France Telecom-Orange outlined its strategic and financial plans for 2011-15, focusing on increased investment and cost reductions in order to return to consistent revenue and cash flow growth. Presented at its Investor Day, the plan is built around two phases.
The first in 2011-13, called the 'adaptation phase', will see the company invest in its networks in anticipation of future customer demands. The operator plans to spend EUR 18.5 billion on capital equipment in the three-year period, including EUR 1 billion on fibre roll-out in France. This averages around 12.6 percent of sales, excluding fibre spending, with an expected peak at 14 percent in 2012. With revenues in the period expected roughly flat, at a CAGR of 0.6 percent, the operator targets EBITDA stabilizing in 2013 above the 2011 level, thanks to the stabilization of EBITDA in France. Cumulative EBITDA for the three-year period should reach around EUR 45 billion.
At the cost level, France Telecom targets EUR 3 billion in savings by 2015, versus the 2010 cost base. This is based on a new performance plan and social contract with staff, as well as the recent joint procurement agreement with Deutsche Telekom. The performance plan focuses in particular on improving customer experience and IT systems, expanding network sharing, pooling service platforms, and optimizing synergies. The above should all lead to cumulative operating cash flow (EBITDA - capex) of around EUR 27 billion in 2011-2013, excluding any exceptional items.
In the second period 2013-2015, called the 'conquest' phase, the investments are expected to lead to an acceleration in revenue growth, to an estimated 2.7 percent CAGR, based on a return to growth in France and the Enterprise segment, and a continued solid contribution from Europe and AMEA. The target for EBITDA growth in the period is 3.4 percent, capex is expected to normalise at around 11 percent of sales including French fibre, and operating cash flow will show a CAGR of 9 percent over the three years.
France Telecom also committed to paying a dividend of EUR 1.40 per share for 2011 and 2012. In addition, the company will consider returning any divestment proceeds to shareholders. The operator said that as part of its review of strategic assets, it has decided to sell any minority holdings where it does not exercise operational control.
