Orange weathers Q2 pricing competition, sees investments in Spain

By Olivier Sorgho and Leo Marchandon

(Reuters) -French telecom operator Orange reported higher second-quarter core earnings on Wednesday helped by growth in Africa and the Middle East, and price hikes in Europe.

It also unveiled plans to create an infrastructure-sharing company with Vodafone in Spain, as it increasingly bets on the Spanish market.

Core profit after leases rose 2.6% year-on-year to 3.11 billion euros ($3.37 billion), slightly above a company-provided consensus that had expected 3.10 billion.

That was helped by Africa and the Middle East where sales grew 10.3%. In Europe, they fell 2.2%, but Orange still made a profit there, as it raised prices while some rivals have cut them.

An Orange mobile package in France costs about 27 euros, while rival Free's offer costs about 11 euros, and SFR's about 14 euros, according to a report by telco website Zone ADSL.

"We have no room and no environment to do a 'big bang' price increase," CEO Christel Heydemann said. In the second half of 2024, Orange would further benefit from existing price hikes in France, she added.

Orange has lost some broadband customers in its home market, also due to inflation. Overall, it gained a net 104,000 mobile customers in France, mainly through its low-cost brand Sosh. But it lost some fixed broadband customers.

SPAIN IN FOCUS

Orange announced a non-binding agreement with Vodafone Spain to create a joint fibre-to-the-home (FTTH) company covering 4 million customers.

The partnership would focus on sharing telecom infrastructure, but the companies would retain separate commercial services.

Orange would hold 50%, Vodafone up to 10%, and they would look to attract an infrastructure fund as an additional investor, the CEO said.

"If we talk about investments, Spain will be our top priority," Heydemann told reporters.

Earlier this year, Orange completed a closely-watched merger of its Spanish business with Spain's MasMovil, creating the country's biggest mobile operator in a 50-50 joint venture called MasOrange.

"‍MasOrange's network plan will likely increase competition for Telefonica in our opinion," ING wrote in a note.

European telcos have for years fought hurdles that prevent mergers, while regulators worry about the impact on prices.

Heydemann said that in Spain, Orange had no plans to further increase prices.

The group confirmed its full-year guidance.

($1 = 0.9217 euros)

(Reporting by Olivier Sorgho and Leo Marchandon; Editing by Alex Richardson, Barbara Lewis and David Evans)