March 17, 2015 / 7:18 AM / 4 years ago

Orange to boost network investments to fuel recovery by 2018

PARIS (Reuters) - France’s Orange will plow 15 billion euros ($15.9 billion) into upgrading networks until 2018 to differentiate itself from rivals in a price war in its domestic market.

French telecom operator Orange Chairman and CEO Stephane Richard speaks during the company's 2014 annual results presentation in Paris February 17, 2015. REUTERS/Charles Platiau

Orange, Europe’s fifth-largest telecom operator by market value, also said that it would take until 2018 for its sales and core operating profit to exceed 2014 levels.

The investment push, much of which will go into fiber broadband in France, follows similar moves by Deutsche Telekom and Britain’s Vodafone, which leads the pack with its 19 billion pound ($28.1 billion), two-year investment plan dubbed Project Spring.

“We want to clearly set ourselves apart from others by offering customers better connectivity,” said Chief Executive Stephane Richard as he unveiled a 2020 strategy plan.

In France, Orange is still coping with the fall-out from the entry of low-cost player Iliad into the mobile market in 2012, which sent prices down by more than a third and left rivals Numericable-SFR and Bouygues Telecom scrambling to revise their own offers.

To help it attract customers who are willing to pay more, Orange plans to triple its investment in fiber broadband by 2020 to connect 12 million homes by 2018 and 20 million by 2022. Orange is aiming to triple average data speeds on mobile and fixed lines by the end of 2018.

CEO Richard said he thought the low point for group sales would come next year, while earnings before interest, tax, depreciation, and amortization (EBITDA) would bottom out this year.

“Our revenues have been falling for five years. We’ve been through a major re-set in France and the impact is still being felt, although most of our customers have passed over to the lower prices,” he said.

Orange pledged to pay a dividend of at least 0.60 euros per share from 2015 to 2018, unchanged from 2014 levels, adding that the payout could increase if operating profit was better than expected.

Orange’s dividend yield is 3.9 percent compared with 4.1 percent for the European stock index overall, while Telefonica and Vodafone both offer 5.5 percent yields.

Deutsche Telekom’s dividend yield stands at 2.9 percent but it has said its dividend will rise in the coming years.

Orange will also keep up its cost cutting with a further 3 billion euros in gross savings targeted through 2018, on par with an earlier plan that was lauded by investors.

($1 = 0.9454 euros)

($1 = 0.6763 pounds)

Reporting by Leila Abboud and Gwenaelle Barzic; Editing by Astrid Wendlandt and Keith Weir

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