French Telco group Orange unveiled respectable numbers for 2022 and detailed a cunning plan for future growth which includes shaking up its Orange Business unit.
At a press conference designed to deliver both the FY 2022 results as well its new ‘Lead the Future’ masterplan, Orange revealed that annual revenues for 2022 climbed 0.6% – attributed to growth in Africa and the Middle East (a 6.4% rise) retail services (a 2.0% rise), and to price increases introduced in each of the Group’s European territories.
Going through the details of the year’s financials, Orange said was ‘an outstanding performance’. It also apparently made €700 million in cost savings between 2019 and 2022 – which was similarly described as ‘quite outstanding’. Even if they say so themselves.
It beat inflationary pressure and met its guidance in Q4 in part by raising prices, we were told, something which has been a bit controversial across the channel when BT announced it would be hiking up prices 14% in April.
“I would like to highlight in particular the achievement of the growth ambition we set for EBITDAaL, with an increase of 2.5% for 2022,” said Christel Heydemann, CEO of the Orange (pictured top left). “This performance was due to our ‘Scale up’ operational efficiency programme that has delivered 700 million euros of cumulative net indirect cost savings since 2019, beating our objectives, as well as our ability to raise prices across our European footprint.”
The firm then laid out a series of objectives to be completed by 2025 which include ‘low single digit’ growth in EBITDAaL (CAGR 2022-2025), increased discipline in Capex, growth of organic cash flow from ‘telecoms activities’ to €4 billion, and it will also ‘maintain its discipline in relation to managing its debt and its balance sheet.’
‘Telecommunications have become essential’ said Heydemann on stage at the event. And after a good deal more boasting with regards to what a good job it has done last year, the operator revealed a strategic plan for the next few years ‘designed to project Orange into the future’.
Sadly this doesn’t involve some form of time travel device they’ve developed as the phrasing suggests, but rather more pedestrianly a plan for growth, particularly in security, in Africa and the Middle East, and through a rethink of its Orange Business Services Division.
It laid out series of objectives to be completed by 2025 which include ‘low single digit’ growth in EBITDAaL (CAGR 2022-2025), increased discipline in Capex, and continued growth of organic cash flow from ‘telecoms activities’ to reach €4 billion.
It pledged to develop its use of data and artificial Intelligence to offer personalised services and improve its network, up its satellite game thanks to a partnership with Eutelsat, expand presence in Spain via a team-up with MásMóvil, deploy of 5 million additional fibre connections in Europe, and generally increase its average revenue per offer (ARPO) ‘despite difficult macro-economic conditions and intense competition.’
Orange Business Services is now called Orange Business. The word ‘Services’ has been dropped which is supposed to reflect the more simplified approach they want to take with the unit, which has apparently suffered some hefty losses of late. Three elements were identified as a way of doing this – ‘action plan, simplification, cost reduction’. This appears to include a management shake-up and reduction, with the end goal being to ‘bring orange business back to market standards and profitable growth.’
It is also targeting revenues of €1.3 billion in the cyber security market by 2025 through Orange Cyberdefense, via acquisitions and entry into new markets such as B2C. it also aims to achieve annual revenue growth of 7% between 2022 and 2025 as well as a ‘significant increase in profitability’ in Africa and the Middle East.
During the Q and A sessions, there was also some interesting musing with regards to the concept of fair contribution – or whether big tech firms like Google and Netflix should be made to pony up for the cost of building out network infrastructure, since their streaming and cloud businesses are making money hand over fist and operators aren’t.
Heydemann said there is ‘something wrong in the model if telcos have to diversify to find growth.’ The point seemed to be that that telecoms infrastructure is so vital to society there really should be a way to make it more profitable to upgrade the networks, and that if telcos can’t make money then they won’t invest in the future.
It’s a fair point, though short of handouts from other industries or government, how this is resolved will require an industry-wide masterplan of a much wider scope.