Orange SA (ORAN) 2017 Q4 法說會逐字稿

Good morning. Welcome to the presentation of our full year 2017 results. I will, as usual, first present the main highlights for this year and then we'll leave the floor to Ramon to go through the details of our results.

So let's start with Slide #4, which presents the main figures for this year. In line with the guidance that we gave in London during our last Investor Day, December 2017, those results confirmed the relevance of our strategy with the second consecutive year of growth in revenue, 1.2% growth; and adjusted EBITDA, 2.2%, which is a clear acceleration as the growth rate in both indicators nearly doubled compared to 2016. The group posted growth in operating cash flow for the first time since 2009 driven by Spain, France and Middle East and Africa.

While clearly 2017 was a year of many successes for most of our segments, France first is back to revenue growth on a full year basis for the first time since 2009. Spain posted record year in revenues, 7% growth year-on-year; and adjusted EBITDA, 17% of growth. Other European countries performed well, thanks to the success of our convergent LOVE offer. Revenue growth in Africa accelerated in H2, reaching for the full year 2017 3% of growth versus 2.6% a year ago. Enterprise revenues showed resilience, thanks to mobile. And the growth of IT and integration services fueled by a double-digit growth in server defense, 19% growth rate; and in cloud services with 21% of growth. 2017 adjusted EBITDA posted a solid 2.2% year-on-year growth, thanks to a better trend in revenues, we've seen this, and ongoing efforts on costs. CapEx was in line with our guidance at EUR 7.2 billion, growing only 3.4% as we continue our efforts in FTTH and 4G.

2017 operating cash flow grew 0.8%. As I mentioned, this is clearly a turnaround first time since 2009. Our net debt to telco adjusted EBITDA ratio decreased to 1.85x, especially thanks to adjusted EBITDA growth in line with our guidance of a net debt to adjusted EBITDA around 2 in the medium term.

Regarding the dividend for fiscal year 2017, we were proposing the 2018 Annual General Shareholders Meeting a level of EUR 0.65 per share and pay 2017 balance of EUR 0.40 on June 7, 2018.

2017 was a year of strong commercial performance, which produced these solid financial results. Let's now take a look at some key achievements. 2017 was clearly an outstanding year in terms of commercial achievements for Orange.

Let's start with France. France posted a record year in fiber net adds with 546,000 new customers, reaching 2 million FTTH customers beginning of 2018. Spain was #1 in FTTH in the market, in FTTH net adds full year of '17, reaching 2.3 million fiber customer. Poland pursued its turnaround with strong results in fixed broadband, posting its best performance since 2007 with 232,000 additional net adds in full year of '17, of which 126,000 net adds in FTTH. Central Europe reached 394,000 broadband customers. This is a 29% growth year-on-year, thanks to convergence in all countries. Middle East and Africa added 10 million new mobile customers in 2017, which is a clear upturn compared to 2016, thanks to our marketing and network investment efforts.

And as part of our diversification strategy, we launched Orange Bank last November in France, which already acquired 55,000 new customers in 2017, which is a clear success, exceeding by far our initial forecast.

Now let's focus quickly on the 2017 investments. In line with our objective of providing the best quality network and services, we kept investing in future growth through CapEx, spectrum, selective content and innovation. CapEx grew 3.4% to EUR 7.2 billion, perfectly in line with our budget and the guidance. 1/3 of the increase in very high broadband CapEx was linked to fiber deployment in our main 5 FTTH countries, France, Spain, Poland, Slovakia and Romania, reaching a group total of 26.6 million very high broadband connectable homes, which is a growth of 31% over the year or 6.3 million new connectable homes. 1/3 of the increase in very high broadband CapEx was linked to mobile as we continued our 4G expansion, adding 3 new countries to our 4G footprint, which now covers a total of 21 countries. Orange Spain accelerated its 4G rollout to reinforce its leadership. Orange France was recognized by ARCEP as offering the best mobile network for the seventh year in a row. We also acquired new spectrum in Jordan and Mali.

We continue to enrich our offers with attractive contents, allowing us to grow our TV customer base in Europe almost 7% year-on-year. In 2017, we also further reinforced the Orange brand footprint through the rebranding of our operations in Burkina Faso, Liberia and Sierra Leone, boosting our competitive position through an improved customer perception.

In addition, Orange, together with the 3 major operators in France, entered into a balanced agreement signed in January with the French government and the French regulator. As you probably know, this agreement combines faster and better mobile coverage, especially in remote areas, the reattribution of spectrum up to 2031 instead of 2021, unchanged spectrum fees and no financial options. So this is a very balanced deal, additional investment and a clear compensation in terms of the financing of those investments by the state. We think that this agreement is a very positive one, both for the customers, the sector and will clearly not alter the competitive balance also within the sector. It is consistent with the Investor Day CapEx guidance for 2018, no change, and following years, as we were able at that time to anticipate this final agreement.

This agreement follows the confirmation by the governments of the national fixed broadband road map, which was also legally secured by the recent commercial court of Paris decision on our contract with SFR on medium dense areas. As you probably know, we won this procedure, and this clears definitely the situation.

Besides investing in organic growth, we've been active in M&A with selective operations. Orange Business Services recently signed an agreement for the acquisition of Enovacom, which is a leading software publisher dedicated to e-health in support of Orange health care's objective to become the main partner for the digital transformation of health care institutions and players in France and abroad. And we are working on finalizing and closing the acquisition of Business & Decision. This is the main points and highlights of our results.

And now let me hand over to Ramon, who will provide you with all the necessary details on our financial and operational results. Ramon?

Thank you, Stéphane. Good morning. So I'm going to start with that traditional slide on convergence, which, as you know, is the key of our strategy in Europe, and you can see here that all of the figures are positive. Convergence is a very strong acquisition tool for both initial and follow-on services. We now have 10.3 million B2C convergent contracts in Europe. This has been growing by more than 11% in 2017. Convergence is also a powerful retention tool. You can see it through return improvement in our 3 main countries, in France, in Spain and in Poland. And as a result, you can also see on this slide that revenues on convergent services have been growing significantly by 15% in France, 9% in Spain, 35% in Poland. So this is working very well, and we're going to continue to build on this strategy.

Turning to revenues. In Q4, group revenues increased by EUR 185 million. This is plus 1.8%, and this is due to improvements in almost all our business segments. France has been posting a third quarter of growth in a row. Africa, Middle East has been significantly accelerating in 2017 with Q4 at plus 5.7% growth. Spain has been posting a very solid growth of 5%. Central Europe is confirming its strong growth at 5.6%. And Enterprise has been improving its revenue trend over the year with a Q4 which is close to stability at minus 0.1%.

Looking at the adjusted EBITDA on the telecom sector. Q4 was up by 2.7%, confirming the improving trend of the previous quarters. On a full year basis, this adjusted EBITDA has been growing by 2.4%. This is an additional of EUR 306 million despite the impact of European roaming regulation. If you would exclude this roaming impact, the growth of the adjusted telecom EBITDA would have been 3.6%.

The full year adjusted EBITDA growth has been driven by a number of elements, starting with the outstanding performance of Spain growing by 17%, also by Middle East Africa growing by 7%; and France by 1.4%. So I will come back into more details in the next slide.

Thanks to our cost efficiency program, Explore2020, we also made gross savings of EUR 934 million in 2017, of which EUR 751 million on OpEx. 2017 has been the best year in terms of OpEx cost efficiency over the Explore2020 time frame, and we have already delivered close to 90% of our target of EUR 3 billion gross savings between 2015 and 2018.

These efforts have given us the flexibility to enrich our content portfolio and also to maintain our commercial efforts over the year, especially in equipment sales, which will also be supporting our performance in 2018. In parallel, we also obviously continued our efforts on -- over cost, such as advertising and labor costs, mainly in France and Poland. We have group full-time equivalent employees decreasing by 3% over the year, 3% in Q4 for the telecom activities. It was 2.7% at group level.

Looking at now this next slide on operating cash flow, as Stéphane said, it has been the first time since 2009 that operating cash flow has been growing. It has been growing by 0.8%, even 2.1% in telecom activities. And this is the result of both this acceleration of growth in EBITDA and a strict CapEx control, where we have been investing EUR 7.2 billion in 2017. As also we have said at the Investor Day, this indicator, operating cash flow, is part of the reference indicators for key employees' incentives.

This performance has led to a consolidated net income of EUR 2.1 billion while the net income from continuing activities has been multiplied by 2 at EUR 2.1 billion. This is mainly the result of, first, a better adjusted EBITDA and also less adjustments than in 2016; an improvement of the financial results, thanks to lower cost of debt, less impairments in 2017 than in 2016. All these positive effects being partly offset by an increase in the income tax compared to last year and more depreciation and amortization linked to higher CapEx.

We have maintained a very solid balance sheet with net debt at EUR 23.8 billion, slightly down from 2016, mainly due to the disposal of 1/3 of our stake in British Telecom. Regarding the net debt to the telco adjusted EBITDA ratio, the growth in adjusted EBITDA contributes to slightly improving the leverage at 1.85, which is obviously fully in line with our guidance. And this demonstrates our capacity to keep a very solid balance sheet while stepping up our investments and also meeting our dividend guidance with an increase of EUR 0.05 in 2017.

Our liquidity position remains strong with more than EUR 14 billion at the end of December, including EUR 8 billion in cash.

Let's now turn to our business review, starting with France, where despite an unprecedented level of promotions by competitors, total revenues have been growing by 1.7% in Q4, allowing full year total revenue to grow for the first time since 2009 by 0.6%. This is the result of our strategy, focusing on very high broadband, convergence, also supported by the favorable impact from our ePresse initiative, contributing EUR 63 million to the overall EUR 78 million revenue growth in Q4, almost evenly distributed between fixed and mobile.

Fixed broadband service revenues grew by 7.5% in Q4, with the broadband ARPU excluding ePresse growing by 1.5%. So you can see that there is an overall growth in broadband ARPU by 4.2%. If you neutralize the ePresse impact, it's growing by 1.5%. And altogether, fixed service revenues have been growing by 0.8% in Q4 at -- plus 2.5% in Q4 mobile service revenues, have been growing for the first time since 2011 with an approximate plus 1% improvement in the underlying trend. That is excluding national roaming, European roaming and ePresse. And looking at the mobile ARPU, you can see an overall growth of 2.5%. If you look at it excluding ePresse, mobile ARPU is also growing by 0.1%.

Convergent B2C revenues were growing by 14.6% in Q4 with a plus 2.7 point growth in the convergent share of fixed broadband subscribers, now at 59.3%; and with an ARPCO, so the ARPU for convergent offers growing by 5.2% at EUR 65.10.

For full year 2017, adjusted EBITDA has been growing by EUR 94 million. This is plus 1.4%. It has been driven by a growth in revenues of EUR 107 million while the overall costs remain almost stable. The full year adjusted EBITDA margin in France grew by 0.3 points in 2017 and reaches 38.2%.

The full year CapEx in France was a stable as a percentage of revenues at 19.1%, up EUR 20 million, while we added during 2017 2.2 million FTTH connectable homes and achieved a 96% population coverage with 4G.

Looking at the commercial performance in France. Well, you can see it has been very strong once again in this quarter, both in fixed and mobile. In fixed, we now serve 2 million FTTH customers with an addition of 164,000 new FTTH customers in Q4. This is the best quarter ever for net adds in fiber, and 57% of those net adds were acquired with new fixed customers to Orange.

Mobile contract net adds reached plus 212,000. This is compared to 116,000 in Q4 2016, with approximately 70% of net adds done on the premium offers. For the second consecutive quarter since the entry of the fourth mobile player, we had a positive portability balance in Q4 against each of our competitors. Overall, we had 717,000 net adds in 2017 for mobile. This is the best year for contract net adds since 2008.

Turning to Spain. In Spain, revenue grew by 5% in Q4. This was driven by service and equipment revenue growth. Mobile service revenues increased by more than 6% in Q4. Fixed broadband revenues increased by 5.4% in Q4. And convergent revenues grew by 9.2% driven by a 2% growth in the number of convergent lines and a 6.7% growth in ARPCO to more than EUR 58 per month.

Please note that the very strong evolution of ARPU in Orange Spain is true in broadband, mobile and convergence. We have, respectively, plus 4%, plus 6% and plus 7% growth in these indicators. And this is clearly the success of the increased penetration of high value-added services, thanks to 4G and fiber.

So we have been continuing in Spain to execute our value strategy with less recourse to promotions than our competitors and focusing also on cost efficiency, allowing us to accelerate the adjusted EBITDA growth in H2. It has been growing by 18.6%, leading to a record growth in full year with adjusted EBITDA growing by 17%. The adjusted EBITDA margin improved as well in H2 against H1, reaching 29.4% in full year. This is plus 2.5 points year-on-year.

The commercial performance has been also very strong also in the fourth quarter despite a very intense competitive market. Once again, we have been following the value-driven strategy, and we believe that this has helped to restore a more disciplined environment reflected in the recent January moves on the Spanish market where we have seen a number of service upgrades. In this context, we have been registering a resilient commercial performance in mobile net adds with plus 61,000. And in fixed, we have posted also a very solid fiber net adds with an addition of 175,000 new customers, reaching a total of close to 2.3 million fiber customers. This is an almost 40% year-on-year growth in Spain. The fiber penetration is now at 54% of our broadband customer base. This is plus 15 points in 2017. The fourth quarter has been also very strong in pay-TV net adds, but TV base has been increasing by 23% to 626,000 customers. And this is obviously due to the attractiveness of our TV offer.

Regarding to convergence, we have been continuing to be the most dynamic operator in Spain with the highest penetration of B2C convergence in our broadband base, which is now standing at 83% with a churn improvement of 9 points if you compare it to the total broadband contract customer base.

In Poland, the fixed broadband customer base has been increasing by 11%, with another strong net addition level in Q4 at plus 61,000. This has been fueling a continuous improvement in fixed broadband revenue growth at plus 7.8% in Q4. And this is the result of our investments in very high broadband with now 2.5 million FTTH connectable homes, also supported by our convergent LOVE offers. On mobile, the contract net adds were solid at plus 64,000, resulting in a 5% year-on-year increase in our customer base. This value-focused approach combined with new cost optimization drove to a strong improvement in our adjusted EBITDA trend. It was decreasing by 1.8% in H2 compared to minus 7.4% in H1 and minus 10% in 2016. And so this trend, this improvement is fully consistent with our ambition to stabilize the adjusted EBITDA in 2018 and to grow thereafter.

In Belgium and Luxembourg, we have seen in the last quarter another improvement in the commercial performance. We recorded 28,000 mobile contract net adds. It's the best quarter since the fourth quarter of 2011, thanks to a growing 4G customer base and also to the increase in data usage supporting postpaid ARPU acceleration of 3.2% in Q4. The total turnover and adjusted EBITDA was impacted, as in other European countries, by the EU roaming regulation and also by decline in MVNO revenues by EUR 15.3 million. These headwinds have been partially offset by the improving customer mix and, as I said, a rigorous cost control.

Central European countries have been witnessing in Q4 another very good quarter of commercial performance. Mobile postpaid has been growing by 2.3% driven by 4G. We now have 4.6 million customers in these countries. This is a plus 44% increase. And we have a broadband base reaching close to 400,000 customers, thanks to the launch of our LOVE convergent offers in these countries. Revenues have been confirming previous strong growth at 5.6% in Q4. It was 6.9% in Q3, and such performance is, as in previous quarters, driven by Romania growing by 7.7% in Q4. The adjusted EBITDA for full year has been decreasing by 1.7%. Once again, this is essentially the impact of the European roaming regulation.

Let's now turn to Africa and the Middle East, which has achieved a 3% growth in revenues in 2017 with an increase of 10 million clients compared to the end of 2016. So the impact of the client identification process is now behind us, and we are now regaining the prepaid customer base and increasing the mobile contract base. Revenue growth has been accelerating to plus 5.7% in Q4. It was 3.1% in Q3. We started the year at 0.7%. This acceleration is driven by a number of countries. We could name Morocco at plus 11%, Egypt close to 9%, the Sonatel group close to 6% and Ivory Coast over 2%. Business-wise, as you can see here, mobile services growth has been strengthening, thanks to mobile data growing by 36% in the fourth quarter.

Orange Money, which is now posting a 58% year-on-year growth, very strong growth, now with more than 12 million active customers, and these drivers have been also enabling us to capture B2B customers. B2B business has been contributing to around 1/3 to the total annual revenue growth, achieving plus 9.2% growth in 2017.

Beyond the top line growth, 2/3 of this growth in revenues has been translated into adjusted EBITDA growing in Africa, Middle East in 2017 by 7%. This results in an increase by 1 point -- 2 point of the EBITDA margin to reach 32%, thanks to the cost structure, which is almost stable, growing by 1.3%.

I am closing my presentation with the Enterprise segment before turning to Stéphane for the 2018 guidance. On the Enterprise segment, we have been benefiting from an ongoing improvement of the revenue trend over the year, fueled by a solid performance in mobile with plus 24,000 mobile net adds and significant growth of mobile equipment revenues. Voice and data had been more resilient with, respectively, minus 3.6% and minus 2.3% in Q4, which is improving compared to the annual trend, but obviously still under pressure of legacy to IP shift, in line with our ambition to grow IT and integration services, which represent now 29% of total OBS revenues. We have been witnessing growth in IT and integration services by 3.6% in Q4, with cyber defense and cloud growing respectively by 17% and 15%. As expected, the adjusted EBITDA trend improved in H2 at plus 0.3%. It was minus 4.9% in H1, and this improvement is due mainly to cost discipline and also the signing of significant new contracts.

This concludes the operational review. And now Stéphane will close with the presentation of the 2018 guidance.

So let's now take a look on 2018. With this very solid results, we clearly confirm the guidance for 2018 as we provided it during our December Investor Day. This guidance will also apply under IFRS15.

So let me remind you of the highlights of this guidance. First, group adjusted EBITDA will grow faster in 2018 compared to 2017. Second, CapEx will reach a peak at EUR 7.4 billion in 2018, decreasing then later. Operating cash flow will grow faster in 2018 compared to 2017. We will keep net debt to adjusted telecom EBITDA ratio around 2.

Regarding the dividend for fiscal year 2018, we will propose in 2019 AGM a dividend payment of EUR 0.70, up EUR 0.05 versus 2017. And we plan to pay EUR 0.30 interim dividends in December 2018. Following the EUR 0.05 increase for fiscal year 2017 compared to fiscal year 2016, this new increase reflects a further improvement in group profitability in 2017, together with our confidence in our ongoing performance. We also believe that it strikes a good balance between our ambition to fuel future business through investment, employee value sharing and shareholder remuneration.

Regarding our M&A policy, we confirm our selective approach aimed at strengthening our existing footprint in our core telco business and supporting Orange's diversification into new services, as explained in our December 2017 Investor Day.

So now let's turn to Q&A with Ramon. Over to you.

Vincent Maulay from ODDO. Two questions. First one on the fixed ARPU in France. How do you explain the lack of inflection point in Q4 despite the full effect of the price increase after the 12 months promotion and despite mix, which seems to remain favorable on gross adds? So is it a question of deterioration of the churn? And a question on the OpEx in 2018. What kind of increase we have to expect from bank, cybersecurity and content? Do we talk about an [envelope] of EUR 300 million incremental OpEx? And with the success of ePresse, are you keen to accelerate in content?

Okay, thank you. Maybe for the first question on the fixed ARPU in France, Fabienne.

There's no deterioration of the churn, and the result on the ARPU -- broadband ARPU is good. Excluding ePresse, the broadband ARPU is still growing plus 1.5%. It's better than the Q3. So it's the result of the strategy we have. And we maintain the same limited recourse to promotion, price premium on fiber and the improvement of the customer mix. 56% of the new fiber customer continues to take the high-end offer. So I don't agree with your perception.

So Ramon, the OpEx from security and bank.

Security, bank and, I think, content, well, first, you can see that the EBITDA margin is increasing at group level also in France. And so we are keeping a very tight control on costs. I mean, you can see the figures on the Explore2020 program with the best year in OpEx in terms of gross savings. So this is a very strong focus we have on OpEx as well as on CapEx. We discussed it extensively at the time of the Investor Day, including through the lean CapEx exercise. So this is going to be secured. And what we also know, and we also explained this in detail when we launched the strategy [Essentials2020] in 2015, there is the capacity to fuel growth, to nourish growth, to sustain growth through some OpEx, if I may say so, good OpEx, which are supporting this performance, which you can see in all the financial figures. If you take content for instance, we have been increasing our initiatives there through a number of partnerships. This is an addition of, in 2017, around EUR 200 million. We did spend around EUR 200 million more on costs for content in 2017. It will be much less as an increase in 2018, turning to your question which was on 2018. It will still be increasing but not at the same magnitude. But once again, this is fueling the performance. In terms of security, I don't have a precise answer, but I don't think it's a source of significant additional OpEx, but maybe Thierry will complement there. And on the bank, we all know that we are now in the process of building the customer base. We gave the figures this morning, which are very good. So it's a great start and this is going to be a few years of kind of OpEx investment in building this customer base. The impact in 2017 has been lower than initially expected, because the launch was a bit later than initially scheduled and the impact will be a bit bigger in 2018, in line with the success of the offer. But it's a bit premature to give precise figures. So I'm just closing in saying that the focus of the whole company on a very strict discipline, both on OpEx and on CapEx, is supporting this performance that you can see once again in a green light on all our financial indicators in 2017 and a very strong guidance for 2018.

Maybe, Thierry, a word on cybersecurity.

On cybersecurity, very briefly, you know that it's one of our growth relay, as presented by Stéphane and Ramon, growing year-over-year by more than 20%. And it's still growing, by the way, being this year the same trend. With the information we have from analysts, specialists within cyber, we have an EBITDA margin, which is better than competition at level of revenues for 2017 even if we don't release the main figure, which is above EUR 250 million for the total year. Yes, we have been working on cost management because it's a labor cost -- labor-intensive business. We have been investing in the big new logos we signed off end of 2017. And that being said, part of it will contribute to improving our EBITDA margin in 2018 and following years while still growing intensively the revenues.

Thank you.

Good morning, Nicolas Didio from Berenberg. I have 2 questions. First, can you update us on the discussions with Altice on the pay TV. What's the rationale to potentially help Altice by reselling their pay-TV package? And second question is on the margin in France. It was down in H2 by 40 bps, if I'm correct. And that benefits of the ePresse. So what was the reason why the margin was down in France in H2? And what will be the driver to improve the margin in 2018?

Okay, I'll take the first question quickly and then ask Fabienne to provide the answer on the second one. The purpose is certainly not to help Altice or, by the way, anybody else. Therefore, the purpose is to take care of our customers and make them in a position to benefit from all the possible contents that's matter for them. And sports, is clearly, if you see Champions League, is an attractive content for our customers. So what is about in our relationship with Altice is to explore the conditions on which we will be able to distribute those contents to our customers, and that's it. And if we can strike a deal with Altice on the financial conditions of this distribution, we will do that. If not, we will manage the situation, but once again, our goal is certainly not to help Altice or anybody else. Our goal is to make sure that our customers will still be able to watch the programs that they wish, and especially in the sports part, because in the rest of contents, cinema and series, I think we have a very attractive offer through, of course, Canal+ and OCS, our own pay-TV channel, which is a big success. And so we don't need any further partnership. In the sports area, the fact is that one of the players, Altice, both those Champions League's rights. And so we will see, once again, if we can find a deal -- a distribution deal in which we could offer to the customers that really want to access to those programs, those programs, that's it. And I don't know today if this deal will be possible or not. It's an ongoing discussion. On the second point, Fabienne?

Yes, you have to look the annual EBITDA and the margin at the end of the year, because H2 has been a little bit impacted by 2 point. More investment in content to prepare the future and bad weather conditions, especially in West French Indies. You remember hurricane, an very important cost for us. But at the end, the EBITDA is growing 1.4% and the margin is better thanks to the transformation plan we accelerate. I just want to remember -- to remind you, EUR 30 million of savings this year. It's a first step and we will continue in this way, so I'm confident.

Thomas Coudry from Bryan Garnier. Just 2 questions please. Just one quick follow-up on the EBITDA margin in France in H2. My question would be very, very specific. Is the Canal+ deal that you signed in mid-2017 dilutive on the H2 EBITDA? Or is it already accretive? And my second question is still in France, in wholesale fixed revenues, they are flat year-on-year, if I'm not mistaken, in Q4 whereas they were growing about 5% in the previous quarters. Can you please tell us why this slowdown in Q4? And what we can expect as a growing trend in wholesale fixed in the coming quarters?

Thanks. Maybe on the first question, the impact of the Canal+ deal on the French margin H2, Fabienne?

It's dilutive. We are very pleased by this deal that helped us exactly what we expect to acquire more fiber customers, but in the (inaudible) it's dilutive.

Okay, thank you, and maybe...

No, maybe just before turning back to Fabienne, her second one, but on this question of the performance of EBITDA in France, you have one-offs and exceptional items in different places. You have weather conditions, you have Canal+, you have rooming, you have e-press, et cetera. What we can say is that the performance you have year-on-year of 1.4% increase in EBITDA in France would still be 1.4% year-on-year if you neutralize these specific elements due to content, due to (inaudible), due to ePresse, et cetera. So it's a very robust performance, and then you can [depict it]. Through all the different angles, you will still find a very good performance, with growth which is back both in revenues, both in EBITDA, both in commercial performance. It is a an extremely solid performance. Just wanted to en francais (foreign language), if I may.

On the wholesale revenues, can you depict this?

Well, the wholesale fixed revenue has been growing by 2.9% in 2017, and this has been supported by the increase in unbundling tariffs, which have been decided in January and also through the FTTH activity. So in Q4, you have a slow decrease by 0.7% of wholesale fixed revenues. This is partly due to other activities, especially copper, which has not been fully compensated by the FTTH. But once again, in terms of wholesale, in France, we are obviously fully confirm what we said in December. In London, which is a positive perspective, with 2020 revenues in wholesale which will be higher than in 2017. And this is exactly what we are still expecting, so nothing change. Of course, quarter-by-quarter, you can still have some evolutions, but the trajectory is exactly the same.

Okay. Nicolas Cote-Colisson from HSBC. Sorry, I wanted to come back on the Canal+ thing because I'm not completely clear. So you're saying it's dilutive at the EBITDA level, but it helps in that (inaudible). So how do you calculate the return and the benefit to the company, especially considering the guaranteed revenues paid to Canal+. And I was also wondering if the guaranteed revenues depends on Canal+ securing the football rights. And if I may have another question about share buybacks. Do you still consider you have the intention or the capacity to buy back shares in case the state wanted to sell after you have just increased the dividend?

Okay, maybe on the first point. The Canal+ deal is a 3-year deal, okay? 2017, 2020. This is, by the way, an answer to your second point, because this deal covers a period when Canal+ has the rights, the French football rights, okay? There is no deal after 2020. The second point is that, it is a 3-year deal, meaning that it is based on expectations in sales of pay-TV bundles along with fiber access on the 3-year period, meaning that, of course, if you take the first 3 months, it doesn't give you a correct view on the financial benefit that we expect from that. We will have to assess the relevance of this deal after those 3 years. We are very confident in our capacity to reach the number of sales, additional sales of pay-TV bundles that is necessary to make this deal accretive, but this will have to be assessed on the 3-year period and not 3-month. Regarding the share buyback, well, if you look at our balance sheet, we have even decreased the level of debt and the debt ratio. Net debt to adjusted EBITDA, we are at 1.85x, which, is in my opinion, one of the lowest ratio in the industry. So yes, I think we have a full capacity to be able to buy some shares, including from the state if this happens in the future. As far as I know, it is simply not in the agenda today, but if you look at our balance sheet, and it's not the dividend increase that will compromise this capacity, certainly not. Patrice? London? So do we have a question in London?

(Operator Instructions) We have now a question from Stephane Beyazian from Raymond James.

My first question is, you had a nice contribution from Africa in 2017. Are you confident you can keep the same level of cost that we've seen in the fourth quarter, which was pretty high, in 2018, and continue to improve margins in the year coming from the African operations? And my second question is, sorry to come back on that, I guess it's recurring at every conference call, but regarding M&A, I think you had quoted in the press for merger talks with Deutsche Telekom or entertain the idea of a possible transaction with AT&T or América Móvil. Is there any color that you want to add to that?

Okay, so let's first take your first point. First, as you mentioned, we had a very good end of 2017 in Africa with an outstanding last quarter in this continent. We are very confident in the trends of revenues and EBITDA for this year, 2018. The first weeks are still very positive, and so there is no reason to think that this should change in the short term. So yes, we are very confident in our prospects in terms of revenue growth and margin improvement in Africa. By the way, the margin improvement is also due to a in-depth work that we have implemented in our African operations aimed at efficiency, mutualization also of some costs, and this will of course provide additional benefits on margin improvement. Well, regarding M&A, I think that everyone should make a difference between what we say clearly in front of you Investor Day, in analyst calls, which is the commitment that we take in front of you, and then the rumors, the comments, the so-called information in the press. So my advice is don't treat every day what is written on such or such company, because you will have plenty of wrong things in your head. Just listen to us when we speak to you, because this is the truth and this is what we say. And then look at the past; we are not doing historical comments. We are not in exercise when we are going to speak about our daily life, all the contacts, all the discussions, all the talkings that we have every day with everyone. Of course, we are not staying in our office; we are meeting our colleagues from the industry; we go to Barcelona; we go to Dallas; we go to plenty of places where we meet people. We have a very close relationship with our German colleagues. It doesn't mean that we are going to merge tomorrow. We are looking on what is happening in Africa. Everyone can see that there are assets on sales, that there are also companies that may cope with some problems at one time. So no speculation on this. Our duty, our job is to explore all the opportunities that may create value for the company every day, every time. This should not be in the press. This is not an M&A strategy. Our M&A strategy is very clear. We focus on in-market consolidation when it is available. We focus on an M&A which helps us to implement our strategy, especially in growing in the value chain, in the business, in the B2B area and in the diversification into new services. This is it. We are not focusing on footprint expansion in the telecom business. I have been very clear about that. And then, that's it, and for the rest, please leave this to the journalists and focus on what we are saying to you and what we are doing.

Our next question comes from Emmet Kelly from Morgan Stanley.

So again, 2 questions from my side. The first question relates to ARCEP and the announcement that some French mobile license fees will be set aside if the French operators agreed to roll out, I think the number was 5,000, new sites and white spots across France. Can you say maybe what Orange's intentions are here, and whether you would look at sharing infrastructure with other French operators? And whether this is expected to be a costly project? And second question is for Ramon. Ramon, just on the Group cash taxes, these were quite low in 2017, I think just under EUR 600 million, so down about 35% year-on-year. Is anything exceptional happening in 2017? And what's the outlook for cash taxes going forward?

Thank you. Regarding what we call the New Deal in good French, which is the agreement between the operators and the government through ARCEP. Let me remind you of the main features of this agreement. The purpose is to improve the coverage, mobile coverage in -- especially in rural areas in France. So meaning that this purpose is certainly good for the user, but it's also good for the operators, because it will provide better service in a number of areas that are poorly also today covered by the operators, and by the way, more by other operators than by Orange. The second point is that this deal is balanced, meaning that there is additional investment, but in front of this, we have a number of things that will mitigate, compensate this additional investment, especially the reallocation of spectrum that we had to enter into in 2021 and that will be postponed to 2031. This is the main point, but there are other tax and legal things in this package that will provide a financial benefit for us. So this is a balanced agreement. There is no additional CapEx or no additional charge coming from this New Deal agreement for the operators and especially for Orange. We will of course, take our part in this New Deal, meaning that we will do ourselves additional sites. We will do our part of the 2,500 mutualized sites that have been decided through this agreement. But no impact on the CapEx trajectory for us, no impact. So this will not compromise what we have told previously, which is the beginning of a decrease in CapEx after 2019. This New Deal will not break this. On the second question, Ramon?

So on cash tax, you're right to point out that the level paid in 2017 is going to be not so high and not to say low, just below EUR 600 million. And this is essentially in 2017 the result of the reimbursement by the French state of the 3% dividend tax, where we have been reimbursed in December 2017. In terms of future cash tax, our expectation is that we would be paying for the period 2018, 2020 around EUR 1 billion to EUR 1.1 billion per year compared to the slightly below EUR 600 million in 2017. This is a result of many evolutions, including the decrease in the corporate tax rate in France. This has been voted in the fiscal law for 2018, and you know that the corporate tax rate is going to decrease from slightly above 34% in 2018 to slightly over 25% in 2022. So there is a very clear perspective of a decline in the tax rate. And there is here a quite a strong difference compared to what is probably in many of your books, because you have to recalculate this outcome. If you take the difference for us of -- resulting from this decrease in tax rate, there is a benefit for us if you take the period 2018-'22 -- 2018-2022, between EUR 400 million and EUR 500 million. So I think there's a big difference compared to what is in the consensus now.

One more question in by phone.

Thank you, sir. Our next question comes from Andrew Lee from Goldman Sachs.

I have 2 questions. Firstly, on M&A, just to follow up on your comments, Stéphane. Macron's reported to have reiterated his supportive stance on French consolidation, and consolidation looks like the clearest route to value creation, at least in our view, for a troubled [RCUS] Europe. So do think consolidation is possible in 2018? Is there anything to stop that? And do think you can lead the parties back to the table? And then second question was on the French competition run rate. Could you talk about how competitive intensity is looking in Q1 so far? Have we seen the impact of [RPC's] comments, that it will work to improve FFOs and KPIs? How is that manifesting itself? And how have competitors responded?

All right, on the first point, the M&A. First, let's me get back very briefly on the previous international M&A speculation by saying this. First, it is difficult to be regularly criticized for a lack of ambition in international development, which is more or less what I read nearly every day in the press, and be criticized by you or by the analyst for having too much ambitions. So maybe the reality must be in the middle of this. So second, let's be clear, there is no hidden agenda. There is no hidden project. There is no hidden negotiation with anybody, neither with the Germans nor with the Africans nor with anybody else, for a very simple reason which is that there is no projects today that make sense in terms of value creation, in terms of political feasibility, in terms of equity story for us. So this is very clear. Then a word on the French consolidation. I don't know actually if we will see something in the coming month in this theater of the French sector. What is sure is that Orange will not play a forefront role in any kind of consolidation scheme, because as you know, it was quite sport 2 years ago for us to be in the leading seat -- in the leading position to implement the consolidation of the French market through Orange to Bouygues deal. It was complex. It was risky to some extent. We did this because we strongly believed that it was a very outstandingly value-creative operation for us and for the market, but first for us, of course. And what is sure is that I don't see any kind of operation or project in which we could play a leading role. There would not be a new round of Orange-Bouygues consolidation; I don't believe this. We are clearly in 2 totally separate ways today. And of course, we might have some speculation about the situation of Altice and SFR. I don't want to enter into these speculations, because I am not Mr. Weill. I am not in his head. I don't have the information about the situation of his company. And so I don't know what he can think about in the future. I'm not also in Martin Bouygues' head, fortunately. And so I don't know either what he has in mind or not regarding this. What is sure is that we would not trigger anything ourselves, because we are not today in a position to do that. We cannot buy SFR. We can now buy, certainly, (inaudible), which is not on sale. So if something happens, it will be between 2 other players. And if this happens, which to some extent, I wish, of course, because as you know, I have always been in favor of in-market consolidation in France. I still think that we are one of the last big markets in Europe with 4 players. We see that it is difficult, because you have all the time, one of the players that is really suffering today, it's probably more SFR. Everyone thought that it would be Bouygues, and in fact, it is probably more SFR today. But so it's still in my view a maybe not long-term sustainable situation. So I am definitely in favor of a consolidation in France. We cannot play any kind of leading role in such a consolidation. But if we can help, if we can facilitate something, of course, we will be available to do that. But don't expect us to take any kind of initiative in the French consolidation game. We have done this in the past; we have tried. And now it is probably the others that might try to do something, but I don't know. Competition in France and impact from Altice strategy or pricing, Fabienne.

Is maybe a little bit too early to have a good color for the Q1. We are just in February, and January is still in front very flat. What we expect? We expect a Q1 in the same trend as the Q4, a little less aggressive on mobile, less promotion. On contrary, more promotion on the broadband. It's exactly what we leave in the Q4. So it's the context we prepare. I just want to remind you that in Q4, we reached 167,000 fiber net adds. So even if we haven't faced a lot of promotion, we succeeded. And we estimate 42% of market share -- compression, sorry, compression. So I think the Q1 will be in the same trend that Q4 and we've prepared this context with the same agility, with the same strategy, preserve the value, and preserve what is the success for Orange: quality of the network, quality of the customer experience, and agile in the offer. And it's the same in front of SFR.

Thank you. One more question from London, maybe.

Thank you, sir. So our next question comes from Frederic Boulan from Bank of America Merrill Lynch.

Two questions, please. First of all, if you could comment a little bit on the Spanish trends. We've seen some worsening, [globe at adds], service revenue slowing down a little bit there as well. So can you comment a little bit on what your outlook for this business in 2018 from a commercial and financial perspective. And then secondly, from a regulatory standpoint, what's (inaudible) is trying to increase competition on the enterprise side. Do you see -- what are your expectations from that front? And how do you see the momentum evolving considering the situation of your biggest competitors or SFR in the enterprise market?

Okay, maybe for the first question I will ask Laurent Paillassot who is with us by phone. Laurent?

Yes, basically if you look at what are our drivers of our growth in Spain, they are quite sustainable. The first one is, obviously, the customer base and the mix of value within our customer base, which is basically driven by the adoption of fiber, the adoption of 4G. Just keep in mind that we are leading in 4G in Spain, but we only have 60% of our mobile base which is 4G. We are leading in FTTH, but we have only 54% of our customer base which is in FTTH. So basically, we are groomed for growth there. The second driver is obviously, the service upgrades. And as you've seen, maybe December, Mobistar and Orange have announced service upgrades. Vodafone and Jazztel have announced service upgrades. So the more formal strategy remains there, and I think that's very good news. The third one is migration on our own network. As you know, we are deploying a strongly FTTH. So we are basically internalizing bitstream fees or bitstream costs into our own margin and the forefront is the wholesale agreements we've had with Maxx Mobile. And basically, this gives us a very strong hedge in terms of their growth. We benefit from that and is not only that, because we not only have the roaming agreement, we also have co-investment agreements, we have sharing agreements with them, which is helping us to optimize our cost base. So basically, these 4 drivers which have been providing value in 2016, 2017 will remain very strong in 2018.

Thank you, Laurent. Thierry, for the enterprise business?

As you all remember, the ARCEP decision was about creating a second wholesale provider within the French market when it comes to the B2B offers. It was translated for us into the mandatory FTTH plus service for the wholesale operators in France. By FTTH plus, I mean FTTH offer for the wholesale market with a lead time guarantee to repair, which is today at within 10 hours. So meaning that within the next 2 days, it has to be a repair. What ARCEP explained regularly, it's that they will come back on a regular basis year-after-year to assess the impact of this decision on the wholesale B2B market. So I don't know what will be there. It's not only depending on us, as you can imagine. The -- for us, what it means, B2B in France, and as always our strategy is providing strategy and customer experience. So that's what we have been doing for years now and with relatively good successes for both fixed and mobile business. Even if mobile is not as stable there, you saw within the presentation that we are still growing within the B2B market, good results, win-backs and the absolute value of our team-based portfolio is growing all along the year. For the fixed business, of course, it means more competition. That's what should happen. And we are, again, regularly investing within growth [criterias] for providing more services on top of core business platform, which could be more impacted by competition in the coming years.

Thank you. Maybe a question here. You, and then you.

Yes, Nicolas Didio from Berenberg. Two questions. To come back on M&A, is there any opportunity to buy back some minorities that you have in -- across the perimeter? And especially, what's the rationale to keep (inaudible) Orange Belgium considering current low valuation. And the second question is, with your election potentially very likely as CEO, can we expect additional changes at the management level after the departure of Pierre Louette?

On the minority...

Honestly, I don't want to speculate too much on the listed company with shares that are being traded every day. So sorry for this probably disappointing answer, but I'm not going to fuel any kind of speculation.

Now regarding the management team, yes, of course, there will be substantial renewal of the team. The purpose is clearly for me to put in place a team, which is fully in line with our plan, with our strategy, with our priorities. And so this team would reflect this, with also, from my part, an objective to have more non-French profiles in the team. So we will have several non-French profiles, more women and more, let's say, operational people, people in charge of P&L and business and operation within the team. So this team will be unveiled beginning of March, so in more or less 2 week’s time. And this will provide me an opportunity to explain this, of course, each of the people that will be in the team and the sense, the meaning of this.

[David Lopez] from (inaudible). I was wondering if you could update us on the situation with TF1. And if you are able to get their signal, should we expect material increase on churn. And I think the press has been writing as well that you could stop your advertising on TF1. So if you stop it, would you spend it somewhere else, Tier 1 advertising, or could that support EBITDA?

Well, it's clear that there is a tough discussion with TF1, but still ongoing. So we are still discussing. It is tough, it is hard, because we are in front of people that have decided on their side to change the rules. And then coming to us and ask us to pay something for which we didn't pay before and for which we think that we have no reason to pay. So of course, it's a tough discussion. We are still discussing, nevertheless, and we are still optimistic in our capacity to reach a deal. I think that no one has any interest to take from an escalation of this. Probably not our customers, that will be, let's say, disturbed by the interruption of TF1 and the other channels of TF1 Group access through the books. Even though it's manageable, but it's still disturbing. But let me tell you that, in my view, it is much more disturbing for TF1 because we stand for more or less 25% of the audience of TF1 in France. And for a company which relies on advertising revenues, it might be a problem to cut the audience by 25% like that. So and then as you know, after us there are other distributors that are also today in a dead-end with TF1: Canal+ and Free. So all in all, we are taking about more than 50% of the audience. So this is a reason why we think that we have -- let's say, we have not a weak position in this discussion. This being said, of course, we are still looking for an agreement. And I think that it is possible to reach an agreement. One last question in London. It's not one last train in London, but one last question in London.

Thank you, sir. So our last question then comes from Dimitri Kallianiotis from Redburn.

Just 2 questions. The first one is regarding the Spain. So just to come back to the previous question, just wanted to get your view in terms of understanding the focus on migrating the DSL customers to fiber, but do you expect the -- your overall broadband subscriber base retail to grow or should we now expect it to be sort of flat? And we should just focus on the benefit of migrating customers to fiber? In my second question is just regarding Orange Bank. If you could give us a little bit more color in terms of your expectations. Obviously, you've launched last year, you mentioned 55,000 subscribers. You have big ambitions in banking. You said you wanted to reach 2 million subs. So just to get your view in terms of how many subs you think you could get, how many customers you think you would get this year? And what sort of EBITDA loss we should expect from the banking activities. I know last year was a bit lower than the EUR 100 million you guided, but any guidance for 2018 would be great.

All right. On the first question, Spain, Laurent?

Obviously, we expect growth in the customer base, basically, in mobile and in fixed. The focus remains on value creation. However, we see the market growing with the new offers coming from the different players from the market. We are now playing with Amena, Jazztel, and Orange in convergence. So yes, we expect growth, slight growth. Obviously, we will not going to very aggressive promotions as has been in Q4. With that, I would say the limit I would put, because we are there to create value and to create EBITDA growth, so -- but yes, we do think that there is room for growth in the Spanish market. As we see the internet interest remains lower than it is in France, but we see the trend in the market, which is remaining very positive, so there's space for growth.

Marc, can you update us on the bank?

Thank you. We successfully launched the bank on November 2nd of 2017. We reached at the end of this year of '17, 55,000 customer and will be close to 100,000 customers by April -- March 2, meaning less than 4 months after the launch, it's a great success. Nobody has done such a successful launch before. Very soon we'll launch new services such as consumer loans, and we are very confident about the fact that this bank business [activa] has reached high interest for the customer. And if I may add one word, the bank activities, one of the 2 pillars of our mobile financial services, the second pillar is around Orange Money. And Orange Money is also very great success with more than 37 million customers at the end of this year. So we are very confident to beat our target regarding our strategic plan by the end of 2018 that was to reach EUR 400 million revenues.

Thank you, Marc, maybe Ramon, last word on EBITDA impact?

Yes, I mean whatever the impact on EBITDA of the buildup of the customer base of the bank, it is crystal clear that the guidance we have been giving for 2018 is based on, first, the better outcome of 2017 than the one we have been discussing in London. So we have a plus 2.2% increase in EBITDA at Group level. And what Stéphane said about the acceleration of this growth in 2018 is at Group level, including the bank, and is clearly to be compared with the level achieved in 2017. So this is fully embarked, and in terms of granular numbers, we will come back to it at a later stage.

So this is the end of this session and please be sure that our only goal is to make you happy. Thank you.