French incumbent Orange (EPA:ORA) remains acquisitive after upping its stake in Morocco’s Meditel and agreeing to buy four African markets from Bharti Airtel (NSE:BHARTIARTL), the company announced at today’s H1 results.
“The group also confirms its…
French incumbent Orange (EPA:ORA) remains acquisitive after upping its stake in Morocco’s Meditel and agreeing to buy four African markets from Bharti Airtel (NSE:BHARTIARTL), the company announced at today’s H1 results.
“The group also confirms its objective to achieve a restated net debt to EBITDA ratio of around 2x over the medium term to preserve Orange’s financial strength and investment capacity. Within this framework, the group is pursuing a policy of selective acquisitions by concentrating on markets in which it is already present,” it stated.
“We continue to pursue our efforts to optimise our portfolio of operations. We have strengthened our presence in Europe with the acquisition of Jazztel in Spain and in Africa, we have recently announced a promising project to acquire operations in four new countries,” said CEO Stephane Richard.
It has been a big month for the company, which has been vocal about its plans to consolidate in both Europe and Africa.
In Europe, the company will focus first on in-market consolidation and convergence – along the lines of its acquisition of Jazztel in Spain and sale of its half of EE in the UK – and then on smaller incumbents such as KPN, Belgacom and Telecom Italia, as mentioned by Richard. The aim is to be a strong European leader ahead of the long-awaited wave of consolidation on the continent.
As part of this, the company will shed smaller or underperforming assets such as Orange Armenia, which it is in talks to sell to local business Ucom. Other smaller European assets include Mobistar in Belgium and Orange Polska.
But creating a European giant may not be smooth sailing.
“Orange is looking at opportunities, but others are too,” said one adviser. “It will be very competitive, so it must focus on the right assets. Furthermore, the company’s 25% ownership by the state could hamper decision making and prevent any accumulation of leverage. Altice’s Patrick Drahi, for example, is able to make quick decisions.”
Africa, with its fast growing population and economy, is meanwhile the company’s growth engine. Now a separate legal entity (alongside the Middle East), Orange will report regional results starting on 29 July and also find it easier to raise finance – possibly through an IPO in the long-term or through a third party partnership.
Just weeks after CFO Ramon Fernandez and region head Marc Rennard proclaimed that “Africa is our core business”, the company stated it was in exclusive talks to buy four markets (Burkina Faso, Chad, Congo Brazzaville and Sierra Leone) from Indian-owned Airtel for a reported US$1bn-US$1.5bn.
Industry observers had for months noted rumoured talks between the two companies over a possible larger consolidation play or a reshuffling of assets along cultural and linguistic lines. Depending on who one believes, the two discussed a full takeover by Orange that collapsed on valuation, but set the ball rolling for the current talks.
Apart from Sierra Leone, the markets are Francophone. Not included in the deal are the DRC (where a transaction could create competition concerns) and Gabon, while Orange still holds Anglophone sub-Saharan assets in Botswana and Kenya.
Orange is mainly interested in in-country consolidation, or bolstering its position in West Africa, Central Africa and North Africa, only looking at operators with number one or two positions, it is understood.
Today, Orange confirmed its objective to achieve between €11.9bn and €12.1bn in restated EBITDA for the full year of 2015, noting that this figure does not however include the integration of Jazztel and Meditel, which will be consolidated in the Group accounts in the 2nd half of 2015.
