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Orange’s Spanish market overshadows launch of towers unit TOTEM

Orange shares fell on Thursday after a fall in profit and a warning on the Spanish market overshadowed the launch of its European masts company TOTEM.

Orange led losses on the CAC 40 index of French blue-chip companies in early trade, after its sales and underlying earnings missed forecasts.

Shares were down 4.5% by 0856 GMT after a “disappointing” fourth quarter, analysts at Credit Suisse said, and the stock extended losses after Orange executives signalled the Spanish market would not yield positive operating profits before 2022.

Some of Orange’s European telecoms rivals are looking to sell mobile networks as infrastructure valuations surge on interest from investors such as U.S. private equity firm KKR and Spain’s Cellnex.

Orange said TOTEM would regroup 25,500 tower sites in Spain and France, Orange’s two biggest markets, with assets that generated 300 million euros in core operating profit last year.

“All options are on the table,” CFO Ramon Fernandez told reporters when asked if the state-controlled group would sell part of the entity or list it.

Recent tower deals have reached an average multiple of more than 22 times enterprise value to earnings before interest, tax, depreciation and amortisation (EBITDA), rating firm Moody’s said in a note on Wednesday.

Orange reported a 2.3% fall in fourth-quarter core operating profit to 3.18 billion euros, hurt by the coronavirus crisis and harsh competition in Spanish market.

“France was fine and Africa and the Middle East strong but this was not enough to offset a very weak performance in Spain,” Credit Suisse analysts said in a note.

The pandemic reduced lucrative roaming fees by more than half a billion euros (545 million) in 2020 as many would-be travellers stayed at home, Orange added.

It posted annual earnings before interest tax depreciation and amortisation after leases (EBITDAaL) of 12.7 billion euros, down 1% on a comparable basis.

Orange confirmed it would propose a dividend of 0.70 euro per share for 2020, on top of a distribution of 20 euro cents per share after it received a 2.2 billion-euro tax refund from the French state.

The group expects core operating profit to be stable or slightly lower this year and its organic free cash flow from telecoms activities to top 2.2 billion euros.

It confirmed its mid-term target of an organic free cash flow in the range of 3.5 to 4 billion euros in 2023. Reuters

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