Orange expects to reap rewards of network investments by 2025

By Mathieu Rosemain

PARIS (Reuters) -Orange on Thursday said it expects to bolster cash flows and increase shareholder returns by 2025 as the French telecoms company reaps the rewards of network investments, sending its shares higher.

Chief Executive Christel Heydemann set out the company's ambitions in a new strategic plan, dubbed "Lead the Future", nearly a year after she took over as CEO.

State-controlled Orange is facing tough competition in its two biggest markets France and Spain, which has hit its shares, which are down 8.4% over the last 12 months. The shares were up around 4.7% by 0837 GMT on Thursday.

Orange expects to increase its annual cash flow from telecoms activities to 4 billion euros, up 29% from the 3.1 billion in 2022, as it gradually moves away from its heavy investment programme on high speed internet broadband.

It also said it expected to increase its minimum dividend payout to shareholders to 72 euro cents in 2023 from 70 cents in 2022, with the aim to reach 75 cents in 2024.

"The overall strategic direction looks sensible but with little radical change in the next few years," Credit Suisse said in a note to clients, pointing to "limited change" to the group's portfolio of assets.

Orange said it would make further moves to turn around the group's enterprise division, which offers voice, data and IT consulting services. The business has been under pressure as companies abandoned regular fixed phone subscriptions to make calls via Internet-supported communication platforms.

The group also highlighted growth opportunities in cybersecurity services.

The company did not update markets about its plans for its loss-making banking business, which was included in strategic review.

Heydemann told analysts the markets would be updated "in due course" on Orange Bank, following several media reports saying it was weighing a sale of the division.

In a separate statement, Orange said fourth-quarter core operating profit was in line with expectations, as strong sales in Africa and the Middle East overshadowed a decline in its enterprise division.

The country's biggest telecoms operator's earnings before interest, tax, depreciation and amortisation after leases (EBITDAaL) for the three months ended Dec. 31 rose 8.5% to 3.45 billion euros ($3.7 billion), matching the average of 16 analyst estimates compiled by the company.

Orange's yearly core operating profit totalled about 13 billion euros, up 2.5%, in line with the lower end of its target.

($1 = 0.9343 euros)

(Reporting by Mathieu Rosemain; Editing by Jacqueline Wong, Rashmi Aich and Jane Merriman)