Orange SA (ORAN) 2020 Q4 法說會逐字稿

Good morning, and welcome to our full year 2020 results presentation. Today, we will also talk about our cost efficiency program and our infrastructure policy with a focus on our European TowerCo, TOTEM, as part of the ongoing group transformation. First, I will cover the main 2020 highlights, and then I'll leave the floor to Ramon, who will go through the details of our results and our cost efficiency program. We will have a separate session on the TowerCo.

Let's start with Slide 4, which presents the key messages of the year. Let me bring your attention to our Q4 key messages. Firstly, we had excellent commercial performance with a record of FTTH Conquest in France and the best FTTH Conquest for the last 2 years in Europe, while pursuing the recovery in Spain, which started last summer.

Secondly, Middle East and Africa shows a very strong top line growth, above 8%, while France, despite COVID headwinds, show slightly positive top line. The main disappointment remains Spain, down around 9%, but under turnaround. Enterprise shows a strong swing in IT&IS, close to up 6%. And Cyberdefense with European leadership post 11% revenue growth year-on-year. Our strategic plan, execution and transformation is also well on track accelerating our EUR 1 billion net saving program, including headcount evolution in France.

All in all, when wrapping up our full year performance, we achieved all guidance elements, including a turnaround of organic cash flow, up to EUR 2.5 billion in 2020 versus more than EUR 2.3 billion guidance with a strong balance sheet reinforced by the EUR 2.2 billion tax refund following a long-standing procedure. As a result of our excellent commercial performance this quarter and more generally, this year, we now serve more than 11 million convergent customers and more than 9 million FTTH customers out of 47 million connectable homes.

Our very high broadband customer base is up 24%, notably thanks to France and Poland, both of which posted the highest ever quarter for FTTH net adds. Orange remains the indisputed #1 FTTH player in Europe.

In mobile, 5G offers are now available in 5 countries with a strong appetite for 5G smartphones. Also we were ranked the best mobile network in France for the tenth consecutive year by ARCEP. In Africa, Middle East, we reached almost EUR 2 billion of EBITDAaL, up 10% in 2020 and even 18% over the last 2 years. And for the first time, Orange Money crossed for the EUR 500 million revenue threshold.

Orange Bank Africa is already a success. It was launched in Ivory Coast 5 months ago and already serves more than 350,000 customers. Last but not least, during this critical period, our Net Promoter Score is up. We are #1 in France, and the enterprise segment reached a new high. This demonstrates the resilience of our network and the success of our focus on customer experience.

Now let me recall that our new infrastructure strategy is based on 3 key pillars. Firstly, finding the smartest way to finance deployment, which depends on the asset class considered; secondly, capturing growth, thanks to optimized network management; and thirdly, managing some of our infrastructure as an independent class of assets when we consider it would create more value than if we kept it under the umbrella of the MNOs.

On the fiber front, we are moving ahead, (technical difficulty) awarded FTTH lines. This platform is set for exceptional growth through a long-term partnership with the sale of a 50% co-controlling stake to a high-profile financial partners consortium, which have an extensive track record in infrastructure management. This transaction was negotiated with very attractive economic terms and conditions with an EV selling price of EUR 600 per line, revealing Orange's total infrastructure value, including full ownership in private areas. Secondly, in Poland, we are making quick progress with the creation of a FiberCo targeting 2.4 million households with a signing target before the end of H1 '21.

Turning to Slide 7. The top line proved our resilience despite the crisis by growing slightly at 0.3% over the year, including Q4 down by 0.2%. The group's EBITDAaL declined by 1% in 2020 with a minus 2.3% year-on-year in Q4. The solid performance in MEA and other European countries mitigates the loss on roaming revenues and costs directly linked to the crisis. eCapex decreased by 1.7%, matching EBITDAaL decline. This decrease, despite a strong acceleration of FTTH rollout in France, is mainly due to cofinancing offset plus our discipline.

To conclude on key financials, organic cash flow 2020 reached EUR 2.5 million despite COVID, reversing the downward trend we saw over the past 10 years. Our social responsibility commitments were structured under the grid of 6 United Nations Sustainable Development Goals. We have defined measurable KPIs to monitor our progress toward a more sustainable, inclusive and responsible 2025. At the end of 2020, for instance, we were able to decrease our CO2 emissions by 12% compared to 2015 despite exponential usages, and we have pursued our actions to support digital inclusion.

The last word to illustrate the group's commitment to several solidarity actions during the crisis. We supported our suppliers by providing immediate payments of more than 200,000 invoices, representing a cumulative amount of more than EUR 800 million.

After this overview of our achievements, I'd like to now hand over the floor to Ramon.

Thank you, Stéphane. Good morning. So turning to group revenues. In 2020, they were up slightly by 0.3% with Q4 revenues slightly eroding at minus 0.2%. In 2020, both France, up 1.6%; and Middle East, Africa, up 5.2%, we were able to offset the drop in both Europe, down by 3.5%, of which Spain down by 5.9% and enterprise down by 1.4%.

From an activity perspective, and despite the COVID context, convergent services kept growing, up by 2.1% for 2020, while mobile and fixed-only services were down by 0.9% and 2.1%, respectively. IT&IS regained traction in Q4, up by 7.4% to close the year up by 4.1% and wholesale up 4.4%, benefiting from FTTH cofinancing in France. As a result of shop closures, equipment sales deteriorated at minus 9.5%.

Turning to EBITDAaL for telecom activities. The 2020 decrease was limited to 1% year-on-year. This is EUR 131 million. In terms of segments, MEA grew by a very strong plus 10%, and other European countries posted solid growth of 2.3%, followed by good resilience from France, slightly positive at 0.2%. Spain and our Orange Business Services recorded an EBITDAaL decline, impacted by market conditions and the COVID crisis.

In this unprecedented year, we had some exceptional impacts on EBITDAaL. Firstly, we registered EUR 253 million costs in EBITDAaL directly linked to COVID. We booked EUR 144 million in bad debts and nearly EUR 109 million related to sanitary costs. Secondly, we registered EUR 292 million in EBITDAaL linked to the losses on roaming related to much less traveling. This performance led to a consolidated net income of EUR 5.1 billion that grew roughly 57% or plus EUR 1.8 billion, which includes plus EUR 2.2 billion of the tax refund.

In 2020, as Stéphane said, the organic cash flow reached EUR 2.5 billion, well in line -- very well in line with our guidance of more than EUR 2.3 billion, reversing the trend of the past 10 years with an increase of EUR 150 million versus 2019. At the end of the year, net debt reached EUR 23.5 billion. Our net debt-to-EBITDAaL ratio stands at 1.83, with an average maturity of Orange SA bonds of 8.6 years and an average cost of gross debt of 3.18%. Our strong liquidity position of EUR 17.2 billion at the end of 2020 includes EUR 11.1 billion in cash.

So let's now take a look at our business review, and we'll start with France. This is Slide 15. Total Q4 revenues grew by 0.2%, driven by FTTH cofinancing and construction in PIN areas. The growth of core retail services, excluding digital content offers, more than offsets the decline on PSTN and roaming.

Let's analyze our underlying performance over the quarter, excluding digital content offers. The most relevant KPI to compare performance with our peers is retail services revenues, excluding PSTN, which grew by 2.4% in Q4, driven by convergence and fiber. This year is also witness to a major shift as retail services, including PSTN, were positive year-on-year in 2020.

EBITDAaL grew by 0.2% or plus 1%, excluding digital content offers. This growth was possible despite costs directly related to the crisis and the decrease of roaming. Thanks to our proactive approach contributing to a better price environment. We are also reaping the benefits of strong investments in fiber, both through wholesale and retail activities.

For the year 2020, eCapex is down by 7.5% under the effect of co-financing, whereas we have accelerated fiber rollout to reach 22.9 million connectable homes, showing an increase of more than 40% compared to 2019.

Now let's take a look at our commercial performance. Leveraging on our network premium and our #1 position in terms of Net Promoter Score, we reinforced our leadership position. As such, on mobile, we were ranked the best mobile network for the tenth year in a row by the French regulator, and we delivered a very solid Q4 performance with 87,000 net adds.

Looking at fixed, we hit a new record of fiber net adds in Q4 with 388,000 fueling broadband net adds at plus 105,000. Importantly, 52% of FTTH new customers are new customers for the group, further strengthening our leadership position with 4.5 million fiber customers.

Let's now turn to Europe. Commercial performance continued to improve, thanks to successfully deployed end of the year campaigns. Fixed broadband net adds of 147,000 were supported by the best Q4 over 2 years in fiber with 175,000 net adds.

Also mobile net ads reached 317,000 in Q4. However, total Q4 revenues remain under pressure at minus 4.3%, driven by equipment down by 6.2% and retail service revenues down by 4.2% linked to the situation in Spain.

Regarding profitability, full year EBITDAaL is down by 5.8%, impacted by Spain and roaming with the latter representing 50% of the decline. Excluding Spain, revenues declined by 1.4%. However, we managed to keep EBITDAaL growing at 2.3% and even 5.3%, excluding roaming. Thanks to convergence, ICT and a strict mitigation plan.

The performance in both Poland and Belgium was great. Let's now take a closer look at Spain, where we have a clear action plan to solve the situation. Our commercial recovery is accelerating in Q4. Thanks to the repositioning of our mainstream offers, which are now more competitive and more active in the low-end segment. This will feed into a better financial performance. But for now, financials are still impacted by past volume losses, roaming drop and ARPU dilution following recent marketing moves. As a result, Q4 total revenue decreased by 8.8% (technical difficulty) achieve this goal, such as simplification, further cost reductions, digitalization of the operational model and then accelerating on the B2B activity.

The next slide is showing the strong success of Africa and Middle East, with revenues up by 8.3% and retail services up by 10.5%, increasing -- increasingly fueled by the growth cash engines of Africa, Middle East. Data, reaching 33 million 4G customers, with revenues up by 23%. Orange Money, we have an active customer base up by 20%, delivering more than EUR 500 million in revenues in 2020, fixed broadband with 1.7 million customers and revenues up by 36%. And finally, B2B with an exceptional 13.5% growth in Q4. Thanks to ICT services, mobile data and fixed broadband. The mobile customer base increased by 5% in 2020 to reach 128 million customers.

All these moves contribute to a growing profitable contribution to the group, and we managed to grow EBITDAaL in 2020 by 10%, and we increased the margin by 1.5 points. Thanks to our capacity to adapt the business and operating model by improving both direct and indirect margins. EBITDAaL in Africa, Middle East has grown by more than 18% since 2018.

Let's now look at the enterprise segment, with revenues down by 1.2% in Q4, an improvement compared to previous quarters. Thanks to a strong recovery in IT&IS, up by 5.6%, which now represents close to 40% of total revenues. Cyberdefense grew by 9%, cloud by 6%, of which cloud service revenues growing by 15%. Mobile down 7.9% in Q4, is still impacted by roaming. Voice came back to its usual legacy declining trend at minus 6%. And finally, data at minus 4.8% in Q4 accelerated its drop dragged by Globecast. Around 2/3 of the EBITDAaL drop at minus 14.9% can be explained by COVID impacts. Despite these largely COVID-driven figures, we are increasingly recognized as a trusted and global network native digital service partner, and this is illustrated by our NPS, reaching its highest level in both French large accounts and international business divisions.

The next 4 slides are dedicated to our net cost savings program. In 2020, we started to execute a new transformation plan called Scale Up to deliver net cost savings of EUR 1 billion by 2023 from an indirect cost base of EUR 13.8 billion in 2019 out of EUR 17.8 billion of the total indirect cost base. As already explained, we decided to exclude indirect costs in areas with strong top line growth, namely in Middle East, Africa linked to the strong top line and EBITDAaL margin growth and in enterprise IT&IS, a growing business, which is rather labor-intensive, increasing our cost base even if it is later rebuilt to customers.

You have here 2 charts illustrating the breakdown of this indirect cost base of EUR 13.8 billion. In the first chart, organized by nature, you see that half of the cost base is labor costs. If we include real estate and G&A, it is 2/3 of the cost base. In the second chart, organized by segments, you see that nearly 2/3 of the Scale Up focus area is in France. Thus, we are going to focus most of our efforts on those 2 large groups, labor and France, even though our cost discipline will apply to all our activities worldwide.

Let me highlight that the Scale Up program has been built on 3 dimensions, 20 initiatives across the whole organization, driven by ExCom members, clear objectives given by country on one hand and by corporate functions on the other hand, committing each CEO and Corporate Executive Vice President to the program and clear objectives on a cost type basis. Today, we are going to briefly concentrate on people, transformation, real estate and RPA programs. But on this slide, you can see other key levers that will help us push down costs.

Slide 24 presents 3 major initiatives at the heart of our Scale Up program. First, around people transformation. Over the past decade, evolution of headcount and skills has always been a key topic for Orange. In the coming years, we will continue to address this question as we did in previous years by engaging in a consensual and transparent dialogue with employee representatives. Bear in mind that from 2015 to 2019, head count has decreased by more than 3,000 net per year in France, adding up to net savings of more than EUR 500 million run rate in labor costs at the end of the period.

The same evolution of EUR 500 million is planned over the coming years, pursuing optimization and rationalization efforts mainly in headquarters activities and support functions. We are starting discussions with employee representatives and become more significant starting in 2022. Secondly, real estate. Our second important savings initiative into the Scale Up program concerns real estate with savings around (technical difficulty) more flex office and desk sharing as seen with Bridge, our new headquarters starting in mid-2021.

We will continue selling under-occupied buildings as we have done with some buildings sold in 2020, especially in Paris. Also we will renegotiate lease by lease wherever possible. Lastly with RPAs. 12 countries within the group have already launched their RPA plan and more than 2,000 robots are already active at Orange locations across the globe. Nearly 900 robots in Poland, 500 in Spain, more than 300 in France. In Spain, RPA proved to deliver an immediate return of EUR 3.8 gain for every EUR 1 invested. Without taking into account productivity gains on our internal workforce, we estimate that the RPA strategy should deliver close to EUR 60 million gains between now and 2023.

To conclude on this topic, we will accelerate year-over-year to deliver EUR 1 billion of net savings by 2023, keeping in mind that actions initiated in 2020 and 2021 will generate full savings at the end of the 2023 period. We will give you more details on people transformation during our H1 2021 results.

Now let's take a look at our guidance before handing back over to Stéphane for the conclusion. In 2020, we reached EUR 2.5 billion of organic cash flow, with an increase of more than 6%, and therefore, as already said, above the guidance threshold of more than EUR 2.3 billion. That's 4% and the target above EUR 2.6 billion. Now let's take a look at the tax allocation proceeds. On the next slide, as Stéphane said, these proceeds will allow us to invest in value-accretive projects, especially FTTH co-financing on third-party networks in France and supporting the strong growth in Middle East, Africa, both generating an investment rate of return between 15% and 20%.

In addition, it will enable us to accelerate our transformation plan, increase employee participation in shareholding thus reinforcing our staff commitment to the Orange equity story. Furthermore, the buyout of Orange Belgium will reduce dividend leakage. And lastly, you will notice that some items do not impact the organic cash flow, notably the EUR 0.20 dividend and Orange Belgium share purchase.

Let's have a look at our guidance. It may look complicated because we chose to give you all the facts, but it is in fact very simple. First of all, I'd like to strip out the tax refund allocation effects in 2021 in order to fully reflect our expected operational performance in 2021. EBITDAaL will grow around 1%.

That said, I will give you our guidance in line with the reported numbers, including the tax refund allocation effects. Firstly, we are targeting a 2021 EBITDAaL around flat minus, following the use of a tax refund for an employee shareholder plan and CSR projects. Secondly, eCapex level will be between EUR 7.6 billion and EUR 7.7 billion, totally in line with our prior guidance of between EUR 14.7 billion and EUR 14.8 billion for 2020, 2021. Thirdly, organic cash flow for '21 is above EUR 2.2 billion. Our target net debt-to-EBITDAaL ratio remains unchanged at around 2x in the medium term. And finally, in regards to the 2021 dividend, we will propose to maintain a EUR 0.70 level while paying (technical difficulty) tax refund.

Now I will hand the floor over to Stéphane, who will conclude the presentation.

Thank you, Ramon. So before opening the floor to questions, I'd like to reiterate our organic cash flow guidance for 2023. (technical difficulty) in 2023 supported by the EUR 1 billion cost savings program and the decrease on eCapex as the bulk of FTTH rollout will be completed in our 3 main countries, France, Spain and Poland. Furthermore, moving ahead with the group's transformation, reinforces our (technical difficulty) management will be aligned on this call.

So this concludes the first part of our presentation. Let's open now the floor to questions related to our 2020 results. And then we will continue the presentation for 30 minutes, focus on our European TowerCo. We have made strong progress in the creation of our European TowerCo, TOTEM. And now -- yes. Okay. So we stop there and open the Q&A session.

(Operator Instructions) Our first question is coming from Nayab Amjad from Citi.

So you guided for EBITDAaL a flat to negative for 2021. Within this, can you be more specific regarding the guidance for France, Spain and enterprise? And more specifically, when should we expect Spain and enterprise return to growth now? And the second question is, can you guide us how much of the EUR 1 billion cost savings is included in the midterm free cash flow guidance of EUR 3.50 billion to 4 billion? Previously, I believe this was around EUR 150 million. Has this changed since then?

Ramon?

So regarding your first question, we are not giving, as you know, specifics for different entities. But I can say 2 things about Spain and Orange Business Services. And we also have with us today, Helmut Reisinger and Jean-François Fallacher. But in terms of Spain, as said, it's going to take some time before the improvement in the commercial performance is going to feed into the financials. And so we expect this will happen in 2022, not in 2021, even though by the end of the year we should start to see the improvement.

So for Spain, let's look at 2022 to expect a positive figure for EBITDAaL with a better situation in the end of 2021. If we look at Orange Business Services, we said for quite a while, and this has not changed, that we should see a positive trend at the end of the year. At the end of the year meaning that in the end of the year, we should look to a positive figure. And this is a perspective for OBS, which, as we said, has been impacted in 2020 by COVID, which explains 2/3 of the decrease of EBITDAaL for the year. So this is the situation for these 2 entities. And once again, we are quite comfortable with the 1% increase in EBITDAaL expected for the group in 2021 before the impact of the shareholder employee plan, which will have an impact, one-shot impact in 2021.

Looking at the way the Scale Up program is embarked into the guidance of organic cash between EUR 3.5 billion and EUR 4 billion for 2023, and as Stéphane said, we are very comfortable with this target and looking at the higher end of the (technical difficulty) savings that we are looking at in terms of employee costs. And so this is why we are extremely confident to reach this target despite the impact of COVID, which has been shaking a number of industries and sectors, and we are managing this through with results you are seeing here.

So when you look at labor, when you look at real estate, when you look at RPAs, when you look at G&A, et cetera, all what we described, this is obviously going to support the organic cash target for 2023.

Let me maybe add just a few (technical difficulty) EUR 3.50 billion to EUR 4 billion of organic cash flow. My feeling is that the markets didn't really buy that and was skeptical about our capacity to really reach those figures. And probably the best evidence of this is the current stock price.

Now what we think we can tell you this morning, and this is very important, is that given the trends of the business in 2020. And after a 2021 year, which will be still on the same positive trend despite some 1-shot effects linked to the tax refund and the Spanish situation, which is recovering, but everyone realizes that it will take time before translating into a financial recovery, the financial -- the commercial recovery that we see today. So this is the business trends.

And then we have the saving programs that we decided 1 year ago to transform into a commitment. And all those elements make us now very confident, very firm, very robust in this target of generating EUR 3.5 to EUR 4 billion of organic cash flow in 2023, clearly aiming the upper range, the upper points of this range. And in fact, what we are saying this morning is that we are giving to you a full set of elements, I mean, the business, the transformation plan, the infrastructure projects that we will detail further this morning that too, in my opinion, should give you a full confidence in our capacity of this company and the management, which will be incentivized on this particular target to generate EUR 4 billion of cash flow in 2023, which will be a historical turnaround, in fact, in the past decades of the company.

We will now take our next question from Akhil Dattani from JPMorgan.

I've got a couple of questions on Spain, please. The first is, you talked about the turnaround plans for 2021 and 2022. I guess I just wanted to elaborate a bit on exactly what you're doing commercially. You've talked about becoming more competitive to the low end. But if I look at your plans, it would also seem that you're taking action plans to become also more competitive at the higher end. So if you can maybe just give us some sense as to how different segments are being prioritized? And also, what does that then mean in terms of the shape of that recovery? Any color in terms of sort of what the EBITDA decline in 2021 might be would be very useful.

And then the second question is in regards to the Spanish consolidation. There's obviously been a lot of speculation around this in recent months. Obviously, I'm interested in any comments or thoughts you might have on that topic. But one of the related things that often comes up is to try and understand if there were a deal between Vodafone and MÁSMÓVIL or how we should think about the potential impact on your wholesale business? So any sort of color on exposure and impact would be interesting, too.

All right. Thank you for your question. So I will first ask Jean-François Fallacher, who is with us on this call to give you some materials on the business and commercial trends, and I'll try to say a few words on your second question on the market consolidation. Jean-François, go ahead.

Thank you very much, Stéphane. Thank you very much for the question on Spain. So a little bit of history on the Spanish market and on the Orange performance. If you look at the year 2020, actually, the beginning of the year has been very tough the first semester for Orange overall. I mean we have lost hundreds of Ks of customers, both in fixed broadband and mobile to the competition. There is one reason for that is that I think our prices were a bit deposition in the market. So my predecessor, which obviously, I respect very much the work has decided to really stay strong on the pricing, and the situation was that basically, we were a bit out of the market.

So what happened during the summer is that Orange Spain team decided to reposition actually all our brands and back in the market. I have to insist on 1 thing is that because I've read in some reports of analysts that we were very aggressive and we were changing prices. This is not the case. I think there has been 1 repositioning of the Orange offers of the (inaudible) offers and our low-cost brands, which happened during the summer. And that fortunately brought us back in the market. And you have seen actually the commercial results in Q3 and Q4. They've been positive again and growing. Q4 is also, as you know, in our business, an important quarter so that explains this growth. So that's what happened.

If I give you even more color on what's happening inside, I would say, this commercial performance, if we look at the main brand, Orange, we're still slightly negative despite this repositioning. I mean, showing that we are very cautious with the value. I mean, we've been bringing Orange back in the market but very cautiously. So there is no, let's say, aggressive move, I mean, knowing what's happening on the Spanish market and that we are the strong number 2, obviously. The least thing we want is to fuel any kind of price war. So that's what has commercially happened. And obviously, this is good news because in our business, the first thing you need to do, obviously, is not to lose customers. So we have stopped the (inaudible) that we saw actually in 2019 and in the first semester 2020 by getting back in the market in terms of pricing strategy.

And then I give back the floor to Stéphane to get back to you on the Spanish market consolidation.

Well, on the Spanish market as a whole, I would say, if today, you have rumors of consolidation, it is because the whole market is suffering. I would say everyone, more or less, is suffering. There are too many players. The infrastructure access is too easy. And in fact, the whole market is pushed down into, let's say, sort of low-cost market. So for sure, the Spanish market is today one of the most challenging markets in Europe.

So is there some room for consolidation? Yes, for sure. Will Orange take advantage of any sort of consolidation? Yes, for sure. When you have a consolidation, in-market consolidation, everyone, in fact, is benefiting from that. So of course, you can take into account the wholesale aspect, but these are things that are less important than the global impact, positive impact of an in-market consolidation.

So I would say that by principle, we are in favor of any in-market consolidation that might occur in Spain. We might be part of this in-market consolidation. There might be some schemes, some options that we are currently thinking about. But even though we are not part of this in-market consolidation that would be good for Orange.

Now, this being said, my own experience after 10 years as the CEO of Orange and trying to implement several times in-market consolidations is that it is a very difficult process, as you know, because you have the business, you have, of course, synergies, you have the regulators. And of course, at the end of the path, you have (inaudible) Okay? So it's everything, but a simple and easy operation and way and strategy to try to do in-market consolidation. And generally speaking, when you work on an in-market consolidation transaction, you are doing this quietly, quietly because it's a lot of work to prepare something that might have a real chance to go to the end of the journey and look at all the trials that have not been able to go to the end of the journey.

So that's what I would say. And this is mainly the reason why we are not counting on in-market consolidation, whether Orange would -- could be part of this or not to implement our recovery plan in Spain. That is the mission of Jean-François. Jean-François' mission is clearly to implement a recovery strategy on a stand-alone basis, not counting on anything that might happen in the environment. Of course, if we have changes, moves in the environment, that will obviously help us to accelerate into the recovery.

Our next question is coming from Stephane Beyazian for Stifel.

Couple of questions, if I can. One on cost. Do you see any room to, let's say, overachieve on your cost guidance in 2021? The reason I'm asking the question is because you seem very confident on your net savings target. And I suspect that you might tell me if I'm wrong that you might not be including a reversal on the roaming impact, which was quite significant in 2020 and perhaps also on the, let's say, various COVID costs that you had to pay in 2020. So perhaps there might be a little bit also of upside that is not in the guidance for 2021?

Second question, perhaps a quick one on Orange Belgium. There is 1 shareholder with quite a sizable stake that expresses agreement on the offer price. I'm just wondering whether there is any comment or anything you intend to do there? And if I can -- a final one, is there any color you could provide on wholesale revenues from fiber in France in 2021?

Thank you, Stephane, for questions. Well, I think Ramon will take the cost question and the Orange Belgium question, and then I'll ask maybe Jérôme Barré who is with us this morning to give you some colors as you -- some flavors, as you said. I just want to make a preliminary remark on the COVID topic in the 2021 guidance, and especially on the roaming side.

Clearly, our 2021 forecast and guidance is, I would say, prudent regarding the length of the sanitary crisis and the length of the restrictions, especially travel restrictions that we have today. I think that in 2020, everybody -- everyone was quite disappointed by seeing that. In fact, after the summer, we had the second wave and maybe now the third wave. So we are living in -- because of this pandemics and all the debates around vaccines and the speed of vaccination campaigns and so on, that clearly we think that we have to remain reasonably cautious in our hypothesis -- assumptions for 2021, especially regarding the roaming.

So we do not -- we do not expect a very strong rebound of roaming revenues. We think that, of course, we will have less, let's say, travel restrictions in the coming months. When? We don't know exactly. But we clearly -- we have built I would say '21 scenario, which is, in my view, realistic and taking into account the fact that there are still a lot of uncertainties regarding the timing of -- well, the end or towards the end of this pandemic. Now Ramon, if you want to maybe develop on the cost and Belgium?

I think you said it all on the cost. I would only add 1 thing, which is that, in 2020, we were not expecting COVID. We had to revise slightly downwards the EBITDAaL performance. We were expecting flat positive, we end minus 1%, but the organic cash flow -- the organic cash flow, which is the real end game, we were committing to do more than 2.3 and we are delivering 2.5.

So my point is whatever happens on EBITDAaL, of course, if we can do better, we will do better. Of course, we are going to use any way on cost discipline and looking for growth to do better. But ultimately, the name of the game is the cash. And you have the commitment, (technical difficulty) critical key objective, which is cash. Because this is driving the performance, as Stéphane said, the organic cash flow is going to have a more important weight in the incentives for the key managers of Orange. Okay? All the executive teams. So this is just to add to what Stéphane said.

On Belgium, the Orange Belgium share price, we are very much convinced it's a good price when you compare to historical evolution of the share price of Orange Belgium, the analyst target price, et cetera. The prospectus is under review by the FSMA and we didn't set any kind of threshold for a squeeze out or whatever. So to be clear, we don't expect to change the share price. It's a good price.

Thank you, Ramon. Jerome, if you want to take the question on (inaudible)

Yes, Stéphane. Thanks for the questions for the fiber co-financing. So as you know, we do not disclose the information on the amount of co-financing we receive. But in (inaudible) in 2020, you know that we continued to receive co-financing and even in Q4, but less than the 2 previous quarters. Therefore, while we're below 50% of the total potential proceeds in Q3, we are now slightly above 50% of what we can get. And as we said in the Q3 financial communication, it's at least EUR 4.9 billion. I remind you that this amount of EUR 4.9 billion concerns the private areas, so it excludes the PIN area. And it's supposed that all our competitors can finance our network at the level of the current broadband market share.

So in 2020, as you know, it was an exceptional year because we're catching big upgrades ticket from 2 competitors, which was switched to co-financing. Therefore, in 2021, we expect fiber co-financing to be -- proceeds to be slightly less -- to bit less, sorry, than 2020. Of course, you know that it's a decision of our competitors to co-finance fiber, and it's their willingness. It's due to their willingness, it's difficult to predict.

What I can say at this moment is that we are confident in the forecast included in our guidance.

Thank you, Jérôme. Next question.

Our next question is coming from Jakob Bluestone from Credit Suisse.

I had a few questions, please. Firstly, just getting back, to Spain. I mean, from what you're saying, it sounds like the revenue and EBITDA declines are basically driven by customers just spinning down to cheaper bundles rather than sort of outright price cuts. Can you maybe give us a little bit of sense of how far through that process are used? Can you, for example, say, what percentage of your customers in Spain have been repriced? Just to sort of give us a sense of how long this will take to get through this change in your business. So that's the first question.

Secondly, just on the TowerCo, you talked in the release about inorganic options. So I was just wondering if you can maybe expand a little bit what are the inorganic options that you see for that business? Particularly, I think you made some comments in an interview before Christmas about sort of potential combinations with other telcos in Europe. So just interested in hearing a little bit more on that. And then just finally on Orange Bank. I think the losses widened slightly. So just interested to hear an update on that part of the business.

Okay. Thanks for your questions. Regarding TowerCo, what we suggest is that just after this first part of our session, we will organize the second part really around TOTEM, the TowerCo project with the first presentation of this and then a Q&A session. So maybe for the -- to keep, let's say, the discussion this morning well organized as we like in France, I suggest that we keep your question on the TowerCo strategy for the second part of the session. And then regarding Spain, Jean-François, please go ahead and then I'll ask Paul that I see with us to, well, make an update on the bank. Jean-François?

Yes. Thank you. So thank you for the question. I understand the question is about the repricing that took place last summer and the effects of it. So as I was saying, I mean, obviously, the effects -- the first positive effects are about the positive net adds that we have for the company in the last 2 quarters. So clearly, I mean, there is -- I mean, you see the drop of the EBITDA of 2020, which is linked to, I would say, 3 phenomenon. The first phenomenon is COVID because Spain has been particularly hit by the loss of tourism. 80% of the tourism of Spain has been lost. So we've been very severely hit by, I mean, visitors roaming here and also prepaid because we had a lot of prepaid used by tourism. So these 2 effects are 1 explanation of this drop. Obviously, this will return at some point after this crisis.

And the second phenomenon is linked indeed to the reprice -- I mean to the volume loss that I was telling about in the past, the fact that we have lost quite a number of customers in 2019 and 2020 is obviously weighting on our revenues and our profitability. And the third phenomenon is the one you are referring to is now the repricing and the fact that obviously, we have not repriced the entire base, but we have repriced for new customers and retention. And this is obviously a mix effect with our ARPUs going down.

That's obviously going to continue because as you can see on the Spanish market, I would say, the main brands, the 3 main brands of the infrastructure operators have been, I think, prudent and cautious with their commercial offer. So where we -- during these last 2 quarters of the year, but the low-cost part of the business and the market has been really educated and it's actually continued to be more and more aggressive on the Spanish market. So obviously, our transformation plan is also relying on -- growing in areas where we believe they are more reasonable competition. This is why we will focus and invest more on B2B activity.

And obviously, the rest of the transformation plan is going to be triggered as customers, customer experience, limiting as much as possible the churn. Spain is a market with a very high market share. So we believe there is something here to gain. And obviously, as well, this is a plan, which is also relying on looking for more efficiencies and cost pockets that we can reduce. And this is -- with this plan that we intend actually to stabilize in 2022 the financial results of the company.

Thank you, Jean-François. Paul, for the bank.

Yes. Thanks, Stéphane. Thanks, Jakob, for your question. Where do we stand with Orange Bank in Europe and tell a few words about Africa, if u want.

In Europe, we have reached 1.2 million customers with Orange Bank, out of which 650,000 are the banking products, could be either banking accounts or consumer loan and 530,000 have an insurance product, which is a mobile insurance product. So you see that our customer base is growing rather rapidly. The good news is that this acquisition cost is less and less costly. Just to give you some figures, our acquisition cost per customer for banking customers have been reduced by 20% over the last 2 years. This acquisition costs were EUR 260 two years ago and now that stands at EUR 200.

And in parallel, the good news is that the share of paying clients is increasing of our banking product again. 2 years -- 2 years ago, we had only 15% of our customers who paid something to us. And now for the new customers we attracted in 2020, we get up to 60% of our customers who pay something to us. So all in all, you see that we pay less to attract customers who pay more to us, which obviously dramatically reduces the ROI of our acquisition cost, which is good news.

So if I turn that into financials, losses for Orange Bank in Europe were EUR 155 million in operating cash flow for 2020. If I focus to France, these losses were EUR 172 million 2 years ago, and now it has decreased down to EUR 135 million, which means a decrease by EUR 40 million in terms of losses. So gap between France and Orange Bank in Europe is Spain, where we are investing quite a lot to create Orange Bank Spain, but now this investment are behind us. That's why we are very confident that we can further decrease these losses. We have decreased these losses by over around 25% in France over the last 2 years. And we're confident that we can keep the same pace in the next years to come. So that's a good news for Europe.

And in Africa, as it was said by Stéphane, Orange Bank Africa has gained 350,000 customers only after 6 months of existence. And we are very confident together with (inaudible) is that we can grow, not only the customer base, but also the reason at which we do consumer loans to these -- micro loan to these customers in Africa at a very high pace.

Thank you, Paul. So I think we can take a last question before the TowerCo part of this presentation. So please, for the -- this last question, and then we'll go into towers.

The last question is from Sam McHugh from Exane.

So just 3 questions, sorry. Firstly, on France. There's obviously been a big focus on co-investment. And I actually think you've given some great color on that. And then for Orange concessions, can you just talk a bit about the construction revenues that you expect to receive in '21 versus '20? Any kind of EBITDA margins that you're achieving on those revenues and whether they'll still ramp up as we head out to the medium-term guidance?

Secondly, in fact your mobile network leadership position in France. (inaudible) came out with some ambitious mobile site targets a couple of weeks ago. Is it your ambition to match or beat those levels on site deployment? And then just lastly, a bit more sensitive one, sorry. On governance, I saw today that we have obviously split the role of Chairman and CEO. I think it's probably fair to say Orange has a pretty high number of heavily involved stakeholders. Is that something you've ever considered or are considering doing?

Okay. Thank you. So with us this morning to take this question, Fabienne? And maybe also on the second question, which is the race with (inaudible) and I'll say a few words on the governance topic. Fabienne?

Yes. Sorry, excuse me. Thank you, Stéphane. Good morning, everyone. So we follow (inaudible) all the competitors. Maybe the point on the mobile before I answer your question, I think I need to recall one point is the market we probably observe this year. And I think it's very important to note as we still -- we observe a real improvement in the French market and specifically on the mobile. And all players seems to play the game of market refer. So that we help to have a better market, a more constructive competition environment and that sustain Orange, as you can observe, because the result we disclosed on the mobile are very strong, fueled by such but also by open and this is the good news of the H2 and specifically for the Q4.

So yes, we are vigilant, what we want to do on this market. But we are not specifically surprised because when they decide to buy IT and they become the second on the market, it was clear they want to be more aggressive in this market. But all the signs they gave, the strategy on the 5G with quality rollout, the price premium, the push are very important for us, more than the aggressiveness they announced in the volume of -- they want to make.

So the most important in the mobile market in France is the market repair we can observe, the 5G opportunity we have in front of us with 3 players oriented with more value strategy. And I think this is the most important to observe, and we will -- we are confident and we will be where we have to be to maintain our leadership on the mobile and the first market share we have.

And on the concessions? Construction...

I mean, on the Orange concession and the construction margin, I mean, this is fundamentally -- in fact, there is nothing changed because the construction revenues are already in our financials, they will stay. And so basically, there is nothing changed on this side compared to what you know.

Okay. So regarding governance, (technical difficulty) 8 appointed members. 4 are -- well, 3 are elected directly by employees, 1 by employee shareholders. So that makes 4, let's say, board members that are directly or indirectly elected by employees. And then you have 8 independent board members, including myself. So my first point is that we have a Board of Directors with the majority, including myself, of independent board members, meaning not linked to any organization and neither the state, neither unions, which is important. And of course, the 3 big committees, Audit Committee, Governance Committee and Strategic Committee are chaired by independent board members.

And maybe just a second point because you referred to maybe evolutions in the governance and especially the roles -- respective roles of Chairman and CEO. Well, so far, and I would say, historically, the company has been managed by a Chairman and CEO. That was the case -- that has been the case for 30 years. So of course, this is not for eternity. And I think that at each renewal or each end of term, and the next one will be in 2022, in May 2022, this topic will be on the table about dissociating the roles of Chairman and the CEO. I don't know what will be the, well, output of this. But clearly, this would be part, I would say, of the discussions and thinkings in our governance prior to 2022, which is the next time when this question would be raised, and everything is open.

All right. So I think now it's time to talk a little bit about TOTEM. And so, yes, I ask Ramon to make the introduction of the -- this very important topic, and then we will take questions also.

Ramon?

Thank you, Steve. As you can see on this slide, 2 key long-term value creation objectives. First is to run our first-class mobile passive infrastructure assets as a profit center to generate organic value and second is to be ready to take part in the European TowerCo market consolidation. As we announced last October, today, we are going to present the key financial KPIS. As well as the key terms of the MSA, legal structure and governance framework that we have designed. TOTEM will be run by a fully independent management team, which will be appointed in the first half of this year. And the objective is to be fully operational by the end of the year.

On Slide 34, to 10 will first operate a premium tower portfolio of close to 26,000 sites. In France and Spain, our 2 largest countries of operation. In France, to them, we'll operate close to 18,000 macro sites with an attractive mix of approximately 55% towers and 45% rooftops. And given via continued strong colocation demand and superior proportion of towers, we see strong potential to increase tenancy, which is currency standing at only EUR 1.2 billion.

In Spain, TOTEM will operate 8,000 macro sites, approximately 52%, towers and 48% rooftops. With a tenancy ratio close to 1.6 because our Spanish operations benefit from the network sharing agreement between Orange and Vodafone, providing significant future stability for the TOTEM hosting activity.

Based on via grid scope for France and Spain, TOTEM has a pro forma revenue of EUR 510 million in 2020, of which 70% is generated in France. And IFRS 16 EBITDA of EUR 444 million, representing a margin of 87% and an EBITDA after land leases costs of dainty EUR 2 million, representing a margin of 57%. It's important to note that EBITDA includes all maintenance costs in conformity with our group accounting policies, whereas our tower peers tend to capitalize a significant portion of maintenance and the maintenance costs for both fronts and Spain represent approximately 5% of TOTEM's revenue.

Going forward, TOTEM has a clear path to organic growth, thanks to -- first, an increase in our tenancy ratio from 1.3% currently to 1.5% by 2026 based on the French and Spanish colocation potential. Secondly, up to 3,000 new macro sites to be built over the next 8 years for Orange. And thirdly, there will be an inflation-linked anchor fee with no cap and a 0% floor.

On the efficiency front, TOTEM will benefit from more than 2,000 plots of land already ambitions. You can see this on the slide. Its independence is underpinned by a separate legal structure, owned directly by Orange Group, a management fully independent from Orange MVNOs, and the Board of Directors with 2 independent board members and Orange group representatives on the Board will be independent from the MVNOs.

Full autonomy will be achieved through 3 key structuring elements. All core asset sites, land, third-party tenancy contracts will be transferred to TOTEM, releases, of course.

TOTEM will have full in-house capabilities to run operations for anchor and third-party tenants, including deployments, both build-to-suit programs and turnkey rollouts and maintenance. And finally, a steady-state organization with around 200 full-time employees will join the TOTEM perimeter. TOTEM will be able to leverage Orange capabilities through arm's length and non-exclusive long-term agreements to benefit from certain key capabilities, such as maintenance in France, or noncore services as long as it is economically more efficient.

Lastly, the relationship between TOTEM and Orange service operators will be clear and supported by a best-in-class master service agreement. We have indeed agreed on the terms of a best-in-class MSA with a common template for France and Spain, ensuring consistency of services and terms. This is the slide you have on the screen.

A 15-year initial contract term with Orange France and on Spain, which is automatically renewable for 2x tenures, will provide long-term revenue visibility for TOTEM to drive growth. Also renewals of the MSA will be on all scope or nothing basis. Orange operators will pay anchor fees aligned with local market benchmarks, anchor fees, as I said, will be inflation-linked with no campaign with a 0% floor in order to link TOTEM revenues with inflation increase.

TOTEM will be our large preferred supplier for mobile passive infrastructure. This means that TOTEM will have a right of first offer on all new sites to be built by Orange operator. The MSA will include provisions for rent sharing protection should such events arise in the future. There will be only a limited number of strategic sites in France, less of 5% of the French portfolio. This will allow Orange, retail operators mobile to maintain the network leadership through our superior active equipment and spectrum Holdings.

Finally, TOTEM will have the first-class assets, scales and independence to drive significant value creation in a growing European tower market. Organic growth will be a key focus for TOTEM management. On the revenue side, we see a significant opportunity to grow the tenancy ratio throughout the portfolio and in particular, in France. At the TOTEM group level, the tenancy ratio is expected to increase from 1.3% to 1. 5% by 2026. In addition, totem will build new sites, not only for Orange, but for all MNOs. TOTEM is expected to build up to 3,000 new macro sites for Orange over the next 8 years.

And also, as digitalization accelerates across our ecosystem with 5G, industrial, IoT, smart cities, TOTEM will be ideally placed to develop new services adapted to each market. On the cost side, cash flow growth will be supported by cost efficiencies, in particular, from systematic lease cost renegotiation and optimization through land acquisitions.

Then TOTEM also has attractive inorganic growth perspective. This was Jacob's question. Beyond France and Spain, we will work on the possibility to contribute a range other European mobile infrastructure assets to TOTEM over time. And we will also consider M&A opportunities in the context of the European tower consolidation with a disciplined and return driven approach.

To support this growth ambition, Orange intends to fully use TOTEM's capital structure flexibility, including additional debt as well as equity issuance. Orange intends to regain control of this asset considered strategic to the group. Let me now hand over to Stéphane to conclude this presentation.

Thank you, Ramon ón. And I think it's time now to open the floor to questions related to the TOTEM project and the tower COS. I think we have answered to the first question regarding the, let's say, inorganic growth prospects around towers. But now...

I hope you're all keeping well and healthy. Just 2 questions, please. First question is on towers, Stephan. Obviously, you also have a very extensive tower portfolio in Orange, Middle East and Africa. And this has obviously been one of your best-performing business over some time. Can you just maybe say a few words about why you did not include these towers in the scope of the TOTEM project?

And maybe just say a few words about the assets that you do own in towers in Middle East and Africa? I recognize it's a little bit of a different business.

And then secondly, I was trying to get a question earlier, but couldn't. Again, it's related to Orange, Middle East and Africa. Clearly, this has being your best business for some time. Can you maybe just say a few words about potential portfolio expansion in Middle East and Africa, in particular, about the potential for license allocation in Ethiopia and the deregulation of that market?

Well, thank you for your questions. And thank you, by the way, for your, I mean, justified interest for Africa and the Middle East, which is, as you mentioned, not only the best business or the best growing business that we have at Orange, but which is in itself, in my view, an amazing opportunity for our industry and for many developments around our industry.

Our operations in the Middle East and Africa are not part of the TOTEM project so far. For a very simple reason, which is that there is a big difference, let's say, between the -- well, networks, let's say, and the tool of deployment and networks in Europe compared to Africa. In Europe, you have a very extensive coverage, more or less everywhere. And the competition on infrastructure is now -- has reached a maturity point where, in fact, it's more about your capacity to gain an advantage at some point and also your capacity to manage in a smarter way your networks that can give you an advantage. But in terms of coverage, you have a very extensive coverage and it's quite difficult to make a difference between operators based on really on coverage and on deployment.

It's very different still in Africa, where, in fact, there is a strong correlation between the growth of your business and your capacity to expand your coverage yourself. So this is mainly the reason why we think that we must keep 100% in our hands today and under our own decision, the geographic extension of our network. Because every time in Africa that you built a tower or you open a site, you are sure to get thousands or more new customers, you see. And so it's really a key element in the competition in Africa and the Middle East to be really fully empowered in the rolling out of your mobile networks. And that is basically the reason why we think that we must prefer simplicity and efficiency on network deployment instead of everything else.

This is the case today. But of course, in the mid to long term, it doesn't mean that it will not make sense to include or even to create a TowerCo in Africa in the Middle East, but certainly not in the short term.

Now your second question regarding expansion, say, in Africa. I know that we have Alioune with our African, CEO for Africa, with us this morning. So I'll ask maybe Alioune to just make an update on Ethiopia because this is an ongoing process and you know that Ethiopia is a large country in, let's say, political situation, which is a little bit troubled, but still trying to pursue a process to open the competition, open the market to new investors. So maybe Alioune can make a point on Ethiopia. More generally speaking, we see Africa, for sure, as a land for growth, a land of opportunities. And we have always said that we would be attentive to any opportunities. Including inorganic opportunities, of course, under a very disciplined set of criteria. We will not make any M&A just to expand or that will have to be really value creative. It's not so easy.

And by the way, that is the reason why you don't see so many operations because, in fact, we are very, very selective and that so far, we have not identified, I would say, a transaction, a possible transaction that would respect our criteria. But we are still looking for because we do believe that Africa and the Middle East is a major growth engines for the group for the future. Alioune, maybe a few words, quick words on Ethiopia? You're on mute, Alioune I think.

Sorry. Good morning, everyone. Do you hear me well?

Yes. Yes, very much.

Good morning, everyone. Thank you for the question. So as Stephan said in the past minutes, Ethiopia here is actually the biggest telecom market still on Monopoly in Africa, you have more than 100 million inhabitant in Ethiopia, and you have a monopoly, state monopoly. And the government has decided to launch an RFP for 2 greenfield license and also to privatize the TelCo company, the state-owned TelCo company. So we've been studying this case since the mid-2019 when the government decided this telecom reform. And we are still -- we have a small team in Ethiopia, working underground to be able to have a business case and be able to answer by the end of next March for the greenfield. So we are still waiting for some very important information coming from the regulator. And we hope we'll be able to answer by the end of March to this RFP from the government. This is what I can say on Ethiopia. Thank you.

Thank you very much. Ramon, you want to add something?

No. I just wanted to add on the Ethiopia case that Alioune described very well that to cut a long story short, either the conditions will allow us to go and to bid or it's not the case, and we will not because we don't need to be there. I mean it's a potential great opportunity, but only if the conditions are met. So if we are not met, we will not bid, that's just to be clear on this.

That is very obvious and simple. Do we have another question, maybe on towers?

The next question is coming from Frederic Boulan from Bank of America.

Two questions for me. One, on the tower side and 1 on the more general long-term target. So first on the towers, maybe if you can share with us what's your ideal capital structure. You mentioned an IPO, would this be the preferred route versus a stick cell? And then how do we reconcile your ambition to take part in consolidation in the European landscape with these plans to maintain control?

And secondly, on your 2023 target, you obviously said that target in December 2019 before the pandemic. We can see, for instance, that Spain is lagging behind the plan, I think, that you set out at the time with 1% growth and 2 points margin improvement. So for me, it's about EUR 400 million shortfall here. OBS is also suffering, which businesses or specific initiatives we should have in mind to offset those impacts?

Okay. Thanks for your 2 questions. Maybe I will start with a few elements. And of course, Ramon will have launched their own, well, Towercos, Vantage towers for Vodafone, the DT tower for Deutsche Telecom. Just to mention the 2 -- well, largest, Telefónica has made a different choice considering that towers are a nonstrategic asset, and they decided to sell.

This is not clearly our view and there is a difference, let's say, between Orange and Telefónica on the status of towers. And then you have a second, I would say, pockets of people in Europe. That are, let's say, Tier 2 operators that might be in the north of Europe, that might be the south of Europe or so that have still not sold the towers to a tower CO, Senex, but that are thinking about doing something with our towers. So to me, the game of European consolidation will be in the next month, around those 2 players, the 2 big ones.

Now with Orange. So we are 3 today, Vodafone, Deutsche Telekom and Orange to have cards in this game. And for sure, we will think about any potential value creative combination of our towers. Between us. And then you have the second pocket of players in Europe that might be interested in joining a Towerco. Because in my view, you will have 2 different kinds of towercos. You will have operators managed and owned and controlled towercos.

Clearly, this is the vantage. This is the TOTEM and this is, of course, the DT model today. And you will have the, I would say, external Towercos, the largest being Senex. And that will make quite a difference, I think, for MNOs also.

So this is my view on the subject. Now what are we prepared to do in terms of opening the capital structure given opening the TOTEM. This is very open. Of course, that will depend on opportunities, and that will depend mainly on the real, let's say, options that we have on the table to grow, to participate in a form of consolidation or to attract more people in TOTEM.

So we have no -- I would say we have no religion on that, maybe with an important exception, which is that we want to keep a controlling stake either alone or with another big operator, I would say, this is more or less what we have in mind.

Your second question is very important because it's about, in fact, what makes us so confident in our capacity to generate this EUR 3.5 billion to EUR 4 billion and even maybe EUR 4 billion of organic cash flow by 2023. So you mentioned Spain. Let me just maybe tell you that if you look at 2020 figures, we've been able to grow the organic cash flow at EUR 2.5 billion. So it's clearly much above the guidance that we had provided to the market.

We generated EUR 2.5 billion organic cash flow, of course, excluding the tax refund, while in the same time, we have a quite strong decline in EBITDA and cash generation in Spain. And so that is a simple message that I want to sense. You are not buying Orange Spain. I'm sorry to say this. You are buying, hopefully, orange.

Orange is a global operator. We have operations in a number of countries. So I can understand, of course, that we can spend some time on Spain because the situation in Spain is clearly under pressure. And we provide any full information. But orange is not Orange Spain.

So what does this mean? It means that, of course, taken into account the length of the recovery. And once again, the time that we will need to translate a commercial recovery, which is now starting into financial recovery, meaning back to a positive trend in revenues and EBITDA, that will take we think between 12 and 18 months, maybe less. But by experience, we think that it's more or less the timing that we have ahead of us. So I want to be very, very clear on the fact that the EUR 3.5 billion to EUR 4 billion of organic cash flow target by 2023, includes everything, includes what are the positive trends that we expect from some parts of the group, but also the headwinds that we know we will have on the way and especially, of course, the time line of the recovery in Spain. And this is true also this year, in 2021, where if you consider the EUR 2.6 billion of organic cash flow, which is the real economic number that you should take into account because it is what reflects our underlying business. You can see that despite the Spanish challenge, we have a very strong commitment in growing the organic cash flow, including in 2021.

And if I may compliment, Stephane, I think, you're right. The main difference compared to what we said and what we were expecting in late 2019 is Spain. But what you should not overlook is that the Spanish EBITDA now is EUR 1.4 billion. OMEA EBITDA is EUR 1.9 billion. In fact, it's close to EUR 2 billion. And this is growing by 10%. So we have Spain, which is weaker than expected. This is very clear. But we have Africa, Middle East and Alumnis with us, delivering, in fact, better than what had been expected, even with COVID. So the Africa engine which, from time to time, is a bit complicated to follow because it's many countries because whatsoever.

In fact, the Africa business is delivering EUR 2 billion of EBITDA and this is not only EBITDA. It's also cash, which is going up. So you should take this in mind. Second point, what did change compared to 2019 and the guidance we gave in December? In December '19, when we said EUR 3.5 billion to EUR 4 billion, you know that at this time, we were only including EUR 150 million of the cost efficiency program. There was this ambition of EUR 1 billion, but we only embarked at the time EUR 150 million. 1 year ago, in February, when we met, we said this ambition becomes a target, and Stephane recalled this a few minutes ago.

And what we said this morning is that the EUR 1 billion is not fantasy. We have given to you some indications that probably in some quarters are seen as -- I would say clear, looking at where we expect the savings to come from.

So over EUR 1 billion, in fact, objective of cost saving is extremely clear, is documented, and we will be delivering this. So this is a major change compared to what had been said before, and this will help, of course, to absorb not only Spain, but also what could be the impact of COVID because we don't know how long COVID is going to be with us. We cannot say today, COVID is over. So when we say EUR 3.5 billion to EUR 4 billion, we commit very strongly and with embarks, all type of uncertainties. The last point is that compared to 2019 and February 2020. We had the benefit of EUR 2.2 billion of tax staff in December. It's nearly is never existed.

Well, we could talk endlessly about this. But we are going to use partly this, of course, to give back to shareholders with extra EUR 0.20, but also to invest on value-creative investments, which will be delivering EBITDA, which will be delivering organic cash. We are investing, we said around EUR 500 million on transformation, which is going to help to go to a target of the EUR 500 million net savings in labor costs. But more generally, we are investing in transformation for the group. This is also new. This is why this target of EUR 3.5 billion to EUR 4 billion is -- we are very confident on it because we are compensating the minuses with some pluses in a very uncertain world. But once again, we've been delivering the organic cash we had been promising.

And maybe the last point, Ramon, which is about the CapEx story and the CapEx trajectory. In the past, the 0 to 5 years, we have invested a lot. And I know that some long-term doubts, questions. Around the relevance, in fact, of such an effort in CapEx. Of course, when you invest a lot, as we did, you generate less organic cash flow at the end of the day. While did we invest so much in the past years, it was because it was like once in a lifetime, what is 1 in, let's say, 2 generations, opportunity to build a new fixed network.

We are going to switch from copper, which was the historical fragile assets of the company, in fact, into fiber. We are, I think -- I claim we are one of the European players that have succeeded the most in managing this transition between copper and fiber. Because we have clearly made a strong choice to invest as much as we can, of course, respecting the financial expectations and returns on those investments on fiber. That explains basically the fact that Orange is one of the European TelCos with the highest CapEx intensity today.

We are going now towards the end of this cycle. Why? Because we have built over 20 million connectable homes in France and that's -- today, we are at 80% plus of building the network in the mid dense area, the dense areas is almost now completed and the rep is the difference is the difference.

So in France, we are approaching the end of this cycle once again, once in 40 or 50 years cycle of building a new network and Orange will have a key position for the future and for future generations of employees and of investors, in France. We are building in Poland, but different numbers. And in Spain, once again, we are now also approaching the end of this cycle.

So it means that in any circumstance, we will have now from 2022, for sure, a decline that would accelerate on the CapEx intensity of the company, and we will join what I have already said to the market. By the way, we will go back to the medium-term standard of CapEx intensity around 15% of our revenues. We are more around 20% today. So take this into account, of course, this is very important because it also explains that this company is now ready to generate regularly more and more cash because of, of course, what we are doing in terms of management especially around the cost management because we can rely on our engine growth, of course, to mitigate also some problems that we can meet as everyone else, more or less and this is the case today in Spain. And because we are approaching the end of this CapEx cycle that will enable us to accelerate in the track to generate more cash.

Our next question is coming from Nicolas Cote-Collison from HSBC.

I've got 2 questions left. One on tower, how can you be confident to grow the tenancy ratio in France, given you have Senex's presence and their relationship with 3 other operators. So if you can elaborate on the competitive dynamics there? And maybe just to follow-up on your comments, Stephane, about the end of cycle of copper. At the same time, we have both the regulator and the government that are putting for better quality and shorter reaper time? And you said you needed EUR 3 per unbundled line to pay for that. So given the regulated tariffs are set for the next 3 years, how do you finance here?

And there is a lot to be built in the next years, especially with the densification of the network and 5G. So there is a lot to build. You've seen that we don't have any run sharing arrangement with one of our competitors. So maybe there will be also -- we will see. There is a potential and there is a potential to welcome other type of partners, new type of services. So yes, we are very confident that the bar we have set is not extremely ambitious, in fact. So the work meaning that, of course, we will meet more and more problems regarding the quality of this network. And then we had a succession of weather occurrences that damaged even more this copper network.

Second, it is still an important asset for a number of people, especially in rural areas where you still not have fiber and where the Internet access is mainly based on this copper network. So it's socially important study in France, and we have to be realistic about that. Now well, to be very clear and show you that I do not practice wishful thinking. I don't expect that the unbundling price may rise by EUR 3 instantly because I know more or less what are the conditions of such a debate and people and, of course, third, third-party operators that access to this network and also the way ARCEP is looking to that.

So what I say, what we say at Orange is that we are now at a moment where you cannot ask only Orange to first be the main company rolling out fiber and investing massively into fiber with commitments, including financial commitments to do it, but it is in our own interest.

And in the same time, ask Orange to put more money on an old network that we will have to extinct in the years to come, and we have to manage this switch from copper to fiber. So this is quite a challenging topic. And the only thing that I say is that we will not be able to manage this alone. So we have to sit around the table with the government, with the state maybe with local agenda of decommissioning the copper, probably starting with areas where fiber is 100% available or typically, we should not be obliged to offer a copper network when fiber is available.

So we will start by decommissioning copper in areas where fiber is everywhere. And then find an agreement on an agenda of this transition and the financial measures that we have to take in order to ensure the best possible transition between copper to fiber.

So the unbending price is part of this. But of course, it is not the only parameter. I can just give another example, which is about some of the network elements that are the most visible also for people like not towers but lepto. We have 15 million...

(foreign language).

Okay. So pylon, pylons, yes. Generally speaking, wooden pylons. So of course, there are old, some of them fall, they are very much exposed to weathered conditions. And so we must replace pylons.

We have normally every year, a program of early replacement of pylons in order to avoid problems that might occur. We might do much more. And for instance, replace, I don't know, 10,000, 15,000, 20,000, 30,000 pylons every year. If we, of course, can have some public financing, at least partly to do it.

So we can elaborate some specific actions, especially in the areas where there are problems with the cope of quality because this is not the case everywhere. It is very much focused on a limited number of areas in France. We can do more. We can do, for instance, more replacements. But to do this, we need we need, once again, to sit around the table and see with partners, how we can do that.

The government and the Arcep, by the way, I think, are -- understand this now. I think they are aware that it is not only about asking everything to Orange and then threatening Orange in the financial way. This is not a proper way to address this problem. And I think that the government has perfectly understood this.

Google tells us that to post.

Of course. Okay. So Potus. Sorry about it.

Sorry, conscious of time, but just I wanted to ask a couple of follow-up questions. So just on the tower capital structure. Just wondered what your thoughts were on the -- on maintaining ownership and what the most efficient balance sheet for a tower asset is your peers and I guess investors are comfortable with kind of five, 6x net debt to EBITDA, but that's limited within the group. So I just wondered how you think about that side of things? And if you are having conversations with larger operators to kind of share majority control, what are you having conversations on that basis at the moment? And then just on the cash usage, particularly from -- specifically from the tax rebates, what changed when you got that tax in, in terms of the need for CapEx? What -- why did you decide that more CapEx was needed versus your original plan? And maybe if you could just discuss maybe versus your restive to your comments earlier in the call? Why not buy back Orange stock that appointment?

Thank you, Andrew, for you to very relevant questions. So maybe we'll start with the Taroko capital structure, Ramon?

Yes. I mean, I think it's very much what Stephane said also earlier, which is that we have a dedicated company to TowerCo TOTEM, it will be fully independent. It will have a flexible capital structure, which means that depending on opportunities, looking at growth, organic or inorganic, we have the flexibility to open the capital of the TOTEM to financial partners, to strategic partners, to envisage listing the entity.

So it's a world of opportunities. But listing is not an objective as such, it can be a means to look for the fundamental objective, which is to create value and to look for growth organically or inorganically. So this is -- the Towerco capital structure can evolve over time depending on these different opportunities.

On the second question, I'll start, maybe and Ramon, of course, will elaborate EUR 400 million out of EUR 2.2 billion. That's number one remark. Second, why more CapEx? Because, in fact, there are 2 areas where it makes sense to use this opportunity and this amount that we didn't expect at the end of the day, even though we struggled a lot to obtain it.

There are 2 areas. The first is, in France, focusing on a very specific aspect of the fiber story, which is our capacity to enter into co financing in third-party networks. So it's about RIPs that we do not operate or it's about the part of the mid- dense area that we do not develop. We are doing 80% and another operator is doing 20%. So we have clearly an obvious and short term interest, including financial interest in augmenting the co financing expense that we might have in France and the tax rebate provides a very good opportunity to do it.

That is the #1 and the most important, in fact, part of this additional CapEx program. Then there is Africa and the Middle East. This has been mentioned, and I tried to also explain to you why there is a very strong link in Africa at least in some countries in Africa between our capacity to accelerate into coverage and the business we generate in terms of revenues and margin.

Not to mention also the fixed broadband part of the business in Africa because we have started to roll out fiber areas also in some of the largest cities in Africa with a very attractive and very profitable business on that. So clearly in Africa, when you put EUR 1 additional CapEx, this is the place where you have the highest, I would say, certainty to get a very good return on that.

So that is basically why we thought that it was a smart usage, once again, for 1 quarter, even 1 -- 20% of the tax rebate. Now why there is no share buyback. First, it is not because the management team and Sushi, myself, are against share buybacks. I hope that this is very clear for everyone. The point is that I am not the only person to make the decision, of course. And well, what we try to do and what I try to do in every circumstance is to try to find the best possible mix of decisions.

Given the constraints that I have to deal with, okay? Our main shareholder with the state. I think you're aware of that. Is a very solid, long term, stable and, I would say, predictable shareholder, which has a lot of advantages when I compare this company with a lot of other companies, okay? So it's very important to understand this. But on the other side, it has a few aspects, let's say, that might be more difficult to cope with in some times. And clearly, the share buyback principle is something that the state as a shareholder doesn't like because it's too financial or even only financial because there is no industrial sense of doing this. It is a purely financial answer to a specific situation. And that, to some extent, when you spend EUR 1 to buy your own shares, it's really because you have strictly no other possibility to spend this euro in a way that will grow your business, improve your trends in the midterm. Maybe find some CapEx with a high return.

So it's a sort of last option. When you think that our business opportunity and business trends are very poor. What I described is the way more or less some people see share buybacks, and we can understand them. So in my view, it would have been meaningful to offer part of the tax refund amount through a share buyback program. I was clear in favor of this because, well, I think that we have attractive investments, and we are doing this. But in the same time, we have also other questions around our investor community and financial situation. And that is the reason why I thought that it would have been relevant to offer a share buyback program.

The final decision is not this one, but there is something which is directly for our shareholders in the tax refund. Allocation, which is the extra dividend. And then the Belgian operation is not exactly a share buyback, but it is a way still to buy back some shares that are today in the market. So at the end of the day, if you take into account the extra dividend and the Belgian operation, there is more or less 1/3 of the tax rebate. Which is directly aimed at our shareholders.

And maybe on -- so on the Towerco, I didn't answer to the leverage question, but a leverage of 5 for the Towerco is the appropriate range to remain investment grade. And this is, of course, within the group debt guidance. So there is room for the Towerco to build on its leverage.

And you asked what about larger operations, share control, I don't know if Stephane would want to come back to this one also. But when we say keep control, it gives you a lot of room, right? On the CapEx question, I'm just repeating, but maybe it's not totally useless. That even though we have been reinjecting part of the tax savings and CapEx. The total envelope did not change because we had initially a much lower figure than initially expected.

So if you take all in all, everything included, the sum of CapEx for 2020 and 2021 is exactly what we said 18 months ago. Exactly. So we are not just pouring more CapEx. We have just the chance to create more value and to accelerate. So same NRP.

So we I think have time for a last question before a few words to conclude.

Our last question is coming from Nick Delfas from Redburn.

So 1 question on towers and then just a couple that I didn't manage to ask in the first section. On the towers, you're looking at 3,000 new sites over 8 years, obviously, the numbers that the other operators and especially bouygue are thinking about are far in excess of that, and they're able to use off-balance sheet financing because, obviously, they're not owning their towers and the way that you want to do.

So could you just tell us how you scope the size of the number of towers that you require to maintain your network leadership. The final other 2 questions are really just on balance sheet. I'm a bit confused by your policy because you've got very good, low leverage, very low-cost of financing. And yet you're looking at using our rich concession, which has to be more expensive finance than simply borrowing.

And it also adds quite a lot of complexity for investors and trying to understand what's going on. And similarly, within TOTEM, you're giving away CPI potentially to any minority investors who come in, and that's obviously a very valuable gift, if you like. So could you just tell us a little bit more about why you've chosen those quite complex financial structures?

And then finally, on Spain, would you be a seller of Spain? And would you reassess your wholesale policy in Spain, which is...

The other questions? Well, first, you cannot reduce this story by saying that Orange is the source of the problems, in fact, in Spain. If for me, this was true. I think it was not -- it would not be very difficult to fix. So that's my first remark.

Let's be professional, and let's look at everything that's going on in this market. And not doing this kind of unfair, in fact, summary. The second point is that, yes, today, we are reviewing our wholesale commitments and contracts with everyone. This is under a very deep and challenge, I would say, critical review.

And we are not prepared to make any we are prepared more to make any necessary and possible change in the way the wholesale, I mean, contracts of a range is organized in Spain in our relationship with the different players in this market. So yes, the wholesale part of Orange business in Spain is today under review.

And this is, by the way, one also of the first priorities of our new CEO in Spain. And here we are, I think -- I don't know if there is anything more to add on Spain.

We have talked a lot about Spain. But you know -- well, I don't want to develop more on Spain. Ramon?

Yes. On the number of sites, you're right to say that when we say 3,000, it looks probably a little conservative compared to some other figures I necessarily a bigger number of sites. Okay? It does not mean that we are not building new sites on a regular basis also for 4G purpose, but the 5G component is going to accelerate in the longer run, in the longer run.

And so the second part of the answer to this question is that, yes, probably, we are a bit conservative. And if there is more sites to build. Of course, as said, Towerco will be the tool to do so. So this is on your first question.

On the second one, I think we would have to go back to the whole question of why do we manage our network infrastructure in a different manner. There are many aspects to this. But the funding cost of Orange concession of the funding costs of TOTEM will be extremely attractive because fundamentally, they replicate most of the Orange balance sheet structure. So the difference is extremely small, and the benefits are very high. So once again, we would need to go back to it. And looking at the CPI aspect of the Towerco.

Well, first, there is no minority shareholder around yet. So we're not losing anything to anybody now. This is a very standard close. It's an anchor fee, which is inflation linked. It does not mean it is inflation. By the way, in France, it's forbidden to be indexed only on non CPI. So it's a link. But it does not mean it replicates exactly the index. And as you see, and as I said, the floor is at 0%. So there is really no big risk to lose much on the contrary. It provides clarity to the Towerco and to its perspective.

Thank you, Ramon. Maybe just an upward on that, which is that the fact is today, the market gives a multiple of, let's say, 25 to 30 on towercos and 5 to telcos. So ask yourself, what is the reason of that. And maybe if you will find also some rationale, I mean, for some moves that the telco industry is doing because fundamentally, it doesn't make so much sense to justify such a gap in valuation between companies that have those assets inside like ourselves and tacos.

I think that...

Just a follow-up on one thing.

Sure.

Sorry, just on Spain. On Spain, I think I just wanted to check whether you consider selling Spain, Vodafone screen.

Sorry, I didn't...

They might do that. I just wanted to check what your view on that is as well?

Well, in Spain, as I told before, I think that in-market consolidation would be really a good news. As I said before, if we can participate into an in market consolidation, we will consider the opportunity. We are not sellers of our operation in Spain, because we believe in the long-term fundamental value of this operation. It has been built over 15 years. It has been a very successful story. It is now more difficult, but this is not a reason clearly to sell the business. So -- and by the way, Orange, the second largest country, Spain, sorry, it's the second largest country for the group today.

So -- and we have a strategy which is clearly focused on 2 priorities, Europe and Africa. So it would not make a lot of sense to sales pain. So we are not sellers of Spain, but we are open, I would say, open-minded and ready to contemplate any operation or transaction that might help in-market consolidation because I think we need this.

Thank you very much for your questions, everyone. And before leaving let me maybe wrap up very quickly the main messages, especially on the Towerco. And so he may make an important comment on the Towerco.

Passive mobile infrastructure is, for us, a core asset it benefits from our operational expertise in the areas of deployment, but also hosting and maintenance. As I told you previously, we are clearly determined to keep these assets that we consider as strategic assets within the scope of the group because we think that this represents a long-term industrial view that might be different from other players. And that those tariffs are an essential asset in guaranteeing oranges independence as well as its ability to foster sustainable economic performance.

So our engine is committed to supporting TOTEM both strategically and financially in order to make it clear, a clear leader in the European market this is our target.

Now -- and very quickly, a few maybe key elements that I want to stress again before living. I just want to remind everyone that during a quite challenging 2020 year, we've been able to provide an excellent cash flow generation with EUR 2.5 billion, well above the number that we guided for 2020.

We are now concretely committed into an ambitious cost-saving programs of EUR 1 billion by 2023. This has been developed with, I think, a level of information and documentation on this program that is something totally new for us and for you. And we have also a clear ramp up over the period.

So resulting from this, I mean the trends of the business and this commitment also on the cost saving part and this CapEx trajectory that I mentioned earlier. I want once again to ensure everyone that we are very confident in our capacity to reach this guidance of EUR 3.5 billion to EUR 4 billion of organic cash flow by 2023. And clearly, we will aim the upper range of this number, meaning EUR 4 billion, that will be our management target and management commitment for 2021.

Thank you very much. Thanks for your attention. Keep safe. Have a nice day.