Orange Juiced by International Growth
The carrier has changed its name from France Telecom to better demonstrate the global nature of its business.
Orange (ORAN)/(ORA) reported 2013 results that were in line with our expectations, and we are maintaining our fair value estimate and Morningstar Economic Moat Rating of narrow. The firm reported revenue of EUR 40.98 billion ($56.8 billion), spot on with our projection. In its home base of France, Orange added 316,000 wireless contract subscribers in the fourth quarter, the most in three years. For the year, its contract base grew 5.9% to 20.9 million, including 1 million 4G customers. However, this was more than offset by a drop of 11.5% in average revenue per user. We are particularly pleased with the growth in 4G, as this is an area where Orange can distinguish itself from rival Iliad.
The firm is also seeing growth in Spain, Africa, and the Middle East, offset by weakness in the rest of Europe. In Spain, Orange increased its wireless base 4.5% and its broadband base 21.2%, to 12.4 million and 1.7 million, respectively. In the Africa and Middle East region, its wireless base improved 7.9%, to 88 million. We continue to believe Spain and the Africa and Middle East region will drive growth, but won't be sufficient to offset continued weakness in France and the rest of Europe. That said, France lapped its last mobile termination rate cut Jan. 1, and with additional countries following suit throughout the year, revenue in 2014 and 2015 should receive a boost.
Allan C. Nichols does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.