Orange SA (ORAN) 2023 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Orange's Full Year 2023 Results Conference Call. The call will be hosted by Christel Heydemann, CEO; and Mr. Laurent Martinez, Chief Financial Officer, with other members of the Orange's Executive Committee for the Q&A session that will start after the presentation.

So thank you. Let me hand over the floor to Ms. Christel Heydemann. Please go ahead.

Good morning, and welcome to our financial results presentation for the full year 2023. I will start with the key highlights, and then I will leave the floor to Laurent, who will go into more detail.

Let's go straight on Page 4 with the key highlights of the year. After the first year of our Lead the Future plan, I am delighted to confirm that we are fully on track with the strategy execution. Firstly, as we indicated during our Capital Market Day, the strong focus on our value strategy has fueled the revenue growth throughout the year. We have also made progress in rationalizing our portfolio with the ongoing process of withdrawal from our banking business in Europe, and we closed the previously announced sale of OCS and Orange Studio in January.

Secondly, we continued to drive in-market consolidation within Europe. We are fully engaged with the competitive authorities regarding our joint venture in Spain and we reached new milestones in Belgium and Romania in 2023.

Finally, we have proven our ability to meet our targets in respect of transformation and efficiencies as well as financial guidance. We delivered an EBITDAaL growth of plus 1.3% over the year and even plus 2% in Q4. We also achieved a remarkable organic cash flow growth of over EUR 600 million, reaching more than EUR 3.6 billion already 2/3 of our growth target for '22 to '25.

Moving to the next, the execution of our ESG strategy is equally on track. On the environment, we are 2 years ahead of schedule in our objective of reducing Scope 1 and 2 CO2 emissions by 30% in '25 compared to 2015. We stabilized our energy consumption despite the network rollout, and we have improved the decarbonation of our electricity consumption, thanks to the ramp-up in electricity from renewable sources. We are now focusing on our next objective for 2030, a 45% reduction of CO2 emissions for all scopes compared to 2020.

On diversity, we improved by 1 percentage point, the proportion of women in senior management as in the group as a whole, thanks to our talent management program.

On digital inclusion, we have increased the number of people receiving our free training by more than 40%, notably thanks to our Orange Digital centers. And we continue to collect mobile devices from our customers by responsibility for waste and to fuel reconditioning and recycling. The continued acceleration in EBITDAaL throughout the year illustrated by the plus 2% growth in the final quarter, was underpinned by an improving second half trend in France, an outstanding MEA performance, a solid delivery in Europe with Spain especially strong and Orange business starting to improve. This is the result of our value strategy and tight cost control.

EBITDAaL growth, combined with a sharp improvement in eCAPEX have led to a strong organic cash flow of more than EUR 3.66 billion were in line with our guidance of at least EUR 3.5 billion. We achieved this financial performance while closely monitoring our environmental commitments, as I just said, we managed to reduce CO2 emissions in scope 1 and 2 by 37%, beating our objective.

Finally, our balance sheet remains very healthy. The net debt over EBITDAaL ratio increased to 2.05x due to the VOO acquisition, in line with our medium-term target of around 2x. As explained during our Capital Market Day, value creation is 1 of the pillars of our Lead the Future plan, and it is driving our decisions. To demonstrate this value creation commitment, starting today, we will be reporting 3 additional financial indicators. Firstly, a comprehensive new cash indicator that we call free cash flow all-in, which includes license payments, subordinated notes coupons and main litigation cash-outs. In 2023, our free cash flow all-in reached EUR 2.9 billion, a massive step-up of EUR 1.1 billion year-on-year, well above our dividend payout.

Secondly, ROCE, this is a key decision-making criteria and in line with our Lead the Future plan, we want to improve this ratio by 100 to 150 basis points between 2022 and 2025. In 2023, driven by strong execution, ROCE improved by 80 basis points to reach 6.7% already more than halfway to our 2025 target.

And finally, EPS which at EUR 0.85 increased by more than 16%. The significant improvement in these indicators underpinned the growth in our dividend as announced in our Lead the Future plan, which reached EUR 0.72 in 2023 and EUR 0.75 in 2024 payable in 2025.

Let's now take a look at where we are with the progress of our deal in Spain. The European Commission is finalizing its review and will provide its decision by February 22. We are confident that we will obtain clearance by then, which will lead to the closing of the deal by the end of the quarter. This will open the way for the combination of Orange Spain and Masmovil to create a market leader in Spain.

We do confirm our run rate synergies and more globally, we are confident on the overall large value creation for Orange of this flagship strategic move. You will hear from us again on this major project in due course, of course. Our Lead the Future plan deployment is now at full steam. We have already made considerable progress on the 4 pillars of our plan, in particular, pursuing our value strategy in Europe. Our best-in-class networks and our strong focus on customer satisfaction have made this possible, notably in France with our leading position in network quality and Net Promoter Score.

As I said earlier, we have also been active with our portfolio rationalization with the ongoing processes on Orange Bank and OCS and Orange Studio. The transformation of Orange business is on track with the recovery plan and started to deliver an improvement in the EBITDAaL trend in 2023. We expect further improvement in '24 and confirm our objective of an EBITDAaL recovery in 2025.

Middle East and Africa once again demonstrated its potential and efficiency, delivering double-digit growth in both revenue and EBITDAaL.

Finally, in parallel, we continue to implement our new enterprise model driving simplification and efficiency, notably through digital. Our Lead the Future strategy also leverages innovation to accelerate our transformation. AI is used in many internal cases to superpower our employees by providing them with tools to help them become more efficient and effective in their daily tasks. For example, we use AI to predict the marketing offers most likely to be appealing and relevant to our customers. This approach is driving measurable revenue increases in many of our countries, and we are actively replicating this work in other countries.

Our innovation team has also developed a secure and European-based internal generative AI tool. It includes the best AI models available from open AI and others that our employees can use in their daily activities. RPA, robot process automation, has allowed savings of more than 0.5 million hours in 2023. This is particularly helpful in areas of the business with many repetitive process-driven tasks such as in our customer contact centers.

Our second key focus is network. We are on a journey to transform our operating model to make it much more automated software-driven, powered by AI and leveraging the disaggregation of hardware and software. And we have already made concrete progress along this journey. For instance, radio configuration is automated in most of our countries with C-SON technology. We are already able to automatically change 20 million parameters per month.

Some of these automation use cases leverage AI to reduce energy consumption, and there are many more applications. For example, we are introducing AI to optimize our CapEx decisions and network planning as well as to implement fast root cause analysis and predictive network maintenance.

Last but not least, we are pulling our operations via 2 network operating centers, one in Middle East and Africa and one in Europe.

Let's move to Slide 11 to review our efficiency plan. Despite an inflationary context, we delivered EUR 300 million of net savings in the first year of our 3-year plan. The savings were mainly related to headcount reduction and explained primarily by the front-loaded effect of the new senior part time plan with 7,600 Cigna series and achieved through the new enterprise model transformation. We are fully confident in reaching the EUR 600 million target in 2025 as we accelerate major cost savings programs in the area of sourcing, network, IT and real estate.

With that, I hand over to Laurent.

Thank you, Christel. Let's start on Slide 13 with a glimpse on the full year revenues, which is up 1.8% year-on-year, reaching EUR 44 billion this year. The growth was achieved, thanks to the retail driven by price increase, which offset the expected decrease in wholesale by more than 2x and supported by the strong equipment sales growth.

Looking at revenues by country, MEA was again our main growth drivers with double-digit revenues uplift. Europe is up for the second year in a row with a solid 2.2% driven by pricing fees implemented across our footprint and the strong performance of Poland and Belgium. Orange businesses boosted 0.2% growth with IT and IS activities, offsetting the expected decline of the legacy business.

Finally, France was down 1.4% with a front-loaded anticipated decline in wholesale, partly offset by 3% growth in retail services, excluding PSTN. This performance is fully in line with our 2% to 4% CAGR objective over the prior '22, '25.

So moving to EBITDAaL. Growth has been accelerating across the year towards 2% in Q4. France improved in the second half as targeted benefiting from the full effect of the broad-based price increase implemented in the second quarter. MEA delivered an outstanding performance and Orange business delivered on its targeted trajectories.

Europe also turned into an excellent performance this year with double-digit growth in Spain and solid results in Poland. All of this resulted into a solid annual growth of 1.3%. So moving to net income, which is up 10%, reaching, as you see, EUR 2.9 billion, up close to EUR 300 million. And this increase resulted primarily from the favorable base effect of the 2022 Orange Romania goodwill impairment. Partially offsetting this effect, we booked one-off impact on the voluntary senior part-time program, related to the raised age of retirement in France and restructuring costs related to Orange Bank and Orange Business.

Moving to eCAPEX, which improved sharply in 2023 by close to EUR 500 million, with a decrease accelerating in Q4 at minus 8% with the deployment peak of fiber largely behind us. As a result, eCAPEX represented 15% of sales in 2023, well in line with our target. France was the main contribution to this improvement with a drop of 10% year-on-year. This decrease, as you know, is sustainable since we reached EUR 37.4 million FTTH connectable homes, which represents around 80% coverage of the country premises. In accordance with our Lead the Future plan, all main segments eCAPEX decreased with the exception of MEA, where we continue to invest to support strong revenue and EBITDAaL growth.

So moving to our organic cash flow, as Christel said, increased by more than EUR 600 million year-on-year, reaching EUR 3.66 billion, when in line with our guidance of at least EUR 3.5 billion. This remarkable performance was driven by the decrease in eCAPEX and the uplift in EBITDAaL. After deducting license payment, hybrid coupon and major litigation, our free cash flow all-in reached EUR 2.9 billion, an outstanding increase of EUR 1.1 billion over the year, thanks to our strong organic cash flow growth, but as well, lower license and litigation payments in 2023.

In terms of net debt, an increase of net debt of nearly EUR 2 billion was related mainly to the VOO acquisition in Belgium and is well in line with our midterm guidance of around 2x EBITDAaL. Our free cash flow all-in generation is greater, as you see than our global dividend payment.

Finally, before turning to our business review, a word on our strong liquidity position, which is a key asset as well as our low cost of debt and together with a very high part of fixed rate debt, together with our credit rating, which is amongst the best in Telcos. All of these assets, as you know, are critical in our current macro environment.

So let's move to the business reviews and of course, starting with France. As you see in France, our value strategy continued to deliver in the last quarters of the year with all ARPO up fueling retail growth with retail PSTN of over 3%, in line with our global target. We delivered a very good Q4 commercial performance in mobile and fiber, despite overall market slowdown since the start of the year. We are best-in-class for churn, which remains moderate and as well for NPS, which is back to its 2022 level.

In terms of operational excellence, we have been ranked the best mobile network in France by Arcep for the 13 consecutive times and for the first time, #1 in all measured criterias. As expected and indicated in H1, our second half EBITDAaL in France improved significantly, thanks to the full positive impact of the broad-based price increase implemented during the first half.

All in all, as you see with eCAPEX declining by more than 10%, in line with our midterm expectations, cash flow generation improved all-in with EBITDAaL less eCAPEX increasing by more than 3%. Looking ahead, we are expecting a stable EBITDAaL trend in 2024, which will continue to benefit from our value strategy.

Let's turn to Europe with revenues and retail services, up by more than 2% in Q4. And the results, which has been driven by 3 main factors: First, a very positive momentum in B2B in Poland. Convergence, which is basically reaping the benefits of our price increase and growth in our very high broadband with now 7 million FTTH and cable customers. Low-margin wholesale revenues continues to decrease at a slower pace, reflecting the regulatory decrease in coal termination rates and decline in international traffic.

Solid retail momentum, together with action implemented to counter inflation pressures have led to a very nice step-up of Europe EBITDAaL by almost 6%, driven by Spain at more than 12% and Poland at almost 3%. For the full year, EBITDAaL less eCAPEX is up by a record 33%, reflecting our very positive EBITDAaL generation and our strong CapEx improvement. Looking forward for 2024, we are expecting Europe to deliver a solid trajectory.

Turning to Spain, with Q4 revenue slightly down due to the decrease in low-margin wholesale. On a full year basis, revenues has been up by 1.1%, driven by retail services growth across all our 4 quarters. In a highly competitive market, as you know, we continue to generate with our focus on customer value management. Convergent ARPO is up 3.5%, with a churn improvement of 2.3% year-on-year. We also achieved a step-up in all B2B segments. Our customer base increased by 13,000 in FTTH in Q4 and 7,000 in mobile, when excluding the disconnection of 57,000 COVID lines. Our 5G customer base now is exceeding 3 million customers. Our sales momentum and our ongoing focus on customer authorization translated into a second half acceleration of our EBITDAaL growth, leading to double-digit positive momentum for the year. In terms of EBITDAaL less eCAPEX, we are up by EUR 240 million, a very large step-up driven by our commercial and operational performance.

So up to Africa and Middle East, which again demonstrated a very strong performance and fully in line with our targets, with revenues up by 11%, a 10-year record. In Q4, our revenue is up by 12%, fueled by our 4 main growth engines, data, fixed broadband, B2B, and last, but not least, Orange Money, which is up 28%. This excellent performance was driven by a solid 4% growth in our mobile customer base up to 150 million customers as we speak, and by our average mobile ARPO, up by 6%.

We are also extremely proud of the success of our new Max it all in one application, which has been launched in November to enhance customer royalties and already has more than 10 million download as of today. As a result, we delivered on double-digit EBITDAaL growth in 2023 for the fourth year in a row, increasing the EBITDAaL margin by 40 basis points to 38.2%.

In terms of EBITDAaL less eCAPEX, we improved by 18% versus last year, our cash generation in euro, which is definitively the key focus of MEA management. This excellent result gives us confidence that we can achieve our objective of high single-digit EBITDAaL growth in 2024.

Finally, turning to Orange business. Our top line recorded a slight increase in 2023. This trend was driven by a positive momentum in IT and IS, specifically in cyberdefense. And a strong performance as well in digital and data, and as expected, decline in legacy business. Relative to the cloud business, we announced in Jan, the launch of the commercial activities of Bleu, our new sovereign cloud platform with services going live as of end of 2024. As you know, Orange Business EBITDAaL recovery is very high on our agenda. Our turnaround program is starting to deliver.

In H2, EBITDAaL decreased by 14% delivering a sequential improvement in comparison with H1 and as well with 2022. In 2024, considering the positive ramp-up of our recovery plan, we are aiming to approximately half the rate of decrease, paving the way for EBITDAaL turnaround in 2025.

Back to you, Christel.

Thank you, Laurent. Let's have a look to our guidance. We achieved all our 2023 financial targets, including 1.3% EBITDAaL growth accelerating during the year and eCAPEX strongly improving in line with our Capital Market Day commitments. Both led to the significant growth of our organic cash flow comfortably in line with our at least EUR 3.5 billion guidance. We confirm as well the increase of the dividend to EUR 0.72 for this year. Looking ahead to 2024 and 2025, at current perimeter, we confirm our Lead the Future trajectory with an additional step-up in 2024, in particular, with an organic cash flow objective of at least EUR 3.8 billion, thanks to a projected low single-digit EBITDAaL growth and eCAPEX to sales remaining at around 15%. As far as the dividend is concerned, we confirm EUR 0.75 for 2024 payable in 2025 and set the floor for EUR 0.75 for 2025 payable in 2026. Our guidance is always -- as always, is set on a pro forma basis.

In light of the expected closing end of Q1 2024 with -- of the JV in Spain, we provide you here our updated guidance taking into account the future deconsolidation of Orange Spain. Overall, we confirm our global trajectory on EBITDAaL and eCAPEX post deconsolidation of our Spanish business as of 2024. Our organic cash flow will continue to increase at the same pace from EUR 3.18 billion, excluding Orange Spain in 2023, with more than EUR 300 million uplift from 2023 to 2025, leading to at least EUR 3.3 billion in 2024 and EUR 3.5 billion cash generation in 2025.

Finally, our objectives in respect of leverage and dividend are also not impacted by the deconsolidation. Overall, we are definitely confident in our ability to execute our Lead the Future trajectory focused on value generation. Thanks for your attention, and let's now turn to Q&A.

(Operator Instructions)

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

Two questions, please. Can you tell us how you deal with asset assumptions when it comes to the organic cash flow guidance in 2024? Because I'm thinking about exit where EBITDA is at risk if a devaluation of [cues]. So where else do you have buffers to make the guidance happen eventually?

And my second question is on France because I can see a pickup in churn. Now you mentioned that you were best in class in the market. But I was just wondering if it was kind of a turning point in the market dynamics. And also if you were seeing any adjustments or down spinning from clients trying to save on their packages. So more generally, what do you think about your pricing power in France, but also in Europe in 2024.

Yes. Nicolas. So I'll take the first one on the asset. So our OCS guidance is all included, so to say. So we are of course, taking the potential evolution on any currencies and we have anticipated talking about the Egyptian pound, some devaluation in 2024 into these numbers.

And when it comes to your question on France, I will let Jean-François comment.

So on France, I mean, indeed, you've seen a slight churn increase of 1.4 points year-on-year in France. I mean there is no pickup in churn. And again, I mean, we are having the best churn of the market. Obviously, this is linked to our price increasing -- increases, sorry, at the beginning of the year 2023. Let me remind that our NPS is back on track on where it was end of 2022. So I mean there is absolutely no worries on the churn side. And just for you to know, the fixed churn is stable versus 2022. So this is clear that linked to the inflation.

There is obviously linked to the inflation in price -- in France, sorry, and the fact that there is pressure on the purchasing power on the French people, there is an appetite, there is more appetite on eventually low-cost offers. We'll talk about that later, probably, we see some agitation in the low end of the market, but absolutely no down spinning on our side.

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

I've got 2 as well, please, if I can. Firstly, on the new metrics that you've providers with today, obviously, it's helpful color to have. I wondered if you could maybe help us a little bit with how we should think about EPS. You obviously highlighted very strong growth in 2023. EBITDA growth this year based on consensus and what you're guiding to should be better. So I just wondered if you could help us understand, at least at a high level how we think about EPS growth into 2024. Can it be as strong or are there other items we should be thinking about? So that's my first question.

And then the second question was on Spain. I'm just trying to understand a bit better the guidance that you've provided, adjusting for the Spanish transaction. You've provided a EUR 0.5 billion bridge between the inc and ex-Spain. And I guess I was just looking for a little bit of color on how you've worked out that bridge. And the reason I ask is, if I look at my numbers or consensus numbers, it seems that we are modeling just under EUR 0.5 billion of operating cash flow for Spain. And I would have thought with the EUR 4.2 billion of proceeds, there will be some sort of interest income. So I would have thought the bridge would be a bit smaller, maybe EUR 0.4 billion or a bit less. So I just wondered if there's any other items or considerations you baked into that, that we should be thinking about?

And then I guess more generally, there's a very slight delay in the Spanish time line. I don't know if you can comment, but any sort of color you can provide on sort of what the process and what's going would be useful as well.

Thank you. On EPS, obviously, it's difficult to give any colors given the unpredictability of some items below EBIT. But obviously, the -- our objective is to drive up EBITDAaL and that should translate into stronger EPS. So that's -- I don't know if, Laurent, you want to add more to that?

No. The key drivers (inaudible) is definitely the EBITDAaL step-up. And as always, there is always a number of points which are in a way difficult to predict, which is some of the elements below the line in terms of hedging and so forth. But globally, the trend is up driven by EBITDAaL.

And your question regarding Spain and the guidance post deconsolidation, so the way we've defined it is obviously consistent with our organic cash flow generation trend. So our objective is to generate more than EUR 300 million additional cash from 2023 to 2025. And we've just looked at the OCS in Spain and removed the EUR 500 million contribution. So this is a mechanical, I would say, consistent with EBITDAaL minus eCAPEX knowing that Spain is a market where we do not pay taxes, thanks to deferred tax assets.

And maybe I had a point, Akhil, on the proceeds from the EUR 4.2 billion of cash that we are expecting at closing. So that will be a plus in the -- indeed, in terms of our interest cash in. Still, as you know, we are expecting a decrease of interest rates in '24 versus '23, which will be an offset to these tailwinds, an increase...

Great. And then just add any color or comments on the very small deliver we've got in the Spanish process. I don't know if that means anything or not.

You mean the -- moving from 15th of February to 22?

Yes, correct. Exactly.

Because are you asking compared to our initial plan, which was to close the deal in 18 months. So no, I mean for us, first of all, it's -- we've resumed from the stop the clock early December and now the process is ongoing. And if the process takes a few more days, it has no impact. So it's really -- I mean, no comment to make anyway. We wait for the clearance. But as we said, we are confident on the outcome, and we are confident on the closing by the end of Q1.

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

Just 2 questions. Firstly, you're guiding to French -- that you're expecting the French EBITDA will be flat in 2024, which is good to see. Just wondered if you could talk through the puts and the takes that go into that. If you could just talk us through the waterfall from your French EBITDA declines this year into flat for 2024 and what exactly you're anticipating to energy tailwinds in 2024. That would be helpful.

And then just second question, obviously, for us, it's very hard to model and really understand the Orange Business trajectory. You clearly still seeing the turnaround plan in line with expectations. Could you talk to us just about how you anticipate 2024 to bridge the gap between your 15% EBITDA declines in '23 and obviously, stabilization in '25.

Okay. So on the France trajectory, as you've repeated, we want -- we aim at a flat EBITDAaL. On the waterfall, obviously, we have some tailwinds and some headwinds. So we continue to drive efficiencies. On the wholesale market, as you know, we had a front-loaded trajectory on the '23 to '25, but continues to impact our EBITDAaL, though to a lesser extent in '24 compared to '23, thanks, in particular, to the improved pricing on unbundling.

On energy tailwind, as you know, in 2023, we had EUR 200 million impact on energy and for next year, I think we are around EUR 50 million and EUR 80 million on the tailwind that we expect from energy. And there's been many, many, I would say, other smaller items. As you know, we welcomed the Olympics in France in '24, which is somehow a onetime impact for us in the trajectory. So there's a lot of different items.

But overall, the EBITDAaL trajectory is driven by a solid retail services growth according to our guideline from the Capital Market Day between 2% and 4% growth, continued pressure from wholesale, a bit of tailwind on the energy and efficiency plans, which we continue to drive in France, and we have the benefit from the early retirement program where massive -- many employees signed up for it during the course of 2023.

On the Orange Business trajectory, we continue to see an improving trend in 2024. And as -- and you've noticed that H2 2023 was already slightly better than H1. And for the time being, we want to have the decrease. So moving from the minus 15% from 2023 to around minus 8% in -- around, I'd say, but halving in 2024, so on continued progress towards our 2025 objective.

That's really helpful. Can I just check I understood correctly on the energy tailwind. You said EUR 50 million plus EUR 80 million, is that EUR 130 million in total? Or how should I understand that?

I'm not sure I heard the last part of your question, on the energy...

Yes. I couldn't quite understand what exactly the total tailwind from energy was in 2024 in France.

It's in the EUR 50 million range.

Our next question comes from Mr. Roshan Ranjit from Deutsche Bank.

I've got 2, please, focus on France. Because you just highlighted the 2% to 4% ex PSTN retail revenue growth. I guess, we've seen that number come down again this quarter at 3.1%. You guys haven't announced a kind of broad-based price increase for this year. I think you've highlighted more targeted price and we've seen your price increase. I think Jean-François, you mentioned good NPS numbers, churn being controlled. And can you revisit that stance on pricing? And can you -- could we see a wider price increase through the year to see that service revenue growth accelerate again, please?

And secondly, on the CapEx guidance, you've highlighted disciplined eCAPEX. And I guess at your CMD you gave a group number around 15% eCAPEX to sales. Now we've seen some of your peers give a bit more color around the domestic trends. And clearly, fiber rollout in France has come down significantly, 19% last year, eCAPEX to sales 17%. Now where can that go in the longer term for French eCAPEX to sales?

On the market dynamic in France, I will let Jean-François give some more insights.

Yes. Thank you, Christel, Roshan. I mean there is -- indeed, if you compare the growth of Q4 versus Q3, there's a slight decrease from 3.4% within Q3 to 3.1% in Q4. Let me explain you why this is. I mean, I remind that we had a very strong price policy and value policy in 2023. We did 3 things, if you remember, the first one was a price increase over the full base that started in Q1 2023, which obviously is paying off since the half of the Q2 2023, first thing.

The second thing we've done is if you remember well, we have slashed the promotions, which used to be 12 months promotion to 6 months promotion. So this is going to start paying off in 2024. And the first thing we've done is doing some, what I call more for more actions on the base that obviously, you have not seen this is -- because this is rather below the line. We have done that starting Q3 2023. And we're still ongoing with chunks of our customer base doing that. And this is clearly going to pay off in 2024.

Why is there a slight decrease in growth in Q4 is simply because what we see also and that we have commented already in Q3 is really a slowdown of the French market. So if we look at the sum of the net adds, and this is published by Arcep quarter after quarter. We see really the market -- the French market slowing down, probably linked to, as I was saying before, the pressure on the French people linked to inflation and the purchasing power being under pressure. We see the global French market slowing down. So this slight decrease of 3.1% is linked exactly to that because Q4 2022, we had more volumes than we had in Q4 2023. So this is the explanation of this very slight decrease in growth.

But again, I mean, nothing to be worried about because we are really extremely disciplined in our pricing policy in our wish to really create value in the French market.

And on your question regarding eCAPEX and I guess, some guidance of trajectory, it's too early, obviously, to speak post 2025. But as you know, we've passed the peak of fiber rollout. If you look backwards, in France, pre-fiber rollout plan, we had a CapEx ratio of around 14%. Now that being said, when we say we've done the rollout of fiber, we continue to have in our CapEx investments customer fiber connections. And obviously, this is related to converting and monetizing our fiber. So this is something that will continue to be in our CapEx trajectory. And obviously, from 2025, we will work actively on the copper decommissioning until 2030.

So I think if we look for an eCAPEX to sales normative, we have to look beyond 2030 somehow. So really too early to comment, both post '25 and post copper decommissioning. But we are very confident in our -- around 15% CapEx to sales ratio on the long run.

The next question comes from Mr. Mathieu Robilliard from Barclays.

First, I had a question about Spain. Coming back to your guidance of free cash flow, excluding the Spanish business. I was wondering if you were including in that some sort of dividend paid by the JV to the 2 shareholders. And how more generically, would you balance dividend payment against the deleveraging target that you've said when you announced the deal? Because I think at closing, it's going to be around 5x and your goal is to go to something closer to 3.5x. So that's the first question.

Then I had a question about towers. We've heard from some of the players in the French market that the growth in data in mobile had slowed and was probably a bit slower than what they had anticipated a few years ago. And that was having an impact in their need to increase the number of (inaudible) or in other of your geographies. But generically, your outlook for the need for more towers would be very interesting.

Thank you. So on Spain, we -- I mean, we have not included in our OCF guidance, any dividend payment from the JV to Orange to 2025. And when it comes, our priority will be to generate the synergies, and obviously, to make sure that we also deleverage the joint venture. As you know, we have the option to reconsolidate the JV in the future, and that's why we are -- we'll be focused on this. So no dividend payout in the guidance in our organic cash flow trajectory.

On towers, I won't comment on what others have said, but we have -- we continue to invest in densifying our networks. But obviously, this is also through software and rollout of 5G and covering rural areas. So at least for us, we have not changed the trajectory of our rollout plan in France. And our focus, if it comes to our TOTEM TowerCo continues to be to increase the tenancy ratio, which has increased and we have a revenue increase of plus -- I don't -- well, I think you have it plus above 0.5% or 1% revenue increase for TOTEM. You see that we haven't commented directly on the call, but you have the details in the documents. But no change in the way we rollout.

Okay. And if I can follow-up on that is that the investments you're making in France is essentially for rural coverage as opposed to densification. And what are you seeing in other countries. And if I can come back to Spain. You have said in the past that the cash you are expected to receive when the deal closes, you would keep it because precisely, you want to have the flexibility to reconsolidate Spain eventually 1 day. And I just wanted to make sure (inaudible) cash in your balance sheet to have flexibility?

So yes, you're right. When it comes to adding new sites -- mobile sites, it's mainly for coverage in rural areas in France and probably the same as well in -- across Europe. And then your question on Spain and the EUR 4.2 billion cash upstream from the transaction, indeed, as we've said in the past, we'll take these proceeds on our balance sheet to keep the flexibility that we need to be able to reconsolidate in the future, the JV.

Our next question comes from Mr. Jakob Bluestone from Exane BNP.

I just had a question about buying fiber assets. I saw there was some press reports saying that you passed on TDF's fiber assets in France, and I appreciate you can't comment on that specifically. But just be interested in understanding a little bit more broadly, do you think there is an opportunity for you guys to acquire fiber assets in France? And if so, what do you think would be important for you to make those kind of acquisitions? What are the criteria that you would be looking at for that to sort of be consistent with your strategy?

Thank you. So I mean, as you know, in France, we already own 60% -- I mean, 50% directly on our balance sheet and then 10% to all concession, JV for rural areas. So we already own 60% of the fiber infrastructure, and we continue to roll out fiber, obviously, to densify, so on the TDF transaction, but I would say, generally speaking, as always, regarding M&A, we are always actively looking at opportunities, but always with an objective that creates value at group level. And so in the case of TDF, combining, I mean, the existing business and the impact it could have on the group, we decided to stop the discussion, and I believe they are now continuing with other parties on their fiber divestment.

Our next question comes from Mr. Georgios from Citi.

I just wanted to focus a bit on the OpEx drivers for the next 3 years. I think you mentioned earlier that you expected a EUR 50 million improvement in energy cost in '24. I was wondering if you can give us perhaps some early indications of (inaudible). And also as you show in your slide for the efficiency target, you've already made a lot of progress in year round. If you could perhaps give us a bit of an update on what you are factoring into your guidance for 2024. So if you think there could be potentially some upside to those targets when the 3-year period is complete?

And then I just wanted one further clarification about Spain. You mentioned earlier the fact that some of the interest benefits you have from the EUR 4 plus billion of proceeds will offset a broader rise in interest costs you would have had anyway, but I still struggle to reconcile why that wouldn't be already reflected in your guidance before the deconsolidation of Spain. So the difference between the 2 not being lower, something I just wanted to check with you again.

Yes. Thank you. So on the OpEx drivers and especially our efficiency plan, as we've said, we've already achieved 50% of our objective with EUR 300 million, and we are confident, and we reconfirm our objective for 2025, EUR 600 million. Obviously, in an environment that continues to have inflation. So we will continue to work. Obviously, we have the benefit of the early retirement plan in France, but we are also actively driving efficiency to sourcing through our network OpEx, IT, real estate. So everything is looked at and it's difficult to give you more colors, but at this stage, we don't give, I would say -- I don't know if there's upside to the EUR 600 million, but we are already working hard on delivering this EUR 600 million.

On the EUR 4.2 billion proceeds from Spain and the -- I don't think we've said there's any upside coming from the interest rates. I think it was a question that Laurent, I don't know if you want to confirm?

Just to confirm, in bold terms, the message is that we are broadly stable in terms of financial interest for '24 versus '23. On the upside, we will have indeed the proceeds in terms of interest coming from the EUR 4 billion. But you need to bear in mind as well that the interest rate will decrease from around 4% in terms of what we get when we are placing our liquidity to around 2.8% in '24. So there will be less positive interest coming from our liquidity placement from '24 to '23. So all of that is broadly balancing and all of that is part of our global guidance in 2024.

Okay. And on energy, (inaudible) '25.

I don't think we have any detail. As you know, we have a secured policy on energy, where we kept or we -- how do you say that? We hedge the pricing for energy in advance. So I think as of today, we probably hedged already more than 50% of our energy consumption for 2025, but we continue obviously to look at the market dynamics. And just to give you some colors in -- we actually have more than 75% that have already been directly hedged for 2025 and we see obviously a price that we expect to continue. I mean, the peak was 2023, 2024, we are reducing, and we commented the EUR 50 million headwind impact for -- tailwind impact for France. 2025, we have a lower price as well, so that will benefit and fuel our trajectory as well.

Our next question comes from Mr. Stéphane Beyazian from ODDO.

Yes. Two questions, if I may. The first one is regarding Africa, the trends are pretty strong, very strong, actually. Is there anything you could say about 2024, do you believe that there might be a little bit of softening, obviously, looking at where we are coming from. Any update on some anti-French sentiment that we have seen in a couple of countries or any factor that we need to take into account when we model 2024 from Africa.

And my second question is regarding France. On the Internet access, you're still losing some customers since you raised some prices. And we've seen 1 competitor launching an interesting box with a lot of content included in their product. So I was wondering are you satisfied with the trends that you're currently seeing on your French Internet access?

Do you actually see the market perhaps becoming a little more competitive. Can you mute your prices? Or should we expect that now it's going to be more difficult looking at your commercial trends and some of the products in the market.

Thank you, Stéphane. So on Africa, and I'll let Jerome comment on the environment and especially regarding French sentiment. But we reconfirm strong performance of -- and you've seen the results in 2023 from Middle East and Africa. And for 2024, we aim at the high single-digit trajectory for Middle East and Africa. So we absolutely continue to perform with this business unit. Jerome, on the environment?

Yes. Thank you, Christel. Thank you for your question. Well, you know our business is very resilient towards geopolitical situation in general in Africa and the Middle East and everywhere else. There is no direct correlation between what you call the French bashing in some countries and the operational results that we have in the West African countries. On the contrary, we see a very great performance higher than the average in those countries for the time being.

And when it comes to France, I mean, we still -- yes, indeed, we have a slight decrease of net adds for broadband. But if -- I mean that's very small compared to our total broadband base. And we monitor, obviously, what the competition is doing, and I will let Jean-François comment further. But the first thing we have to notice from the last free announcement was an increase of their broadband prices as well. Jean-François?

Just to add on what Christel was just saying, I mean on the minus 30,000 that you are probably referring to in terms of the Q4 evolution of our broadband base. Let me remind that we have added 264,000 new fiber customers, so net adds. So this is quite massive. And these numbers indeed are to be compared to a base of 12.3 million broadband customers in France. So we are pretty confident. And the reason of that is what I was saying before is we really see a slowdown on the French market, both on mobile and fixed. So as the ones having the bigger base, this is explaining the slight decrease in Q4.

As concerned the launch of the new box of our new competitor, we see it actually rather as a good value signal because you have probably noticed that they are introducing a price point at EUR 60 per month, so -- which we see as positive. Obviously, we will monitor closely the situation. And in terms of content, first, there is no news because we are offering for years all this content. I mean what we've just seen is kind of all-you-can-eat approach from them, whether we do have an a la carte approach again for many years. So here as well, we are pretty confident, and we are watching out the development in the upcoming months.

And regarding pricing, that any indication on what you could be doing in 2024.

Same strategy -- value strategy. We will be extremely, extremely cautious on our pricing strategy, trying to -- not trying to, but achieving like we did last year, an increase of value of our customer base -- we'll be very disciplined.

Our next question comes from Mr. Javier Borrachero from Kepler Cheuvreux.

May I come back to your guidance, please, to 2024, 2025. Now if I look at your EBITDA guidance, this low single digit, if I take consensus expectations of around, say, 2% growth, that is a delta of, say, 300 ex-Spain, maybe 400 with Spain, now how should we reconcile this with the delta in the organic cash flow, which is growth below 200. I mean you mentioned relatively stable financial charges, maybe a little more of taxes. But I mean in terms of CapEx, shall we then think about an increase in absolute CapEx in 2024 and 2025.

So the CapEx remains unchanged. The guidance with or without Spain remains unchanged. And as we said, we are very committed and comfortable with around 15% eCAPEX to sales ratio. So this is true pre or post deconsolidation of Orange Spain. And then on the cash flow, organic cash flow guidance, as we said, it's -- we've taken a mechanical approach and reconfirm our cash flow improvement with or without Orange Spain. I don't know if Laurent want to add.

No, I think that -- our OCS is up -- will be up basically in line with EBITDAaL. CapEx will be roughly flat in '24, and then there is always some very limited plus and minus in terms of DSL, working capital or tax. But globally, the main drivers will be in terms of OCS will be EBITDAaL.

Our next question comes from Mr. Titus Krahn from Bank of America.

You had just 2 small questions from my side. First of all, on your new metric, all-in free cash flow, really appreciated the focus on that one. Just could you give any color on those items below organic cash flow? Is it safe to assume they could be largely stable in 2024 compared to 2023 when we look at that number?

And the second question, just a small follow-up on your remaining fiber rollout on balance sheet left in France. Could you just remind us how many households are still to be covered in the next 2 years for you?

So on the all-in free cash flow, I mean, as we've said, what -- between organic cash flow and all-in free cash flow, there is a spectrum license payments, there is litigation, which is highly unpredictable, I would say, and coupon payments. So on spectrum -- so that's why we don't give a guidance on free cash flow all-in, and we are very committed to our organic cash flow guidance because license payment, we had Poland in 2023. We have a few 5G licenses coming in Middle East and Africa.

We had some as well in 2023. But it's difficult to predict the pace and we don't want to -- and obviously, this is an investment for the future. So we don't give any guidance, but we want -- our message is, obviously, that we are very focused on this KPI.

When it comes to fiber rollout in France, we continue to rollout fiber and all the commitments that we have with weather in the mid-dense areas where we have commitments that have been reconfirmed with the government recently in the regulator or in the rural areas, which are done through Orange Concession, all of this is included in our eCAPEX guidance. Today, in France, there's 88% homes connectable through fiber. So that's only 12% left. Then depending on dense areas, rural areas or mid-dense areas, the objective will be to increase. But again, this is all included in our CapEx guidance.

Okay. And yes, on the free cash flow, just helpful to see there's nothing specific to flag.

(Operator Instructions)

Our next question comes from Mr. Nick Lyall from Societe Generale.

A couple of questions on France, if that's okay. You seem very confident about the ERP, and obviously, the staff costs were down about EUR 150 million year-on-year. So could you just maybe give us a bit of an update on the timing of any salary rises, please? And you seem reasonably confident on the wage settlement. Is that a fair assumption given your comments about the ERP overall?

And then secondly, on wholesale, apologies if this was answered earlier, I missed the very start of the call, but minus 11% on wholesale in France in the fourth quarter seemed a bit tough, especially given the comments on things expected to improve with the price rises into 2024. Could you just explain why wholesale was so weak? And are you still confident about a rebound overall on the revenue trends, please, into next year?

So on the salary rise, we are -- the negotiations with our workers' unions are ongoing in France, but -- and it will pick up in its April 1, the salary rise increase, but it's something that every year, it's the same. So it's -- there's no peak. And we do anticipate a lower salary rise in 2024 than what we had in 2023. And it's anticipated to be lower than the rate of inflation.

On the wholesale dynamic, first, I mean, the increase in unbundling prices will only kick off as of Q2 2024. So it's not in our Q4 numbers for France. So that's why you've seen this -- I mean, as we said, wholesale impact continues to be negative overall in France, but to a lesser extent in '24 compared to '23.

I'm sorry, that dip off in the fourth quarter, Christel, in the wholesale numbers. I think you went from sort of minus 7% or so minus 8% or to minus 11%. There's nothing in that we should be concerned about in terms of volume trends or anything else that's hitting because wholesale has been quite a drag for quite a while now.

No, I don't -- there is no -- nothing that would be -- so there's maybe a onetime and maybe it's on some rural areas or I don't know, but there's nothing that would set a tougher line for '24 compared to '23, overall the year 2023 was at minus 8.5% on wholesale. And you see -- and we are confident that obviously, it will continue to decrease, as I said, in '24, but we have the benefit from the new unbundling and civil engineering tariffs.

Our final question today comes from Mr. Fernando Cordero from Banco Santander.

Both questions are coming from one about Spain. And the first one is related with your 2 key priorities, first on materializing the synergies that you have announced to the market in that sense, I just would like to understand what kind of OpEx and CapEx and costs are you expecting order to materialize this EUR 450 million synergies run rate?

And the second question is you have already announced an agreement with the challenger regarding the potential remedies on this deal. And just to understand a little bit how is the mechanics of the roaming agreement that you have already agreed with the figures possible.

Thank you. So on the synergies, we are indeed reconfirming the EUR 450 million annual synergies after year 4. And it's mainly on OpEx. And then when it comes to CapEx, obviously, we will -- the benefit of the JV will be to have a larger customer base, and we will continue to make investments. Too early to comment on what the CapEx would be, but there's obviously a lot of network synergies because, as you know, Masmovil is massively using our mobile networks, but there's also some overlaps. So these are synergies that we will tap into.

We have, obviously, as usual, sales and marketing synergies and then there's many other synergies on the management position, but the teams are very, very confident. And as we said, we reconfirm the focus on those synergies.

When it comes to the roaming agreement and potential remedies, it's too early to comment. But indeed, there is this, I would say, so-called optional roaming agreement possibly for the JV with DIGI, but we will not make any further comments. The only thing I would say is that it's a market price roaming agreement. And as you know, today, DIGI is using Telefonica for its -- as roaming with roaming agreement.

Okay. It looks we have no further questions. I'll pass the line back to Ms. Christel for her concluding remarks.

Thank you. So to wrap up this session, let me reconfirm to you our very strong confidence to keep on improving profitability in France and turning around our Orange Business confidence as well to maintain a very strict management of cost and OpEx and secured a very strong ramp-up in our cash flow aggregates and the value creation KPIs. Thank you all, and I look forward to seeing you on the road.

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