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Orange has raised its growth forecasts and accelerated its plan to invest in full fibre networks in France and Spain, as investment in the faster broadband services has provided a boost to revenues.
At an investor day in London, the French telecoms company said it had spent €2bn in developing full fibre networks between 2015 and 2017, generating a higher return for the company than older broadband technologies. Orange, which charges a premium for the faster network, said it was earning €6.20 a month more in average revenue per user after upgrading a line and it expects that to rise to €7 in 2018.
It said that its full fibre network would reach 20m homes in high and medium-density populated areas in France by 2021, a year earlier than planned, while it expected to reach 16m homes in Spain by 2020 having raised its target by 2m.
The push into fibre, alongside the launch of an online bank, has strengthened the company’s confidence. It expects growth in adjusted earnings before interest, taxation, depreciation and amortisation of about 2 per cent this year and for that rate to accelerate in 2018.
The company also allayed fears of a capital expenditure spike by stressing that its cash flow would return to growth this year and that spending would peak at €7.4bn next year.
Stéphane Richard, chairman and chief executive, said: “We are very confident in delivering what we promised today — growth.”
Shares in Orange were up 1.9 per cent to €14.52 by mid-afternoon on Thursday.
Mr Richard batted back concerns that the French government might look to sell down its 23 per cent stake in the company, saying that Orange’s balance sheet was strong enough to buy the shares.
He added that the company could look for takeovers but said it was not interested in geographical expansion and the prospects of pan-European consolidation were low due to political and regulatory risk. “I don’t see this as a short-term or even medium-term realistic scenario,” he said.
Stephane Beyazian, an analyst with Raymond James, said the company echoed the sentiments of “Je te promets”, a song by the Johnny Hallyday, the French singer who died this week. “Orange promised its best medium-term outlook today in around 15 years, including a surprise target of acceleration in 2018 ebitda growth,” he said, noting the “clear benefits” of fibre investment.