Orange earnings fall 7% on competition, regulation

French telecoms incumbent Orange has reported a slump in earnings and revenues for the three months ending September, with regulation and competition weighing heavily on the operator in its economically challenged European heartlands.

The operator witnessed a 4% drop in revenues, to €10.16 billion ($14 billion), and saw restated earnings before interest, taxation, depreciation and amortization (EBITDA) fall by 7%, to €3.37 billion, in its third quarter.

French telecoms incumbent Orange has reported a slump in earnings and revenues for the three months ending September, with regulation and competition weighing heavily on the operator in its economically challenged European heartlands.

The operator witnessed a 4% drop in revenues, to €10.16 billion ($14 billion), and saw restated earnings before interest, taxation, depreciation and amortization (EBITDA) fall by 7%, to €3.37 billion, in its third quarter.

Although regulatory cuts to mobile termination rates were largely responsible for the setbacks, Orange (Paris, France) would have reported a 2.4% revenue decline and a 5.7% fall in EBITDA had there been no regulatory intervention.

The results have not prompted Orange to make any changes to its full-year guidance of generating at least €7 billion in operating cash flow, down from €7.97 billion in 2012.

Like other operators in the European region, Orange has been affected by a mixture of adverse regulation and price-based competition in saturated markets yet to recover from the recent economic recession.

Although Orange managed to grow its customer base in all of its major markets, its earnings were hit by a fall in average revenue per user (ARPU), with prices continuing to fall.

Much of the pressure has come in Orange’s domestic market, where mobile incumbents are still reeling from the impact of Iliad’s (Paris, France) market entry in early 2012.

The new entrant has been trying to build market share by undercutting its rivals on price, forcing Orange, SFR (Paris, France) and Bouygues (Paris, France) to overhaul their tariffs or risk losing subscribers.

Orange now claims to have stabilized ARPU in France in relation to the previous quarter, but its mobile service revenues fell by 8.1%, compared with the third quarter of 2012.

Commenting on the operator’s results, chief executive Stephane Richard drew attention to the cost savings the business has been able to realize.

“We have already achieved our annual target of €600 million in savings, a third of which is down to lower indirect costs,” he said.

In the meantime, Orange is investing heavily in the rollout of 4G and fiber networks in France, hoping the higher-speed technologies will boost its competitiveness and spur service-revenue growth.

Group capital expenditure rose by 6%, to €1.29 billion, largely on account of increased spending on the rollout of networks in France.