4 2014 – at 1.8 per cent, to €4.72 billion – so halting a series of ever steeper falls in domestic turnover suffered in previous quarters – Q3 2014 (3.1 per cent), Q2 (4.2 per cent), Q1 (5 per cent) and Q4 2013 (7 per cent).

The mobile contract churn rate also continues to fall, hitting its lowest level since 2010 at 14.2 per cent (14.8 per cent the previous quarter, and as high as 16.3 per cent in Q1 2014).

And Orange net contract adds in France were 164,000, up from the 85,000 gained in Q1 2014. Orange attributed the near doubling of net adds to “exceptional gross sales in the enterprise market with the regaining of fleet management business, and a record in retail contracts”.

But worries still persist in the operator’s domestic market. Revenue from mobile services fell 4.8 per cent, to €1.85 billion, although this was partially offset by a 24.9 per cent increase in mobile equipment sales, to €149 million.

The squeeze in revenue is no doubt testimony to stiff competition, although Richard expressed confidence earlier this week that a price war in France, which has taken a toll on the country’s operators and their margins, will come to an end.

Fixed revenues in France were down 1.1 per cent, to €2.58 billion.

Mixed fortunes abroad
While sales in the rest of Europe fell 3.5 per cent, to €2.32 billion – with price reductions and the growth of SIM-only offers being factors – Orange fared better from its operations in Africa and the Middle East.

Bouyed by strong performances in Côte d’Ivoire, Egypt, Mali, Guinea and the Democratic Republic of the Congo, sales from its Africa and Middle East business segment rose 6.8 per cent, to €1.12 billion.

Orange confirmed that it expects to meet its full-year 2015 financial target for restated EBITDA of between €11.9 billion and €12.1 billion, which is down slightly from the €12.19 billion reported in 2014.