Doubt about strategy overshadows Orange’s belief in goals

Group says Spain returns to growth, confirms targets Investors await strategic update from new CEOShares down more than 2%, among worst CAC 40 performers

PARIS, Oct. 25 (Reuters) – Investors penalized Orange on Tuesday for a lack of strategic certainty, rejecting claims by the French telecom operator that it is on track to meet its targets and redirect its stagnant corporate division.

The stock was down a whopping 3%, falling about 2.4% at 0951 GMT, making the stock the second-worst performer in the French blue-chip index CAC 40 (.FCHI).

Christel Heydemann, who took up the position of chief executive of the former monopoly last April, is conducting an evaluation of the group.

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She has until February to answer questions related to the possible sale of Orange’s loss-making banking business and the possible arrival of new investors in its mobile infrastructure unit Totem.

Orange’s reiteration that it will meet its full-year targets on core profits and organic cash flow by 2023 failed to convince the market.

“The commitment to goals beyond 2022 is somewhat masked by the ongoing strategic review that the new CEO is conducting,” said Jerry Dellis, an analyst at Jefferies.

He added that a lot is “up in the air”, citing planned investments and the extent to which that will weigh on profits.

Heydemann, who did not attend the analyst call, will present Orange’s next strategic plan on Feb. 16, when the group reports its annual results, Chief Financial Officer Ramon Fernandez told the call.

The group said all options remained open for Orange Bank, following reports that it was considering selling the division that has been central to efforts to diversify revenue sources under previous CEO Stephane Richard.

Analysts at ODDO BHF pointed to slowing sales growth in Orange’s Africa and Middle East regions, which were the growth drivers.

Orange also faces heavy investments in its largest markets, France and Spain, to roll out networks.

Aliette Mousnier-Lompre, the new head of Orange’s enterprise division, which provides voice, data and IT consulting services to businesses, said she did not expect the division to return to profit before 2024.

It has suffered as companies have abandoned regular fixed-line telephony subscriptions to make calls via internet-enabled communication platforms.

Orange said its core operating profit in the third quarter was up 0.2% on a like-for-like basis from a year earlier, to 3.58 billion euros ($3.5 billion), in line with expectations.

It confirmed its full-year targets, including core operating profit growth of 2.5% to 3%.

Sales in Spain, Orange’s second largest market, grew by 0.2% for the first time since the first quarter of 2019.

Group sales for the three-month period ended September 30 increased by 1% on a comparable basis to EUR 10.8 billion, slightly above expectations.

($1 = 1,0129 euros)

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Reporting by Mathieu Rosemain; Editing by Sudip Kar-Gupta, Kirsten Donovan and Barbara Lewis

Our Standards: The Thomson Reuters Trust Principles.

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