Orange has confirmed a stable dividend for 2020, after reporting a return to sales growth in the third quarter. Growth in convergent offers and wholesale fibre in France and continued expansion in Africa and the Middle East supported the higher sales in Q3, offsetting the impact of the Covid-19 crisis, which hurt roaming and handset sales. Orange still expects a small drop in EBITDA this year, but a delay in capex means cash flow will be unaffected, supporting its dividend plans.
Quarterly revenues of EUR 10.58 billion were up 0.1 percent year-on-year, with a 0.8 percent increase on an organic basis. EBITDA after leases fell 0.8 percent to EUR 3.58 billion, with a 0.4 percent fall on an organic basis due to the drop in roaming and higher costs related to the health crisis, such as bad debt provisions.
The sales growth was driven by wholesale services after the co-financing received for the fibre network in France and by convergent services, which rose 5.7 percent and 1.5 percent respectively. Roaming continued to suffer from travel restrictions, while the decline in equipment sales was contained at 1.9 percent. France and Africa & Middle East improved to growth rates of respectively 3.1 percent and 5.1 percent, while revenues in the rest of Europe were down 4.2 percent.
Adjusted capex edged up 0.9 percent to EUR 1.73 billion in Q3, led by the fibre investment in France. Over the first nine months of 2020, capex was still down 6.6 percent to EUR 4.89 billion, leading to a 6.4 percent rise in operating cash flow to EUR 4.6 billion.
Stable cash flow in 2020
Orange maintained its forecast for stable cash flow in 2020, as the lower capex offsets an expected 1 percent fall in EBITDA. Thanks to the solid cash flow, the company is increasing its interim dividend payment to EUR 0.40 per share from the EUR 0.30 announced in July. This will be paid out in December, and the company will propose to the AGM next year a stable annual dividend of EUR 0.70 per share, reversing its earlier plan to lower the dividend due to the health crisis.
Capex has been kept under control thanks to the co-financing received in France, which has allowed the company to maintain expansion of its network there. Orange said it's received EUR 2.4 billion in total since 2009 for the fibre network in France, which is just under half what it estimates is the total long-term co-financing potential.
More fibre financing on the way
The company is working on plans to finance further fibre expansion with partners via 'FiberCos' and said it expects to sign agreements in the first half of 2021 on setting up the ventures in France and Poland. These companies should be operational in 2021. Orange is also working on monetising its European mobile towers and expects more details to be announced with its annual results early next year.
