EuroBusiness Media: One of the leading telecom operators in the world, Orange has just published its 2018 results. We are with its Chairman and CEO, Stéphane Richard. Good morning.
Stéphane Richard: Good morning.
EBM: Let’s look at the highlights of 2018. How would you sum up the year in a single word?
Stéphane Richard: Undoubtedly “acceleration” because in 2018 the Group turned in an excellent performance that accelerated from 2017. Acceleration first of all in revenues, which rose 1.3% in 2018. That’s an acceleration. Acceleration of EBITDA, which grew 2.7% in 2018, and acceleration too in operating cash flow, which increased 1.7%.
These are very satisfying results. The Group reached all its objectives. Very important to say that right at the outset.
Naturally we attribute this to the strategy we have stuck to for several years now. It is based on efforts to differentiate through network quality, which requires significant investment. More generally we aim for a high-quality customer experience.
It is important to point out that all our countries contributed to this momentum. For the second year in a row, revenues rose in France. Africa & Middle East continued to grow rapidly, and now provides half of the Group’s global growth. There are outstanding performances in Europe, especially Spain and Romania, which ended the year on an upbeat note with growth accelerating even in the fourth quarter.
Today Orange is number one in Europe in fiber and convergence. These two elements are very important for our activity and strategy, not only as differentiators for Orange but also, I believe, as a basis for sustainable growth. We have a convergent customer base which continued to expand in 2018. We are number one in convergence. We made this choice, this conviction, early on. We deploy more fiber to the subscriber than any other operator in Europe.
That’s the overall picture. The Group’s fundamentals are solid, and we delivered very good results in 2018.
EBM: The acceleration you mention, and EBITDA in particular, are the result of increasingly disciplined cost control. Could you tell us more?
Stéphane Richard: Yes, for several years we have been tightly focused on cost control. We have launched several programs to achieve this. In 2015–2018, we aimed to save €3 billion gross and managed €3.5 billion, exceeding our goal. More recently we committed to optimizing CAPEX unit expenditure, by which we aim for savings of €1 billion which will be partly reinvested in the networks. It’s an ongoing effort, and we will not let up. For example, we have implemented a new plan aiming for savings of €1 billion in OpEx in 2019–2020.
The cost control measures will be applied across the board. For networks, which have very high costs, but also IT and retail. Here are a few examples of how intensive digitalization can improve performance.
Take customer relations, for example. We observed between 2015 and 2018 that calls to our call centers decreased by one-third. This created substantial savings in operating costs. This is the result of efforts to improve not only the quality, but also the speed with which we redeploy customer relations to new channels. Especially the digital channel.
The other example is retail stores. In recent years we have reduced the number of stores. At the same time we made significant investments in existing stores. We modernized them, making them showcases for the new customer experience we want to promote at Orange. We also began offering new services, particularly finance services.
EBM: Let’s talk now about Orange’s initiatives in mobile finance services, especially Orange Bank, which has gotten so much press. Where do things stand?
Stéphane Richard: Mobile financial services are very important for us. They made spectacular progress in 2018. If we consider Orange Money in Africa & Middle East, at the end of 2018 we had 14 million customers. That’s 25% more than the previous year. This service continues to show rapid development and is now indispensable in the daily lives of millions of Africans. And there was the launch of Orange Bank in France. We are very satisfied, because in one year we opened around 250,000 accounts. This is a strong beginning for a brand-new bank which offers an unprecedented experience both digital and physical, as there are plans for in-store service. So a very encouraging beginning, very promising for Orange Bank.
In all, whether in Africa or Europe, we have many projects to develop this activity in the months and years to come. We are convinced that a sort of convergence is forming between the two business lines of mobile finance and telecoms. They have many assets in common: retail, technological skill, current smartphone use, security. We aim to be the trusted operator for all our customers. We are convinced that there will be a form of convergence between the two businesses of mobile finance and telecoms.
EBM: What is your outlook for 2019? Certain accounting standards are going to change. What will the consequences be?
Stéphane Richard: In 2019 we’ll be migrating to IFRS 16, which will require us to change certain aggregates such as EBITDA, which will become EBITDAaL (after lease). And then CAPEX, which will become eCAPEX for economic CAPEX.
These changes in no way bring into question the positive trends that we presented and explained at our Investor Day in 2017.
Specifically, we forecast that EBITDAaL will continue to rise in 2019. However, the pace will be more moderate than the one of 2018, just because of market conditions in our principal countries (notably France and Spain). We may have to be more prudent and realistic about this objective.
As for CAPEX (eCAPEX), I can confirm that it will begin to come down in 2019. Operating cash flow will continue to rise. Through financial discipline we will aim to maintain a net debt / EBITDAaL ratio of two. The dividend of 70 cents to be approved at the next Shareholders’ Meeting should be considered a floor. The definitive amount will be set in 2020, on the basis of 2019 results.
Those are our forecasts.
You can see that we keep our performance consistent, and all indicators confirm this dynamic. At the same time we are taking into account changes in the evolving environment, particularly our main European markets.
EBM: A few closing words, Stéphane Richard?
Stéphane Richard: In conclusion, we are very satisfied with the 2018 results, and very confident in the outlook for 2019. I would like to thank all our loyal shareholders, who stay with us – and rightfully so - because the company is solid. It keeps its promises and will continue to do so. And of course thanks go out to all our staff, the 150,000 employees of Orange Group who every day contribute their energy, skill and commitment to the company and to achieving its performances.
EBM: Stéphane Richard, Chairman and CEO, thank you very much.
Stéphane Richard: Thank you.
