Orange SA (ORAN) 2023 Q2 法說會逐字稿

Good morning, ladies and gentlemen. I'd like to welcome you to Orange's First Half 2023 Results Conference Call. The host -- the call today will be hosted by Ms. Christel Heydemann, the CEO; and Mr. Jean-Michel Thibaud, Interim Vice President, Finance, Performance and Development, with other members of Orange's Executive Committee for the Q&A session that will start after the presentation.

Thank you very much. And I would like to now pass the line to Ms. Christel Heydemann. Please go ahead, ma'am.

Good morning, everyone, and welcome to our financial results presentation for the first half year 2023. I will start with the key highlights of the second quarter, and then I will leave the floor to Jean-Michel to detail our results. Let's start directly on Slide 4 with the key highlights for the second quarter.

First, I would like to highlight the results of our focus on execution, which gives us complete confidence in achieving our full year guidance with, firstly, a strong retail acceleration in France and Europe, thanks to our pricing power, which is driving up convergent ARPO. Secondly, our outstanding performance in Middle East and Africa with EBITDAaL up double digit. Third, strict cost discipline already delivering EUR 175 million net cost savings in first half 2023. Last but not least, our recovery plan to improve Orange Business EBITDAaL is on track.

During Q2, we also achieved crucial new milestones in terms of our asset portfolio management, starting with the closing of the VOO acquisition, which is now consolidated in the group's accounts from June. This crucial acquisition for strengthening our convergent strategy in Europe does not imply any change in our group's guidance.

The European Commission's investigation of our joint venture with MASMOVIL entered Phase 2. As expected, discussions to reach an agreement on the retail business are continuing while it was confirmed that the deal would not impact competition within the wholesale market in Spain. We expect a closing during the second half of 2023.

Finally, the deterioration of the banking market has delayed our breakeven for Orange Bank in Europe. As a result, we announced at the end of June our intention to withdraw Orange Bank in Europe from the retail banking market by 2025. In parallel, we entered into exclusive negotiations with BNP Paribas to define a referral partnership for the Orange Bank customer portfolio in France and to take over the business in Spain. This restructuring plan does not impact our group's guidance and will lead to a limited EUR 200 million cumulative net cash out for the group.

Moving to the next slide and our financial achievements. Our recent price moves account for the acceleration in our Q2 revenue growth and will fully impact our top line in the second half of the year. Our EBITDAaL performance grew by plus 1% in Q2, demonstrating our ability to offset inflationary pressures through strict cost discipline and a strong pricing power. Our eCAPEX continued to strongly decrease, allowing, together with our EBITDAaL slight growth, organic cash flow to reach EUR 1.5 billion, giving us full confidence in delivering at least EUR 3.5 billion organic cash flow this year. Finally, our balance sheet remains very healthy with the net debt over EBITDAaL ratio increased to 2.09x due to the VOO acquisition, still in line with our objective to remain around 2x in the medium term.

In H2, we also progressed on our ESG commitments. We are proud to have reached, well ahead of 2025, our target of minus 30% carbon emissions for Scope 1 and 2, thanks to an acceleration of renewable sources within the group energy mix. The next milestones to reach our commitment to become net zero carbon by 2040 notably includes the objective to decrease by 45% our carbon emissions for all scopes by 2030 with Scope 3 representing more than 80% of the group carbon emissions. Besides environment, we are on track towards our 2025 objectives relating to circular economy and digital inclusion.

With all of that, I will now hand over the floor to Jean-Michel for more details on our financial performance.

Thank you very much, Christel. Good morning, everyone. Let's start on Slide 8 with group revenues at plus 2.6% year-on-year in Q2, recording the highest top line growth in 15 years to reach EUR 10.9 billion for the Q2. So as Christel highlighted, top line growth accelerated in the quarter, driven by our retail performance, which benefited from price increases. Growth in retail outpaced the decrease in wholesale by more than 4x while equipment sales maintained a high single-digit growth.

Looking at our segments, MEA continued to be the main growth driver with revenues up double-digit at plus 12%. Europe posted a solid growth at 2.7%. This strong performance was achieved thanks to Poland at 5.5%, Belgium with 3% and Spain at 2.1%, confirming its recovery. Orange Business recorded a 2.4% growth with IT&IS and mobile activities that more than offset decline in legacy business. Finally, France was down by minus 1.3% as the retail services, excluding PSTN, growth was 3.4% and did not offset the expected decline in wholesale.

Moving on to EBITDAaL. It grew in H1 by plus 0.8% after a sequential acceleration in Q2 to plus 1%, thanks to a remarkable MEA and a robust performance of Europe, especially fueled by the turnaround in Spain. This sound performances more than offset both Orange Business still decreasing in the year of its recovery plan but clearly improving the trend compared to 2022. And France, negative expected due to a peak in inflation, especially on energy costs while only partially benefiting from price increases. Our cost discipline is even more crucial to the -- in the current inflationary context. And with already EUR 175 million net cost savings achieved in H1 versus '22, we are well on track to reach our EUR 600 million net cost saving target by 2025.

The group eCAPEX decreased by minus 5.7% in H1. As a result, H1 eCAPEX represented 14.6% of sales, well in line with our ambition of reaching around 15% of eCAPEX to sales at the end of 2023. The main contributor of this nearly EUR 200 million decrease in net investment over H1 is France with a sustainable drop of minus 223 points eCAPEX to sales, given that we have now reached 35.6 million FTTH connectable homes that represent an 83% coverage of the country's premises. In parallel, as part of group's capital allocation policy geared towards value creation, MEA has increased by 95%, supporting its strong top line and EBITDAaL growth.

On the next slide, you can see that our net income landed at EUR 1.1 billion, almost minus EUR 0.4 million year-on-year decrease mainly resulted from the impact of the French pensions reform, which extended the duration of our senior part-time program.

Our organic cash flow reached EUR 1.5 billion in the first half, which gives us complete confidence in achieving our full year guidance of at least EUR 3.5 billion. As a reminder, cash flow generation is usually higher in H2 due to the seasonality of our business. Last year, cash generation was more evenly spread than usual, which explains the limited year-on-year improvement in the first half of the year. The net debt increased by nearly EUR 2 billion due to the VOO acquisition and remains around 2x EBITDAaL in consistence with our medium-term target.

Last but not least, before turning to our business review, let me highlight our strong liquidity position as well as our low cost of debt with an average maturity of 7.7 years, which are crucial assets in the current macro environment with interest rates rising, especially compared to some of our direct competitors.

Let's now start our business review with France, where retail services revenue growth already accelerated sequentially in Q2 at plus 3.4%, excluding PSTN, despite benefiting only partially from our recent price increase. Our disciplined strategy that balances volumes and value resulted in an increase of all ARPOs, and in particular, convergent ARPO at plus 3.6% year-on-year, while mobile contract churn stabilized at a low 10.8% and with a Net Promoter Score back to above 25 in July. Retail growth will further accelerate sequentially as price increases deliver their full potential in H2 as well as with the launch of 5G by Sosh with a plus EUR 5 premium versus 4G.

H1 EBITDAaL decrease was mainly due to energy price peak and also included, as planned, the front-loaded part of our '22, '25 wholesale drop while only benefiting from 2 months of price increases at their full potential. H2 EBITDAaL decrease will be more than halved compared to H1, despite adverse effects which will remain, thanks to the full positive impact coming from price increases. All in all, with eCAPEX declining sharply by 13.5%, in line with our medium-term expectations, cash flow generation grew with EBITDAaL minus eCAPEX increasing by plus 5% year-on-year in H1.

Let's now turn to Europe, where retail services accelerated in Q2, supported by convergence delivering the benefits of price increases as well as strong B2B performance, notably in Poland. Wholesale revenues continue to reflect the regulatory decrease in call termination rates and the decline in international traffic, both of which have a low impact on margins. Solid retail momentum, together with actions implemented to counter inflationary pressures, have enabled us to increase EBITDAaL by an impressive plus 7%, thanks to EBITDAaL growth in all countries without exception, including Europe's EBITDAaL margin by plus 0.9 points year-over-year.

Let's have a closer look at Spain, where revenues grew for the fourth consecutive quarter. This growth is being fueled by the continuous acceleration of retail services and strong equipment sales. The wholesale decrease was the result of regulated reductions in mobile termination rates. In a highly competitive market, we continue to support growth through our focus on customer value management. This resulted in the accelerated increase of convergent ARPO by plus 4.9% year-over-year, combined with continued improvement in churn, minus 2.3% year-over-year.

Moreover, in B2B, we achieved growth in all segments. Our customer base increased by plus 6,000 in FTTH and plus 51,000 in mobile postpaid, passing 2 million 5G customers. Our sales momentum supplemented by our continuous efforts on cost optimization has positively impacted our EBITDAaL, which is now back to growth and confirming the expected turnaround this year.

Let's now move on to the MEA region, which is, once again, a region that demonstrated sustainability of its strong performance, fully in line with our ambitions. Revenues increased by 12% in Q2. All countries grew. And our 4 growth drivers, Orange Money, fixed broadband, data and transversely B2B run at full speed. EBITDAaL grew faster than revenues at plus 12% year-over-year in the first half, with 7 out of 16 countries recording double-digit growth in EBITDAaL. As such, our EBITDAaL margin increased by plus 50 basis points fueled, in particular, by the strong turnaround at Orange Money.

Turning to Orange Business. Revenues increased by 2.4% in the quarter. This was driven by the growth in mobile and IT&IS, which together outweighed the decline in the legacy business. The growth in IT&IS alone exceeded by 1.5x the decrease in fixed services, thanks to robust growth in digital and data and in our cybersecurity business.

All our efforts are focused on EBITDAaL recovery. Consistent with that focus, H1 losses are in line with our aim to reduce the rate of decrease in '23 EBITDAaL compared to '22, which, as a reminder, was at minus 19%. The trajectory of H1 EBITDAaL is fully in line with our expectations. Our recovery plan started this year and will take time to materialize. Indeed, key initiatives such as the voluntary departure plan are expected to have an impact into next year's EBITDAaL.

This concludes this business review section, and I will now hand over back to Christel.

Thank you, Jean-Michel. I would like to conclude this presentation simply by reaffirming that this first semester's results underpin our confidence in achieving our full year guidance, which remain absolutely unchanged and now included VOO.

Thank you for your attention. Jean-Michel, the entire ComEx and I are now ready for your questions.

(Operator Instructions) Our first question comes from Mr. Nick Lyall from Societe Generale.

Yes. Could you help us a little bit on some of the movements for France for the second half, please? It sounds like you're talking up a little bit, obviously, on the revenue, as you've said before, because of the price rise is coming through for the full 6 months. So could you help us a little bit with the service revenue boost and whether things like the front book moves and such might help a touch.

But also, are there any moves on costs that we need to bear in mind for the run rate for the second half as well? It sounds like what you've said is everything is pretty much revenue base. But are there any movements in costs maybe that we should pencil in, such as energy, which might a little bit beneficial for run rates in the second half too?

I will start and then will hand over to Jean-Francois who can give you a bit more colors. But as we highlighted, clearly, the impact in H1, on the revenue line, there's only 1 -- I mean 1 quarter of price increase and you will have the full semester of price increase in H2. So top line will benefit from it.

On the cost side, indeed, we are actively working on our cost-efficiency programs and it is part of our trajectory, and we fully confirm the overall guidance that we have for performance of France of slight EBITDAaL decrease over our 3-year plan. Indeed, we had this impact in H1 mostly due to the energy price which, unfortunately, we know is determined for this year. And we'll have more benefit, I would say, of the lower price of energy for next year.

Now on the top line performance, I will let Jean-Francois give more colors on the overall commercial performance.

Thank you, Christel. Yes, to add upon what you were just saying, I mean in terms of comparison H1, H2 on the cost side, I mean there is no expectation of any rise whatsoever on the cost side. I mean you've seen that year-on-year, we had a raise of our energy prices, which explains actually the EBITDAaL performance in H1 year-on-year.

And as Christel was saying, in terms of top line, what you see in these results is actually a raise in service revenues to 3.4% in Q2 versus 2.1% in Q1, which is clearly explained by the fact that you all know that we raised our prices beginning of this year. I mean we announced this raise of prices from EUR 1 or EUR 2 on mobile and broadband and convergent offers. So we have been massively raising our prices, 90 million of our customers have been impacted by that. So you see the performance in ARPU, which is going up.

And actually, what is embedded, what you have to understand very well is that in this first semester, H1, you have only 2 months which -- of these price increases, which are embedded. So we expect, indeed, H2, in terms of service revenues, to be better because we'll have the full benefit in H2 of these price increases. And once more, on the cost side, I mean we have no expectation -- or we have expectation of basically some stability and not only stability, but as Christel was saying, we are obviously working very hard on efficiencies and there are already some efficiencies embedded this year linked to what we call TPS, which is the departure of many people in Orange France versus last year.

Our next question comes from Mr. Nick Delfas from Redburn.

Just a question on Spain. If I look at the Spanish revenue performance, it's pretty good. If I take out the equipment, though, it's flattish. So can you talk a little bit about how you've restructured costs to get the EBITDAaL performance that you've achieved there?

And then just finally, on MASMOVIL Orange, just to confirm, you're still expecting a resolution early September?

So indeed, Spain, as you know, we've been working already for several quarters on the recovery, and we conducted a number of cost efficiency programs, which are now fully benefiting in Q2. On top of that, because of the inflationary environment, we had a number of price increases, and so you're right to say that the equipment business is boosting top line.

But as you know, we follow carefully the retail services and the level of churn, which was part of our recovery plan with a churn that has massively decreased. And we've also worked on cost efficiency, including sales commissions, cost reduction. So that's -- overall, there's not one item that explains this recovery. It's a number of items that we worked on.

And I don't know if, Marie-Noelle, you want to give more colors on the top line dynamic?

So I guess it's -- the market is highly dynamic, but we've been both working on the price increase with a very positive dynamic on the gross adds, but the churn is also having a very good trend despite the price increase, and this is absolutely true on the mobile but also on the fixed part. So there is this strong positive move.

And then as Christel said, this is what has been put in place by Jean-Francois and by Ludovic, is making sure that there is a very, very strict discipline on all the different costs. So this is a very positive for the H1 and for the H2 either.

And coming to your question regarding the progress on the MASMOVIL project. As you know, we continue to work -- we continue working with the European Commission to find acceptable solutions, and we remain confident in the outcome of this process. As you know, the timetable, we have until July 28, end of this week, to submit remedies, and the decision is expected on September 4. So we are confident on the process, which will enable the transaction to be finalized by the end of 2023.

Our next question is from Jakob Bluestone from Exane.

I had a question just on the French competitive environment. If you could maybe just give us a little bit of color. It seems like there's been a pickup in promotional activity. But at the same time, your mobile net adds seemed fairly robust. And I think you had almost a 1 percentage point drop in contract churn in France. So it's below 11%. So if you can maybe just help us understand what's going on there.

And then just also very quickly on net working capital, I think you had a fairly sizable inflow in the quarter as in the first half. Can you maybe just remind us what you expect for the full year?

You're right to say that the competitive environment has sharpened in Q2. I don't know if, Jean-Francois, you want to give more details, especially on the mobile market?

Yes. Thank you, Christel. Thank you for the question. So in terms of competitive environment, in France, we have seen some, let's say, aggressivity on the side of 2 of our competitors entering with, let's say, some offers at around EUR 10 offering 40 gigabits of data. So indeed, the market has not been completely quiet. We believe that this is probably linked to the Q1 results. As you have seen in Q1, if you remember well, I mean the overall French market has been slowing down. It was one of the first quarter where the total net adds of the market were not positive. So we believe this is probably a reaction from our competitors to that.

On our side, what I can say is that we've been extremely disciplined. We have been extremely disciplined in terms of pricing and promotions. We definitely are into value, pursuing a value strategy. We are watching day by day the mix between volume and value with, again, a value strategy which is leading us to this, I think, quite impressive year-on-year service revenue growth of 3.12%. I take the opportunity to anticipate a question about the price moves we have been doing.

As you've been saying, I mean our churn is really under control. We see, year-on-year, a very slight increase of churn. We had a Q1 which was not as good, but Q2 is much better. And if we look at the measure of customer satisfaction, which is NPS, What we can say is that as well, I mean price increase is not obviously transparent. So we had a decrease in NPS if we compare to last year in Q1, in Q2 as well. But we are very happy to see that in the first 2 weeks of July, we are back to the level of the NPS that we had last year same period.

So overall, what we can say is that this massive price increase that we applied to 90 million customers has been really -- I mean very well executed and without damage to our customer base and our customer satisfaction, I mean showing the results of the very strong investments that have been done in the past. And we are very proud, again, after all the stars we got from Arcep on the mobile network to see that the last results published by Arcep on our fiber network also that in the top 75 mobile and fixed networks in France, 60 are Orange networks, showing as well our strong performance and quality on our networks that are appreciated by our consumers.

And your second question, was it on the network capital expenditure or working capital?

Working cap. You had an inflow of EUR 250 million in H1. So just what you expect for the full year?

Okay. Jean-Michel, you want to take it?

Yes, indeed. The point is that, as I mentioned earlier on, in H1, we have a temporary element, which is that as we have massively reduced our CapEx, basically, the activity effect on working capital is very short-term negative because the football field of people whom we owe money to has shrinked a little bit. But for the full year, this should normalize, and we should not have this negative working capital contribution to the organic cash flow for the full year.

This is one of the reasons why we are fully confident in reaching the above EUR 3.5 billion target for the year, combined with the fact that usually our organic cash flow is backloaded in the second part of the year as in every year. So nothing bad to expect in this area.

Our next question comes from Georgios Ierodiaconou from Citi.

The first one is just a follow-up on the comments you just made around the French pricing environment. I was curious, you mentioned NPS returning back to pre-price increase levels. If you don't mind giving us an update of whether churn is also improving during the second quarter and into July. I'm just asking this because, obviously, the competitive intensity increased during Q2 and into Q3. So just wanted to understand whether the improvement in NPS is sufficient to mitigate some of these competitive moves.

And then my second question is around Ethiopia and there has been, obviously, a few articles suggesting that the local government wanted to approach you and see if there was an interest either in investing in the local incumbent or in a third license. Just curious to hear your thoughts whether that is a venture of interest to you. And between a brownfield versus greenfield project, what will be preferable?

I will hand over to Jean-Francois to give more comments on the churn and especially end of Q2 impact of the competitive environment in -- on mobile especially.

Yes, I'm going to comment on the Q2, there's a competitive environment, which I believe has been rather stable. We've been even seeing in these first 2 weeks of July, some moves from our competitors, which are, we believe, going in the right direction because we've seen some slight, very slight, but still price increases from -- to our competitors and the offers I was referring to that were brought in Q1, which we found pretty aggressive. The offers that EUR 10, 40 gig have been actually -- have been changed by 2 competitors to EUR 10, 20 gig. So here as well, we see things on the market rather moving in the right direction.

To answer your question on the churn, I mean, obviously, we have seen a slight increase in the churn linked to the price increase -- the massive price increase we announced in end of last year, Q1 2023. As I was saying, in Q2, this is back to, I would say, on mobile quasi level of churn we had last year same quarter. As concerns broadband, this is slightly above last year, but nothing that we are worried about. Again, I mean this movement, we see it as a success, basically.

And then coming to your question on Ethiopia, as we've said, our plan to grow and deliver solid performance in Middle East and Africa is -- I mean relies on our organic performance, but we are also always looking at nonorganic opportunities but only if we believe they are creating value for the group. There's an official process that was launched by the Ethiopian government. And that's why it's been, I would say, reported in the media.

But at this stage, we have more comment to make, and we don't believe, at this stage at least, that there's any -- I mean no comment to make, and the conditions are not yet the one that we would consider value creation. But again, these discussions are ongoing officially driven by the government in Ethiopia.

Our next question is coming from Mr. Stéphane Beyazian from ODDO.

Yes. Two quick ones, please. On fiber, there are still a lot of talks in the French press about the quality of network. And -- I mean you've seen less exposed to shutdowns and faults than some competitors. But do you see any evidence that the rollout was rushed perhaps in the country side and perhaps some reinforcement and even burying some lines on the ground could happen and possibly have an impact on future CapEx for Orange?

And second one, perhaps to Christel, Orange Bank was obviously a key project of the previous CEO. It's going to free up a little bit of cash. And now that you're more than a year into the CEO role and free cash flow are recovering, have you identified or are you looking for any sort of project where you would -- potentially would want to drive Orange or your focus is very much on the free cash flow recovery?

I will let Jean-Francois comment on the strong quality of our fiber infrastructure, which was validated by the regulator in France indeed.

Yes. Thank you, Christel. I mean we were absolutely proud and happy to discover the first ranking that was published by Arcep 2 weeks ago about the quality on the fiber networks. As you know and you have seen on this listing, there are more than 230 local fiber networks and fiber networks providers in France. Indeed, mainly, in rural.

I'm not going to comment whether or not this has been rushed or not. What I want to insist upon is that in this list of 230 networks, if you take the 75 best networks in terms of the number of failures on these networks. So in the 75 best ones, Orange has deployed 61 of them. And if you look at the 75 best networks in terms of the number of customers that are -- the success ratio of customers that are brought to this network, Orange again is placing 55 networks in this 75.

So we're very happy to see that this is the proof, if ever needed, that being a telco is really our job, and we are placing, again, the best network in the top of this list. And by the way, if you look at the bottom of the list of these networks, none of these networks have been deployed by Orange.

Thank you, Jean-Francois. Regarding your question on Orange Bank and new projects or business diversification that we could think of, first and foremost, we are very focused on the execution of our Lead the Future plan, and we have many innovations and many things that we are investing in to continue delivering value in our core business and leveraging the work of Orange innovation and the excellence of our teams, both on the infrastructure layer, on the services for our customers, on the Enterprise segment, in particular.

We're also investing on cybersecurity. So no big bet, I would say, in terms of new opportunities. Really focusing on creating value and delivering our Lead the Future plan.

Our next question comes from Mr. Andrew Lee from Goldman Sachs.

I've just got two questions. Firstly, just maybe following on from your answer to the last question, your broadband line losses accelerated in the second quarter to just over 30,000 from just over 20,000 in the previous quarter. I wonder if you could just talk to why you think that is, given the improvements you mentioned you were making?

And then second question, just on Enterprise, which is a black box for us, and we get that visibility is probably not that high for you, but given we're halfway through the year now and you're still anticipating improvement this year versus last year, could you just give us a sense of trajectory as we head into 2024? It's obviously very heightened, EBITDAaL declines are very anomalous versus most of the rest of the sector even given that's a low bar. How do you think about the improvement into 2024 or at least the run rate that we'll be heading out to 2023 on Enterprise?

On the broadband negative, I mean net adds in France, remember that we have 2 trends: one with fiber, one with DSL. But again, Jean-Francois, you want to give more detail?

Yes. Thank you, Christel. What I can say is that, indeed, I mean, as you can see, we have a negative net adds, which are slightly negative. I just want to remind that we have a customer base of 12.4 million broadband customers, out of which a large majority, more than 60%, are fiber customers. And I want also to remind that if you look at just fiber, we had a quarter with 250,000 fiber net adds. So the machine -- the acquisition machine of fiber is still going full speed ahead.

And indeed, this, let's say, slight negative, if we look at the total broadband, is clearly explained by the fact that, as you've seen in Q1, we believe that the entire market is basically slowing down. And there, as we have the largest base, obviously, we are slightly suffering more eventually than others, but these numbers are absolutely according our expectations, I can say.

Thank you, Jean-Francois. Regarding the Enterprise business, which, obviously, is not a black box for us, and we know exactly what we are driving. As we've always said, the transformation is a deep transformation and it will take 2 years for us to recover, and we don't provide detailed guidance by business, but we expect to improve compared to last year the EBITDAaL losses for Enterprise.

We've launched many actions, and I will let Aliette comment, including a voluntary departure plan which will take full effect end of this year. And we've launched many actions on the pruning of the portfolio repositioning. So I don't know, Aliette, if you want to give more details?

Yes. So to give slightly more color, so indeed, to remind first starting with the numbers we had in H1 '22 was a minus 25% year-on-year on the EBITDAaL. In H2 last year was a minus 17%, if we exclude the 2021 employee shareholding plan impact. And our objective for this year was first to stop the bleeding and also to implement structural changes that will be fueling our future recovery.

So that's why you see only, I would say, very modest improvements at this stage in H1 '23, as we have a minus 16.7% decrease of the EBITDA (sic) [EBITDAaL]. But this is fully matching our target for this period, and we are in line with our plan. So the recovery plan objective is now and as we explained in the Capital Market Day earlier this year, the profit transformation will take 2 years, and we expect to start -- to keep on improving the decreasing trend in H2 and moving forward in '24.

So concretely, what we had announced is a plan with 4 pillars. The first one is about simplifying our operating model. What we've done so far in this is that we have a new operating model that has been put in place on January 1 with tighter P&L monitoring. I have also changed half of the executive management team of the company. We are launching a voluntary departure plan and we are discussing with the social representatives at the moment. This should be starting in Q4 this year. We should get -- go to proceed by the end of this year. And this will be actually materializing into departure of staff as from Q1 '24, so Q1 next year.

The second lever of the transformation plan was to focus our investments and to restructure our portfolio and what will really make us win in the future. And on this, we are fully on track with what we had announced, which is that we will divide by 2 our product portfolio by the end of Q1 next year. And this is ongoing as we speak, and this will give us oxygen to, again, focus our investments and focus on what is delivering value.

The third pillar of the transformation plan is about transforming our traditional connectivity business to gain efficiency. And here, we are working on several aspects, including improving our delivery lead times and delivery performance, especially on fiber in France. And we are also investing to digitalize and to automate our connectivity business with clear expected impact on the customer experience and on our efficiency drivers.

And the last pillar of the transformation plan was -- has been about accelerating the profitable growth in digital services to fuel our future growth. And here, we have launched an ambitious reskilling plan and we are also having ambitious recruitment campaigns to fuel our cyber defense, but also our digital and data activities. And we are also working hard to fix our cloud performance that has not been at the expected level.

Our next question comes from Thomas Coudry from Bryan Garnier.

I have three, please. First two ones are on broadband actually. Coming back to the discussion on broadband as we saw indeed limited in comparison with the customer base. Still, are there diverging trends that you see here in your dynamics and performance in rural areas versus more urban areas?

That actually takes me to my second question, to talk about satellites. I think that Christel has -- you have gone to a teleport a few days ago and made some announcement as far as Orange strategy in satellite is concerned with the new offer to be launched. Could you please tell us more about how you view satellite in your mix? Is it a good way for you to address the performance in rural areas? And more importantly, do you intend and how do you intend to accelerate in satellites? We know there are many things going on in the industry with many new offers coming to the market. What is your vision here? And how do you intend to push on that front?

And the third question, actually, a global question for Jean-Francois. Obviously, you have left Spain in very good conditions. Are there any recipes that you intend to apply to France given your experience of good track record in Spain?

I will take the satellite question, and then I will let Jean-Francois give his recipe for France and broadband net adds. So satellite, as you've seen, rightfully, actually, satellite is part of our tools to provide solutions and broadband connectivity to customers. And that's why we wanted to communicate. And actually, we are already using satellite for broadband connectivity in rural areas in France. It's today under our Nordnet affiliate, which is a company owned by Orange France, and we did this communication to make sure that this would be more visible.

And rightfully, we will launch new offers with better bandwidth and connectivity to second half of this year -- I mean towards the end of the year under the Orange brand, which will help us make more visible this solution while absolutely key if we want to reach 100% connectivity of the territory in France. And to be fair, if we look at the landscape, we -- the regulator, and I would say our politicians tend to think a lot about 100% coverage through fiber in France, which we know is not economically viable, and it's not -- and satellite connectivity is a fantastic solution for rural areas.

So that's why we want to promote them as well in addition to our mobile fixed wireless connectivity as well as, obviously, our fiber connectivity. We do not intend to invest massively CapEx on satellite. We already have a lot of terrestrial infrastructure, which we leverage actually for many constellations, but we will not invest in satellites themselves. We buy. We have partnership with all the satellite projects, so we do work with all the constellations. And we also use satellite as a fantastic resiliency solution for all our Enterprise customers.

So this is definitely an area that we want to continue to leverage, to invest, to make sure that it's fully used as part of our, I would say, toolbox to serve customers, but not as a new venue for CapEx investment, of course. Now, Jean-Francois, any recipe?

I will take this first question. So I wish it would be that simple that you could use the Spanish cooking recipes to France. But unfortunately, as you know, we have different kitchen here. Now seriously, the markets are different. The challenges are different. The positions of Orange in Spain is different than the one in France. So I've learned in my past that it's very difficult to just apply recipes like that.

That's why I've been spending the first 90 days of my mandate here understanding the market, understanding the team, the position. And with the help of Christel, we are actually working in instant -- making an instance, let's say, of the Lead the Future strategy to France that I'm planning to communicate back to school in September next year. So we are working on a very strong plan to push what we were explaining. So a strategy of value in France, clearly to execute the plan that has been explained to you guys in Feb of 2003. That's on the cooking side.

On the first question you raised about some trend changes in the rural versus urban areas in France, the answer is no. We don't see any change of trends. We are extremely attentive to what's happening on the rural areas in France, simply because you know that we have very strong market shares in these areas. So we are really very attentive here. We are relying on our very strong point. The very strong point is clearly our territorial presence in France.

We are strongly present in all the territories with a very large retail network of shops in France that we have decided to slightly extend to a number of 600 shops in 2026 for that reason as well. So we're extremely attentive, and we see no changes there. We are keeping, I would say, the acquisition share that we need to have to defend our market share in these areas on fiber.

We will be moving to the next question. Next question comes from Emmet Kelly from Morgan Stanley.

Yes. I just have one question, please, and it's on French EBITDAaL trends. And back at the Capital Markets Day, you gave guidance for the CMD period for French EBITDAaL to be down low single-digit percentage. It's obviously down by 5% in H1, and you said it should be down by -- you stated that the rate of decline should be more than half in the second half of the year. Could you talk about the kind of key dynamics that we'll see in French EBITDAaL beyond 2023 in terms of the moving parts and, in particular, energy costs, head count costs, et cetera, and whether you believe the 2023 could be the low point for EBITDAaL growth in France?

So as we've -- and you rightfully said, we believe that in H2, the EBITDAaL decrease will be halved compared to H1. There are many trends as we highlighted during the Capital Market Day, and we fully confirm our '22, '25 guidance for France with a slight decrease of EBITDAaL over the period.

As you know, there are many trends, very solid retail services growth, the wholesale decline, which we know is front-loaded on the 3 years and, obviously, working on our cost structure to cope with that. So we do believe, indeed, that H1 2023 was a low point for EBITDAaL decrease, and we fully confirm our 3-year guidance for France.

Our next question comes from Mr. Akhil Dattani from JPMorgan.

I've just got two, please. Firstly, on VOO. Christel, you mentioned, obviously, the benefits that transaction can have for your Belgium asset. But I just wanted to dig a little bit deeper into some of the numbers. You've provided in your pro forma financials the contribution VOO provides for this year, and that implies an EBITDAaL margin of just 25% for the asset, whereas I think when the asset was being acquired, the implied margin that you were providing was for about 37%. So I just wanted you to help us understand what's changed? And that implies acquisition multiple of about 13x EBITDAaL. So it seems like quite a high multiple. So I don't know if I'm missing something, but any sort of color to help us better understand what's going on there would be super helpful.

And then just a quick one on Spain. You've obviously had very good trends and a very strong recovery so far in H1. I wonder if you could provide us a little bit more granularity on what's happening around pricing. It seems to be that whilst the higher brands are raising prices, and we've had CPI linkages from some operators, at the low end, we seem to be seeing some quite aggressive moves with data speeds on broadband increasing, data allowances increasing, but without price hike. So it looks like there's a bit of cannibalization at the low end. So just a bit of color on exactly what's going on and how confident you are in terms of the trends you've seen at the moment.

So on VOO, you're right to say that there's a difference. And actually the difference between the historic EBITDAaL that was presented for VOO in the signing presentation and the now pro forma figures is linked to different accounting practice and, in particular, VOO had a significant level of operating expenses that were capitalized that we reclassified in consistency with the Orange accounting practice. So there is no change. It's just accounting that's been aligned with our pro forma practice to restate and to use the same methodology.

And -- sorry, just to elaborate on that, so to avoid any misunderstanding. There's no surprise in this respect. Everything had been spotted in the due diligence. So these accounting practices or differences were fully spotted, and we have just implemented what we had seen during the due diligence phase.

On the Spanish market, and I will let Marie-Noelle give -- provide more details. But you're right to say that there are still a very competitive low end of the market in Spain with very dynamic competitors. And as you know, the Spanish market is extremely competitive. And that's actually our strong argument when we interact with the European Commission on the antitrust process for the rationale of our transaction with MASMOVIL, which is we need to gain market share to generate more ability to invest for our Spanish customers on the Spanish market.

I don't know if, Marie-Noelle, you want to add on the dynamic...

No, I guess the Spanish market is highly dynamic. And as you said, this is what we're saying to the European Commission because it will stay as a very dynamic market. The high-end part of the market which is led by essentially Telefónica and Orange and all the football offers and so on is really the upper part of the market. And we'll have a very strong dynamic either on the middle part of the market or on the low part of the market. And these both parts are much more than 50% today. So this is going as since many months in Spain, so we still have high value and Orange is very well positioned in this market with an increase of value for our customers, but we have a very dynamic market.

The overall churn of the market is going down. So this is very important also because you know this washing machine had to slow down. But we have this market in 3 parts, the lower one, middle one which is a strong one with Jazztel, and the upper part of the market with high ARPU and low churn.

Next question comes from Mr. Mathieu Robilliard from Barclays.

I had two questions. The first one is on French (technical difficulty) in terms of the increase of (technical difficulty) a few months ago. I just wanted to confirm if this increase only applies to out of contract, which is typically 30% or maybe 40% of the base. But as existing customers exit the contract, they are then facing a similar price increase. So the impact of the price increase will grow throughout the year because there's more and more customers being affected by it. So I just wanted to check that, and it was the first question.

With regards to the second question, it had to do with wholesale. So you gave us a detailed impact of the decline of wholesale revenues between 2022, 2025 at the Capital Market Day and also gave us an impact on EBITDAaL of EUR 0.4 billion. And I just wanted to understand if that EUR 0.4 billion also includes the fact that in areas where you are not rolling out fiber yourself, you have to basically rent infrastructure and, therefore, that is a bit more costly. So I just wanted to understand if that was included or if that was a different one.

So on your first question and the line wasn't good, but I think your question was on the price increase mechanism and the impact on our accounts. And I'm not sure what you describe is exactly what we did because actually, we did a full back book price increase. So any customer who had a contract with us received a letter between December and January, February, where we informed them about the plus EUR 1 or plus EUR 2 of price increase, which, and as you know, we have a 3 months advance notice obligation under French law.

And that's why we announced those letters and then the price increase was fully implemented, and obviously, we did with more than 20 million customers. So that's why we couldn't do that one shot, and it was done and the full impact started -- we had the first impact starting in March, but the full impact only started really in May, and that's why we said that we will have the full benefit in H2, while in H1, we only had fully 2 months of price increase on the total customer base.

When it comes to the wholesale dynamic, so we look at EBITDA and the impact of wholesale decrease on EBITDAaL only for the business we do for the wholesale. The impact of EBITDAaL for our retail services, when we rent fiber, we apply it to our retail services EBITDAaL. So the EUR 400 million decrease linked to the wholesale decrease of corporate to fiber migration in France as well as many other low margin or any other wholesale activities does not include the impact of renting fiber on non-Orange networks.

And this, Mathieu, is fully embedded into our '22, '25 EBITDAaL guidance. We have transformation at work. As Jean-Francois said, we have lots of departures. So all this is showing the fact that we have, as we said during the Capital Market Day, '22 to '25, a slight decrease in CAGR for EBITDAaL for France. And H1 is perfectly in line with our plans. This is exactly the point we were expecting with the recovery that we commented with the fact that H2 rate of decrease will be more than halved.

And then as the -- there are 2 elements that will ease the way into '24 and '25. One is the fact that the wholesale revenue side is front-loaded as part of the EUR 400 million EBITDAaL hit as we said. So this pressure will be lower in '24, '25. And second, there is the energy component where we have a peak in energy cost in '23 and as well this will ease into '24 and '25, and together with the ongoing deep transformation of our France with our cook, Jean-Francois.

Our next question comes from Mr. Nicolas Cote-Colisson from HSBC.

I've got a last question on Africa. Can you update on Orange Money because it looks like the revenue is growing fast. So would you think that the competition is now more rational? And what are the next ways to grow revenue beyond the penetration of services?

Very happy to ask Jerome to answer that question.

Thank you for your question. Indeed, our Orange Money revenues have been increasing 2 digit, over 25% growth during this half. And this is the result of the transformation plan we conducted with lower pricing, which has a strong impact on the elasticity of the volumes, but with an ARPU which is now stable or increasing, depending on the countries, because we have as well a much better mix of the revenues of Orange Money doesn't rely only on cash out, which was the case before we conducted this transformation plan of Orange Money.

It's now much more balanced in between cash-in, cash-out transfers, international transfers and payments, and that gives us a very strong positive perspective for months and years to come because the more we will rely on the diversity of services, the more we will be able to increase our revenues on top of the very strong dynamics of customer base.

Nicolas, you are unmuted. If you were saying anything or any follow-up, please go ahead now.

No, that's all fine.

Our next question comes from Roshan Ranjit from Deutsche.

Two questions, please. Firstly, just a quick follow-up on France. You've been talking about the price increase, which has driven that nice acceleration of growth. Your previous guidance, ex PSTN, 2% to 4%. Given that we've got an extra month of the price increase in Q3, could we be right at the top end of that range? And what about the upselling within the tiers? You've previously given a number. I think it was around 20% of your new adds were taken the Livebox 6, which had that EUR 5 premium. So if you could give us an update there, please?

And secondly, just on CapEx, a nice decrease again this quarter. Any inflationary pressures that you're seeing on your CapEx spend? And your guidance for a sharp decrease, are we talking about basically 6% decrease, so we are tracking in line with what you delivered in H1?

So on the 2% to 4% guidance for the whole '23, '25 period for retail services, we confirm it. And as you -- I mean the price increase, the ARPO increase, will obviously be part of this -- of -- I mean will be a key lever to achieve it. But at this stage, we don't change it, and we don't provide obviously more detailed guidance by year or by quarter.

On the CapEx, indeed, we continue to drive -- I mean to benefit from the massive investment we've done in the past on fiber, and that's now allowing us to reduce the overall CapEx spend. We monitor closely the inflationary pressure that we have. But thanks to buying our JV for procurement with Deutsche Telekom, we are very confident on our ability to contain the impact of inflation on our CapEx.

On the Livebox's performance, Jean-Francois?

This is going very well. I mean this is, obviously, the one we are providing in the high end of our offers on Orange and going very well. And what I can share is that it's more -- it's representing more than 10% of our acquisitions, so a very strong commercial success.

Our next question comes from Carl Murdock-Smith from Berenberg.

It's great to see your progress on turning net zero carbon and your focus there. Kind of given the focus in recent weeks on the other side of the Atlantic, I just thought I'd ask for an update in terms of the amount of lead in your network? And how do you control -- how you remove that and that kind of progress?

And then secondly, on Enterprise, there's been some -- well, Enterprise and B2B more generally. Enterprise revenue beat expectations and within the European division, B2B growing 8%, that's all very impressive. So I was just wondering what the outlook was like in that segment? And what are the key drivers of that kind of acceleration? And how much is that European growth related potentially to the European recovery funds?

Thank you for your comment on our net zero carbon trajectory. Regarding environment and the lead pollution discussion that popped up recently, actually, this is not something new. And in the case of all, I would say, infrastructure in Europe, this is something that we've worked in the past. But today, there is only a very, very, very small. And actually if we look at France, it's -- we estimate 0.07% of our copper network in France, which still contains lead. There is no lead in fiber or cable networks. And these copper cables are usually in concrete structures that are waterproof, so no risk.

And as you know, lead was banned in Europe much earlier than it was in other geographies. So this is not an issue. And obviously, this is something that we follow very carefully. So in Poland as well, we are well below 0 -- I mean 1% of all our copper cables that would have led. So it's really something that we follow carefully. And as you know, we have this corporate decommissioning program. So we also implement all that's required to protect our employees and our subcontractors when it comes to, I would say, polluting or dangerous material environment.

On the B2B performance, so we are very happy with our B2B growth in Europe as we reported. And it's driven by the focus that we have. The key drivers, it's a mix of drivers. But in some countries, we actually benefit from the European funds. I have in mind Spain, for instance. In Poland as well. But it's not the only driver. We are also actively focused with all our teams in all geographies to make sure that we tapped especially in the -- with the small and medium enterprise when we operate in those countries.

That was our last question. I will now pass the line back to the management team for the concluding remarks.

So before ending this call, I would like to give you a few words. Firstly, we achieved a strong performance in this first half of 2023, which demonstrates the positive effects of our disciplined execution, including the right pricing policy in executing our cost savings plan and, obviously, in our investment decisions. Secondly, we will see H2 EBITDAaL in France improvement, thanks to full effects of price increase in the second half of the year, making us totally confident in an improved second half EBITDAaL performance and full achievement of our guidance.

Finally, and the most important, we remain fully focused on the execution of our Lead the Future strategic plan, key to sustainable growth across all our main financial KPIs, which include a strong organic cash flow growth trajectory and a clear improvement in value creation.

I now wish you all nice holidays and look forward to meeting you again in September.

Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you, and goodbye.