This report contains forward-looking statements about Orange. These forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from the results anticipated in the forward-looking statements. The most significant risks are described in Section 2.1 Risk factors of the 2019 Universal Registration Document as well as in Section 1.1.4 Information on trends and the main risks and uncertainties in this report concerning the risks linked to the Covid-19 pandemic.
The following comments are based on the consolidated financial statements prepared in accordance with IFRS (International Financial Reporting Standards, see Note 2 to the consolidated financial statements). The Statutory Auditors conducted a limited review of these financial statements.
Data on a comparable basis, EBITDA after Leases (referred to as "EBITDAaL"), economic CAPEX" (referred to as "eCAPEX" or "economic CAPEX", the "EBIDTAaL - eCAPEX" indicator, organic cash flow from telecoms activities, net financial debt, and the ratio of net financial debt to EBITDAaL of telecoms activities, are financial indicators not defined by IFRS. For further information on the calculation of these indicators and the reasons why the Orange group uses them and considers them useful for readers, see Section 1.5 Financial indicators not defined by IFRS and Section 1.6.4 Financial glossary.
Data on a historical basis (see Section 1.6.4 Financial glossary) relates to data for past periods as reported in the consolidated financial statements for the current period. The transition from data on a historical basis to data on a comparable basis for the first half of 2019 is set out in Section 1.5.1 Data on a comparable basis.
The segment information (see Note 1 to the consolidated financial statements) that is presented in the following sections is understood, unless stated otherwise, before eliminations for transactions with other segments.
Unless stated otherwise, data in the tables is presented in millions of euros, without a decimal point. This presentation may, in some cases, lead to negligible differences in the totals and sub-totals in the tables. Furthermore, the changes presented are calculated based on data in thousands of euros.
1.1 Overview
1.1.1 Financial data and workforce information
Operating data
|
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue (2)
|
20,769
|
20,703
|
20,573
|
0.3%
|
1.0%
|
|
EBITDAaL (1)
|
5,914
|
5,960
|
5,958
|
(0.8)%
|
(0.7)%
|
|
|
Telecoms activities
|
5,986
|
6,037
|
6,035
|
(0.9)%
|
(0.8)%
|
|
|
EBITDAaL/Revenue from telecoms activities
|
28.8%
|
29.2%
|
29.3%
|
|
|
|
|
Orange Bank activities
|
(72)
|
(78)
|
(78)
|
7.7%
|
7.7%
|
|
Operating income
|
2,249
|
|
2,388
|
|
(5.8)%
|
|
|
Telecoms activities
|
2,336
|
|
2,475
|
|
(5.6)%
|
|
|
Orange Bank activities
|
(87)
|
|
(88)
|
|
0.9%
|
|
eCAPEX (1)
|
3,156
|
3,502
|
3,509
|
(9.9)%
|
(10.1)%
|
|
|
Telecoms activities
|
3,142
|
3,486
|
3,493
|
(9.9)%
|
(10.1)%
|
|
|
eCAPEX/Revenue from telecoms activities
|
15.1%
|
16.8%
|
17.0%
|
|
|
|
|
Orange Bank activities
|
14
|
16
|
16
|
(14.5)%
|
(14.5)%
|
|
EBITDAaL - eCAPEX (1)
|
2,759
|
2,458
|
2,449
|
12.2%
|
12.7%
|
|
|
Telecoms activities
|
2,844
|
2,552
|
2,542
|
11.5%
|
11.9%
|
|
|
Orange Bank activities
|
(86)
|
(94)
|
(94)
|
8.9%
|
8.9%
|
|
Telecommunication licenses
|
42
|
507
|
510
|
(91.6)%
|
(91.7)%
|
|
Average number of employees (full-time equivalents) (3)
|
134,085
|
136,391
|
135,804
|
(1.7)%
|
(1.3)%
|
|
Number of employees (active employees at end of period) (3)
|
142,969
|
148,342
|
147,818
|
(3.6)%
|
(3.3)%
|
(1) See Section 1.5 Financial indicators not defined by IFRS and Section 1.6.4 Financial glossary.
(2) Revenue from telecoms activities. The Net Banking Income (NBI) of Orange Bank is recognized in other operating income (see Notes 1.2 and 1.3 to the consolidated financial statements).
(3) See Section 1.6.4 Financial glossary.
Net income
|
|
2020
|
2019
|
|
(at June 30, in millions of euros)
|
|
data on a historical basis
|
|
Operating income
|
2,249
|
2,388
|
|
Finance costs, net
|
(742)
|
(738)
|
|
Income Tax
|
(491)
|
(513)
|
|
Consolidated net income
|
1,016
|
1,137
|
|
Net income attributable to owners of the parent company
|
927
|
1,039
|
|
Non-controlling interests
|
88
|
98
|
Organic cash flow (telecoms activities)
|
|
2020
|
2019
|
|
(at June 30, in millions of euros)
|
|
data on a historical basis
|
|
Organic cash flow from telecoms activities (1)
|
255
|
92
|
(1) See Section 1.5 Financial indicators not defined by IFRS, Section 1.6.4 Financial glossary, and Note 1.7 to the consolidated financial statements.
Net financial debt
|
|
June 30, 2020
|
December 31, 2019
|
|
(in millions of euros)
|
|
data on a historical basis
|
|
Net financial debt (1)
|
26,420
|
25,466
|
(1) See Section 1.5 Financial indicators not defined by IFRS, Section 1.6.4 Financial glossary, and Note 9.4 to the consolidated financial statements.
For further information on the risks relating to the Orange group’s financial debt, see Section 2.1.3 Financial risks of the 2019 Universal Registration Document.
1.1.2 Summary of results for the first half of 2020
Orange was very resilient in the first half of 2020 despite the effects of the Covid-19 pandemic (see Section 1.1.3 Significant events). Revenues and EBITDAaL declined in the second quarter, negatively impacted by the effects of the health crisis, however in the first half overall, revenues continued to grow, with a very moderate decline in EBITDAaL. In addition, the Group delivered good commercial performance in the first six months of the year.
Revenue totaled 20,769 million euros in the first half of 2020, up 1.0% on a historical basis and 0.3% on a comparable basis compared with the first half of 2019. On a comparable basis, this growth was driven by France and the countries in Africa & Middle East. The Covid-19 health crisis heavily impacted equipment sales in European countries due to the closure of stores and points of sale, and resulted in a generalized decline in international roaming revenues in all countries (see Section 1.1.3 Significant events).
Commercial activity held up well despite a very competitive environment and the effects of the Covid-19 pandemic. These resilient results stem from the Group's strategy focused on greater connectivity and new growth areas. On a comparable basis, mobile accesses grew 1.9% year-on-year. Thus, in Africa & Middle East, the continued roll-out of 4G allowed Orange to reach more than 27.9 million customers at June 30, 2020, up 40.4% year-on-year, and Orange Money's customer base totaled 19.6 million at June 30, 2020 (18.9% year-on-year growth). Convergent offers totaled 10.8 million customers at June 30, 2020, up by 2.1% over one year, allowing Orange to strengthen its position as the leading convergent operator in Europe. In fiber, Orange recorded 8.1 million fiber accesses at June 30, 2020. Despite the lockdown, the Group posted a 19.4% year-on-year increase in its access base, mainly in France, Poland and countries in Africa & Middle East. Lastly, as of June 30, 2020, Orange Bank had a total of 1 million customers, following the integration of Orange Courtage and the expansion of its offers in Spain. In becoming an insurance broker, the bank took a further step its cross-selling policy with Orange France.
EBITDAaL stood at 5,914 million euros in the first half of 2020, down 0.7% on a historical basis and 0.8% on a comparable basis compared to the first half of 2019, negatively impacted in particular by the costs of health measures, the decrease in international roaming and a slight increase in customer bad debts on account of the Covid-19 pandemic. The main excess costs arising from the management of the health crisis totaled 160 million euros over the first six months (see Section 1.1.3 Significant events). They were broadly offset by efforts to control costs of an equivalent amount. Regarding telecoms activities, EBITDAaL amounted to 5,986 million euros (down 0.9% on a comparable basis) and the ratio of EBITDAaL of telecoms activities to revenue stood at 28.8% in the first half of 2020, down 0.3 points compared to the first half of 2019, on a comparable basis.
Operating income totaled 2,249 million euros in the first half of 2020, versus 2,388 million euros in the first half of 2019 on a historical basis, a 5.8% decrease. This decrease is explained mainly by (i) the 104 million euro increase in net expenses for major legal actions, corresponding to the reassessment of the risk relating to a number of disputes, (ii) the 49 million euro increase in depreciation and amortization of fixed assets, and (iii) the 44 million euro decrease in EBITDAaL on a historical basis, (iv) partially offset by the 56 million euro decline in the costs of restructuring programs.
Consolidated net income stood at 1,016 million euros in the first half of 2020, versus 1,137 million euros in the first half of 2019. This change mainly reflects the decline in operating income.
Economic CAPEX amounted to 3,156 million euros in the first half of 2020, down 10.1% on a historical basis and 9,9% on a comparable basis compared with the first half of 2019. This decrease is mostly explained by (i) the increase in external financing between the two periods, in particular co-financing received from other operators, notably in France, (ii) the slowdown in investments in the first half of 2020 due to the Covid-19 health crisis (see Section 1.1.3 Significant events), and (iii) the increase in disposals of fixed assets in Spain, with the disposal of non-strategic towers, and in France, notably with the disposal of FTTH connections to SFR in the first half of 2020, following the signing of an agreement in May 2018 between Orange and SFR.
Net financial debt stood at 26,420 million euros ay June 30, 2020. The change in net financial debt in the first half of 2020 was related in particular to the seasonality of the business. The ratio of net financial debt to EBITDAaL of telecoms activities stood at 2.04 at June 30, 2020, in line with the objective of a ratio of about 2x in the medium term.
Organic cash flow from telecoms activities reached 255 million euros in the first half of 2020, up by 163 million euros over one year on a historical basis. This was mainly due to the decline in economic CAPEX and payments linked to net financial interests and to corporate taxes which offset the decline in EBITDAaL and the deterioration of working capital requirements affected in particular by the impact of the Group's measures to support its most vulnerable suppliers and service providers in France.
1.1.3 Significant events
Impacts of the Covid-19 pandemic on the Group's activities and financial situation
The Covid-19 pandemic in France and the world during the first half of 2020 affected the Group's activities and financial situation but also employees, suppliers, subcontractors and customers, and in addition, all of its stakeholders. In these circumstances, the priorities of Orange were and remain to ensure the safety of its employees and to support its customers by supplying telecommunications services that are more essential than ever. At the beginning of the pandemic, the Group rapidly put in place a number of actions to adapt to the crisis situation, provide for business continuity and reduce the risks presented by the pandemic. In particular, Orange focused its actions on:
− business continuity. In countries that have been severely affected by the pandemic, Orange must, as a provider of services essential to businesses, ensure the continuity of its electronic communications services, and in particular its critical activities. In accordance with government requirements, Orange implemented, in particular in France, a business continuity plan and then a business resumption plan, which essentially cover network and information system supervision and operation teams, security teams, technical support, Data center employees and field-work teams. As part of the health crisis, Orange SA and its wholly owned entities in France as well as most of the Group's subsidiaries in Europe and in the Africa & Middle East countries did not implement exceptional systems of short-time working;
Moreover, the Group enhanced the capacity of its networks and put in place supervision and security actions to face both the burden brought on by the increase in traffic linked to the crisis and the potential increase in cyber security attacks. The quality and the resiliency of the Orange networks absorbed the major growth in traffic and uses. The combination of Fiber Optic, 4G and fixed service-based Wifi networks demonstrated its effectiveness by allowing the Group's customers to benefit from reliable and high performance services, thus demonstrating the relevance of Orange's strategy concerning massive investments in high quality broadband services;
− health and human safety. Orange makes the health and safety of its employees a top priority. A coordinator reporting directly to the Chairman and CEO on the evolution of the world situation has been appointed, as well as correspondents in the various geographical regions of the Group. Orange's activity in the various countries has been adapted to comply with the health recommendations given by each national authority, while providing the conditions for business continuity. The Group has implemented preventive measures by using teleworking for its employees, whenever the activity can be carried out remotely and the necessary equipment is available. In the other cases, Orange has also promoted barrier actions as soon as possible in its instructions to employees and provided individual protection equipment and suitable hygiene systems;
− the implementation of specific solidarity actions with respect to customers, the health world, education and public authorities, and the strengthening of internal and external communication.
The consequences of the Covid-19 pandemic on the Group’s business and financial situation are not easily quantifiable, as these effects are difficult to separate from the other factors of evolution (see Note 3 to the consolidated financial statements. However, in the first half of 2020, the main effects of the Covid-19 pandemic are the following:
− On the Group's revenue:
- a drop in equipment sales (retail and business customers), in Europe, due to the closing of Orange stores. At the height of the health crisis, all stores in France and three quarters of the sales points in Europe were closed, and those that remained open recorded significantly lower customer visitation;
- a growth in revenue of fixed services to carriers, less then what had been expected, due to a slowdown in the construction of Public Initiative Networks (PIN) commercialized, deployed and operated by Orange in France;
- a general decline in revenue from international roaming (of customers and visitors), in nearly all countries and markedly for the B2B services, due to the restriction of travel and the closing of boundaries;
- a slowdown in B2B services activities, with a particular decline in revenue from integration services and information technologies in the second quarter of 2020 and, on an ancillary basis, of some data services (satellite TV broadcasting) not offset by the growth of some voice services (audioconferences);
- and a general decline in sales activity, with the closing of Orange stores, and depending on the country, restriction of portability, the prohibition of aggressive sales campaigns... partially offset by overall weaker desubscription rates;
− On the operating expenses included in the calculation of the Group's EBITDaL:
- an overall increase in the Group's interconnection charges, mainly in France, Spain and Poland, but with quite variable effects according to the country depending on the changes in traffic volumes;
- an increase in external purchases (essentially other external purchases), mainly linked to (i) purchases related to sanitation and the safety of employees for 50 million euros, (ii) excess costs related to supportive measures for a number of network service providers in France (in order to maintain the activity and offset a portion of their fixed costs) for 20 million euros (see also below the effects of the Covid-19 pandemic on investments), and (iii) donations and sponsorships for 9 million euros;
- a €72 million increase in depreciation and losses on trade receivables (see Notes 5.1 and 6.1 to the consolidated financial statements), including 67 million euros linked to telecoms activities (mainly in France and Spain and for Enterprise services) and 5 million euros linked to Orange Bank activities;
- on an ancillary basis, a 10 million euro increase in employee expenses with the payment, to certain employees, of specific bonuses in connection with the health crisis, in particular bonuses for committed to employees who continued their on-site activity (internal or external to Orange);
- and, inversely (i) a significant decline in commercial expenses and equipment costs, with the decrease in handset purchases and other products sold, the decline in advertising and promotion expenses, and reduced distribution commissions, and (ii) a decline in overheads, linked to travel savings and the cancellation of various events;
During the first half of 2020, 160 million euros were recognized in relation to the main specific excess costs incurred in managing the health crisis (see Note 3 to the consolidated financial statements).
− On the Group's investments:
- a significant decline in investing due to the slowdown in network deployment, both fixed (FTTH) and mobile, during confinement periods and after these periods due to measures and restrictions imposed by the health crisis, and the stopping of several economic segments;
- a delay in some of the Group's major projects, such as Orange Concessions, that aims (i) to regroup the fixed (FTTH) connections of the Public Initiative Networks (PIN) that belong to local authorities in France and for which Orange is the concession holder, and (ii) to seize potential opportunities for growth or consolidation on this market;
- On an ancillary basis, the recognition of excess costs related to supportive measures for a number of network service providers in France for 23 million euros (see also above the effects of the Covid-19 pandemic on external purchases);
- and the recognition of modifications or temporary delays in the process of awarding 5G licenses, in particular in France, Spain, and Poland.
− On the value of the Group's long-term assets:
On June 30, 2020, the group reviewed the impairment loss indexes of its geographic areas and activities. Taking into account the epidemic outbreaks and the uncertainties of the current environment, the key assumption such as the discount and growth rates, as well as the cash flow sensitivity analyses generated by certain activities, were revised. These elements did not lead to the recognition of asset impairments at June 30, 2020 (see Note 7 to the consolidated financial statements).
− On cash, management of financial debt and organic cash flow of telecoms activities:
In the first half of 2020, the Covid-19 crisis did not impact the management of risks relating to financial instruments. The Group therefore continued to put in place and to manage hedging instruments in order to limit its exposure to operational and financial interest rate and foreign exchange risks. The cash flow hedges in place, in particular, have not been affected in spite of the crisis. Moreover, the Group maintained a policy of diversified financing. Financing during the first half of 2020 was therefore part of the Orange group's active and opportunistic refinancing policy that is to preserve prudent and anticipated management of its liquidity by optimizing the cost of its resources in maintaining a high level of cash. At June 30, 2020, the liquidity position of telecoms activities thus stood at 16,523 million euros (see Note 10.1 to the consolidated financial statements).
In the first half of 2020, the organic cash flow from telecoms activities is impacted (i) positively by the decline of economic CAPEX, linked to the slowdown in the deployment of fixed and mobile networks during the Covid-19 health crisis (see above), and (ii) negatively by the increase in the change in working capital requirements. Early on, Orange realized the extent of the emerging crisis and decided in March to prepay suppliers in France, in particular by accelerating and systematizing the cash payment of invoices for less than €50,000 from small and medium-size partner companies, in order to assist the most impacted economic segments. In addition, Orange decided to support its network service providers in France by granting them financial advances (see Notes 5.1 and 6.3 to the consolidated financial statements).
− And on the Orange dividend:
Due to the uncertainties generated by this exceptional crisis, the Orange Shareholders' Meeting held on May 19, 2020 approved, upon proposal of the Board of Directors, the distribution of a dividend of 0.50 euro per share for the 2019 fiscal year instead of a
previously announced dividend of 0.70 euro per share. In view of the payment of an interim dividend of 0.30 euros in December, 2019 the balance of the cash dividend paid on June 4, 2020 was 0.20 euros per share (see note 12.3 to the consolidated financial statements).
Apart from the health crisis, the Group launched a plan to prioritize digital inclusion, aiming at the ongoing improvement of networks and accelerating digitalization. The fixed and mobile networks, the network access sharing agreements, and optimized network management, that were already at the core of the Orange strategy, are and remain major priorities for the Group. Moreover, Orange wishes in particular to assist the acceleration of its customers’ digitalization and focus on the house/home with even more relevant strategic choices. In addition, the Group's objective is to prioritize its future commercial activities, to secure its supply chains and as much as possible, catch up with the delivery and production delays.
Reorganization of the Group's Executive Committee
In June 2020, Stéphane Richard, Chairman and CEO of Orange, announced the reorganization of the Group's Executive Committee in order to accelerate the implementation of the Group's new strategic plan, Engage 2025. The changes will take effect starting September 1, 2020.
Following this change in the organization of the Executive Committee, the presentation of segment information could be modified in the second half of 2020.
Capitalization on the Group's lead in networks
Fixed access networks
During the first half of 2020, the Covid-19 health crisis marked a significant decline in the roll-out of FTTH networks. Nevertheless, the Group continued the roll-out of its very high-speed fixed broadband networks with 8.0 million additional households connectable year-on-year. At June 30, 2020, Orange had 43.5 million very high-speed broadband connectable households throughout the world (up 22.7% year-on-year), including 19.3 million in France, 15.1 million in Spain and 7.9 million in the rest of Europe (operating segment).
Whether through its own infrastructure or the use of third-party networks, in late 2019 Orange announced its aim to be able to offer its FTTH packages to more than 65 million households in Europe by 2023, to assert its leadership position in Europe in fiber. In Spain, concerning fixed access networks for very high-speed broadband Internet access (fiber optic and other very high-speed broadband technologies), Orange wants to accelerate its roll-outs and has now set itself the objective of connecting 18 million households with very high-speed broadband by 2023 (through several channels, including its own roll-outs), compared with 15 million households announced at end-2019. For that, the Group put in place financing through a financial lease program with its partner Banco Santander.
Mobile access networks
In January 2020, Orange France selected Nokia and Ericsson as 5G equipment suppliers at the end of several months of testing. This partnership concerns a number of products and services enabling the roll-out of the 5G network throughout mainland France. Already industrial partners for many years, these two companies demonstrated the quality of their products on 2G/3G/4G networks and share the same values as Orange, i.e., customer support and high quality customer experience. The roll-out of 5G is one of the major pillars of the Engage 2025 strategic plan.
In February 2020, Orange and Free Mobile signed an amendment extending the termination period for Free Mobile’s national roaming on Orange’s 2G and 3G networks until December 31, 2022. On April 3, 2020, Arcep (French Postal, Electronic Communications and Media Distribution Regulatory Authority) informed the market players that it is reviewing this amendment.
Transmission networks
In February 2020, Orange announced its partnership with Telxius (a subsidiary of Telefónica) to collaborate on backhaul extensions for the Google "Dunant" transatlantic cable. Orange and Telxius will offer and operate co-location services in their respective cable landing stations located on either side of the Atlantic Ocean. This agreement will strengthen the Group's connectivity capacities for its international customers in Europe and America and its international leadership in the wholesale market. The commissioning of the 6,600 kilometer Dunant cable is expected before the end of 2020 and will be used to meet the growing need for data exchanged between the two continents.
In May 2020, Orange also announced its participation in the 2Africa project. This project, supported by an international consortium, will enable the creation of a 37,000 kilometer submarine cable around Africa to improve Internet access to this continent and to the Middle-East. The commissioning of the cable is expected in 2023 or 2024.
In addition, in April 2020, Orange Marine and its Italian subsidiary Elettra commissioned a new ship named the "Urbano Monti". This ship will enable surveys of marine routes, a key step in choosing the right cable routes. Orange thus continues to strengthen its expertise in marine activities related to submarine cables with this new activity which comes in addition to the traditional missions of cable installation and maintenance.
Satellite capacity purchasing
In July 2020, Orange announced that it had purchased all available capacity of the Eutelsat Konnect satellite from Eutelsat Communications, to cover the whole of France. Using satellite technology, all Orange retail accounts that so wish, including those in the most isolated areas, can benefit from very high-speed fixed broadband services starting January 2021. This agreement is directly in line with the Broadband/Very High-Speed Broadband France Plan adopted by the government with the aim of rolling out broadband services of at least 30 megabytes/second over the whole of France by 2022. The service will be distributed by Orange's Nordnet subsidiary, the leading French distributor of satellite Internet services since 2008.
Acceleration in growth areas
Africa & Middle East
In early January 2020, Orange inaugurated the new headquarters of its subsidiary Orange Middle East and Africa in Casablanca, Morocco. A major player in the Africa region for more than 20 years, Orange hopes to become the preferred multiservice operator for the people. To be successful, Orange must develop its new services in Africa thus getting closer to its customers and adapting to local specificities to best meet their needs.
As such, in February 2020, Orange announced that it had invested, through its subsidiary Orange Digital Ventures, in the pan-African marketplace Gebeya, specialized in the training and placing of future talents in African Tech. Likewise, in March 2020, Orange Digital Ventures invested in Youverify, a start-up company specializing in identity and address verification.
Mobile financial services (Orange Money - Orange Bank)
In March 2020, Orange Bank expanded its services and took a further step in its cross-selling policy with Orange by integrating Orange Courtage, a subsidiary which offers in particular insurance for mobile handsets to 450,000 individual customers and 150,000 business customers. This integration allows Orange Bank to become an insurance broker and eventually offer new insurance products. Orange Bank now has one million customers with accounts, loans or insurance.
In Africa, the Orange strategy in mobile financial services aims to offer solutions accessible to the greatest number regardless of their income level or place of residence.
In March 2020, Orange thus announced the launch of Orange Money in Morocco. This service enables Moroccans to use their telephones to make payments and transfer money, thereby facilitating exchanges. Today, the Orange Money service is now available in all countries in Africa & Middle East. Moreover, since May 2020, Orange Money customers can transfer money from France to Morocco or Burkina Faso, in real-time and securely, directly through an Orange Money account. As of June 30, 2020, Orange Money had 54 million customers, including 19.6 million active customers using the service each month, in 16 countries (excluding associates and joint ventures).
Moreover, in July 2020, Orange and NSIA, a leader in bancassurance, announced the launch of Orange Bank Africa's commercial activities in Abidjan, Côte d’Ivoire. Orange Bank Africa via its Orange Money service will offer a range of savings and micro credit services allowing customers to borrow as little as 5,000 CFA francs using their mobile phone. Orange Bank Africa plans to expand to Senegal, Mali and Burkina Faso. The goal of Orange Bank Africa is to become the benchmark player for financial inclusion in West Africa.
Wholesale
In July 2020, Orange Wholesale France became the first wholesale operator to offer e-SIMs (embedded SIM cards) for light mobile virtual network operators (MVNOs). Through its partnership with Orange, Prixtel will become the first MVNO on the French market to offer the e-SIM to its retail customers from summer 2020. Through this process, Orange Wholesale France hopes to become the preferred partner of operators in France, by assisting them in the digitalization of the customer journey.
Orange, a people-oriented and digital employer
In February 2020, Orange announced that it planned to invest more than 1.5 billion euros in a skills development and professional retraining program. The Group decided to place the skills challenge at the heart of the Engage 2025 plan and address this challenge, defined in three major priorities: strengthen its technical expertise, develop data practices and applications, and offer each employee the chance to develop their soft skills.
Changes in asset portfolio
As announced in February 2020, on May 28, 2020, Orange Business Services launched a mandatory public buyout offer for all the shares of Business & Decision not yet held by the Group, representing 6.38% of the capital. At the close of the offer, on July 8, Orange held 95.75% of the capital and 97.22% of the voting rights of Business & Decision. The offer was followed by the delisting of the shares of Business & Decision on July 13, 2020 (see Note 4.2 to the consolidated financial statements).
Launch of the operational efficiency program, Scale Up
In order to secure its objectives in late 2019 Orange committed to achieving net savings by 2023 of one billion euros over a defined scope of indirect costs from telecoms activities of 14 billion euros at end-2019 (defined scope of indirect costs from telecoms activities at end-2019 of 14 billion euros, excluding (i) all indirect costs of Africa & Middle East and (ii) labor expenses, and other network expenses and IT expenses of the Enterprise IT & integration services). To achieve this, in the first half of 2020, Orange launched the operational efficiency program, Scale Up.
1.1.4 Information on trends and the main risks and uncertainties
For the 2020 fiscal year, Orange confirms that it does not foresee any significant deviation from its financial objectives:
− Given current information and currently anticipated trajectories, the Group now expects a slight decline in 2020 EBITDAaL (see Section 1.5.2 EBITDAaL) of about -1% including all the effects linked to the Covid-19 pandemic. It should be noted that, excluding the Covid-19 impact, EBITDAaL would have been flat positive, as expected.
− Given delays in investments to date, Economic CAPEX will be lower (see Section 1.5.3 eCAPEX), offsetting the decline in EBITDAaL.
− Therefore, the Group's "EBITDAaL - Economic CAPEX" indicator (see Section 1.5.4 EBITDAaL - eCAPEX) will be stable in 2020.
− The Group's commitment to exceed 2.3 billion euros in organic cash flow from telecoms activities remains unchanged.
− The target ratio of net financial debt to EBITDAaL of telecoms activities (see Section 1.5.7 Ratio of net financial debt to EBITDAaL of telecoms activities) is maintained at 2x in the medium-term.
These forward-looking statements are nevertheless subject to numerous risks and uncertainties that could cause actual results to differ materially from the results anticipated in the forward-looking statements. Taking into account the major uncertainties with respect to the changing health and economic situation that exist at the date of publication of this report, Orange will closely monitor in particular the revenue from Enterprise services and international roaming, equipment sales, as well as provisions for customer risks and incoming customer payments.
In addition, the Covid-19 pandemic could aggravate all types of risks faced by the Group as described in Section 2.1 Risk factors of the 2019 Universal Registration Document, and in particular:
− Operational risks:
- increase the pricing pressure exerted by certain Orange competitors;
- harden the position of industry regulators;
- contribute to the implementation of economic sanctions targeting certain critical Orange suppliers and thereby increase the risks linked to the high concentration among these suppliers;
- aggravate the exposure of Orange to geopolitical or macroeconomic risks;
- lead to a deterioration in the quality of service on the Orange networks due to the significant increase in traffic;
- and contribute to changing the strategic positioning of world players in the technology sphere.
− Legal risks:
- cause legislative or regulatory changes notably concerning increased taxes or the granting of licenses;
- and contribute to the increase in litigation involving Orange.
− Financial risks:
- increase the cost of the Group's access to capital markets;
- and lead to a decline in the value of goodwill or fixed assets.
− And non-financial risks:
- lead to an increase in cyber security attacks;
- and have psychological impacts on Orange employees due to isolation and remote working due to the lockdown measures taken by the public authorities and passed on by the Group.
Orange will pay an interim dividend of 0.30 euros in cash on December 9, 2020. The decision on the final amount of the 2020 dividend will be announced between the results publication dates for the 3rd and 4th quarters of 2020. A distribution of 0.70 euros per share remains the Group's objective, including for the 2020 fiscal year. The final decision will be taken at a later date, depending on the situation.
1.2 Analysis of the Group’s results and capital expenditures
1.2.1 Group revenue
1.2.1.1 Revenues
|
Revenue by segment (2)
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
France
|
9,024
|
8,880
|
8,874
|
1.6%
|
1.7%
|
|
Spain
|
2,503
|
2,624
|
2,624
|
(4.6)%
|
(4.6)%
|
|
Europe
|
2,729
|
2,774
|
2,789
|
(1.6)%
|
(2.1)%
|
|
Africa & Middle East
|
2,845
|
2,742
|
2,737
|
3.8%
|
3.9%
|
|
Enterprise
|
3,859
|
3,908
|
3,770
|
(1.3)%
|
2.3%
|
|
International Carriers & Shared Services
|
728
|
746
|
747
|
(2.4)%
|
(2.4)%
|
|
Eliminations
|
(920)
|
(971)
|
(968)
|
|
|
|
Group total
|
20,769
|
20,703
|
20,573
|
0.3%
|
1.0%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) Revenue from telecoms activities (see Note 1.1 to the consolidated financial statements). The Net Banking Income (NBI) of Orange Bank is recognized in other operating income (see Notes 1.2 and 1.3 to the consolidated financial statements).
|
Revenue per offering (2)
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Convergent services
|
3,645
|
3,502
|
3,495
|
4.1%
|
4.3%
|
|
Mobile services only
|
5,122
|
5,182
|
5,204
|
(1.2)%
|
(1.6)%
|
|
Fixed services only
|
4,673
|
4,767
|
4,764
|
(2.0)%
|
(1.9)%
|
|
IT & integration services
|
1,555
|
1,479
|
1,334
|
5.1%
|
16.5%
|
|
Wholesale
|
4,062
|
3,861
|
3,863
|
5.2%
|
5.2%
|
|
Equipment sales
|
1,184
|
1,424
|
1,428
|
(16.9)%
|
(17.1)%
|
|
Other revenues
|
529
|
487
|
485
|
8.6%
|
8.9%
|
|
Group total
|
20,769
|
20,703
|
20,573
|
0.3%
|
1.0%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) Revenue from telecoms activities (see Note 1.1 to the consolidated financial statements). The Net Banking Income (NBI) of Orange Bank is recognized in other operating income (see Notes 1.2 and 1.3 to the consolidated financial statements).
The revenue of the Orange group totaled 20,769 million euros in the first half of 2020, up 1.0% on a historical basis and 0.3% on a comparable basis, compared with the first half of 2019.
On a historical basis, the 1.0% or 196 million euro increase in Group revenue between the first half of 2019 and the first half of 2020 reflected:
− the favorable effect of changes in the scope of consolidation and other changes, which totals 112 million euros, and which mainly includes (i) the effect of acquisitions in July 2019 of SecureLink for 122 million euros and, to a lesser extent, BKM for 19 million euros, partially offset by the effect of the sale of Orange Niger in November 2019 for 34 million euros;
− the positive effect of foreign exchange fluctuations, which represents 18 million euros, taking in account mainly the change in the Egyptian pound and the US dollar against the euro, partially offset by the change in the Polish zloty against the euro;
− and organic change on a comparable basis, representing a 66 million euro increase in revenue.
On a comparable basis, the 0.3% or 66 million euro increase in Group revenue between the first half of 2019 and the first half of 2020 was attributable primarily to:
− the 144 million euro increase in revenue in France (i.e., an increase of 1.6%). This change is mainly attributable to:
- the increase in fixed wholesale services, principally related to the construction, operation, and commercialization of fiber optic networks (with the growth in leasing of lines to third-party operators, joint financing, and the construction of Public Initiative Networks (PIN), despite delays in the construction of PIN due to the Covid-19 health crisis,
- growth in convergent services (driven both by the growth of the customer base and the increase in the convergent ARPO over six months, see Section 1.6.4 Financial glossary),
- growth in other revenues (start of roll-outs of build-to-suit mobile sites) and, to a lesser extent, the increase in fixed broadband services only,
- partially offset by (i) the major decrease in equipment sales linked to the Covid-19 health crisis, with the closing of stores in France during the lockdown, (ii) the downward trend in fixed narrowband services only (traditional telephony), (iii) the decrease
in mobile wholesale services (national roaming) and (iv) the decline in mobile services only (migration of contract offers toward convergent offers and structural decline of prepaid offers);
− and the 103 million euro growth in revenue in Africa & Middle-East countries (up by 3.8%), driven mostly by the growth of data services and, to a lesser extent, Orange Money, despite the revenue losses recorded in this area due to the Covid-19 health crisis. The growth in the area is driven mainly by the good performances of the Côte d’Ivoire subgroup (all countries), Egypt, and the Sonatel subgroup (mainly Guinea).
These positive items were partially offset by:
− the 121 million euro decrease in revenue in Spain (a 4.6% decline), against a backdrop of intense advertising activity and strong competition in entry-level mobile and fixed broadband. This decline mainly reflects (i) the decrease in mobile services only and, to a lesser extent, the decline in convergent services, due to the polarization of offers and the general market trend toward low-cost offers, and (ii) a major decline in equipment sales, due to the significant decrease in volumes linked to the Covid-19 health crisis (closure of stores) and a trading down on terminals sold, (iii) partially offset by the increase in wholesale, driven largely by growth in international traffic;
− the 49 million euro decrease in revenue from Enterprise services (down 1.3%), mainly due to (i) the decline in mobile services and equipment, impacted by the Covid-19 crisis, (ii) the downward trend in voice services, and (iii) secondarily, the decrease in data services (mainly satellite TV broadcasting services), (iv) partially offset by the growth in IT & integration services (mainly Cloud and security services);
− the 44 million euro decrease in revenue in Europe (down 1.6%), mainly due to:
- (i) the significant decrease in sales of equipment in all countries except Moldova, resulting from the Covid-19 health crisis (closure of stores, travel restrictions, etc.), (ii) the decline in mobile services only, mainly in Belgium, Romania and Slovakia, in connection with the migration of customers toward convergent offers, (iii) the fall in other revenues in Poland (energy sales), Romania and Belgium (decrease in activity due to the Covid-19 health crisis) and, to a lesser extent, (iii) the decrease in wholesale mobile (especially in Belgium and Romania, in connection with the Covid-19 health crisis) and (iv) the downward trend in fixed narrowband services only in Poland (decline in traditional telephony),
- partially offset by (i) the significant growth in convergent services in all countries, driven in particular by the customer base and (ii) the increase in IT & integration services, mainly in Poland and, to a lesser extent, in Romania;
− and the 18 million euro decline in revenue from services to International Carriers & Shared Services (down 2.4%), under the effect mainly of the Covid-19 health crisis (restrictions on international travel) reduction in the flows on voice corridors) and the decline in international carrier business.
Concerning the effect of the Covid-19 pandemic on the activities and the financial position of the Group, see Section 1.1.3 Significant events.
1.2.1.2 Number of customers
|
Number of customers
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in thousands, at the end of the period)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Convergent services
|
|
|
|
|
|
|
Number of convergent customers
|
10,814
|
10,588
|
10,588
|
2.1%
|
2.1%
|
|
Mobile services
|
|
|
|
|
|
|
Number of mobile accesses (2)
|
207,956
|
204,155
|
206,874
|
1.9%
|
0.5%
|
|
Incl.
|
Mobile accesses of convergent customers
|
19,233
|
18,654
|
18,654
|
3.1%
|
3.1%
|
|
|
Mobile accesses only
|
188,722
|
185,501
|
188,219
|
1.7%
|
0.3%
|
|
Incl.
|
Contract customers
|
75,094
|
72,730
|
72,790
|
3.3%
|
3.2%
|
|
|
Prepaid customers
|
132,862
|
131,425
|
134,083
|
1.1%
|
(0.9)%
|
|
Fixed services
|
|
|
|
|
|
|
Number of fixed accesses
|
45,120
|
46,025
|
46,026
|
(2.0)%
|
(2.0)%
|
|
Number of fixed retail accesses
|
29,322
|
29,892
|
29,894
|
(1.9)%
|
(1.9)%
|
|
Incl.
|
Number of fixed broadband accesses
|
20,971
|
20,353
|
20,355
|
3.0%
|
3.0%
|
|
|
Incl.
|
Accesses with very high-speed broadband
|
8,421
|
7,028
|
7,030
|
19.8%
|
19.8%
|
|
|
Incl.
|
Accesses of convergent customers
|
10,814
|
10,588
|
10,588
|
2.1%
|
2.1%
|
|
|
|
Fixed accesses only
|
10,158
|
9,765
|
9,766
|
4.0%
|
4.0%
|
|
|
Number of fixed narrowband accesses
|
8,351
|
9,539
|
9,539
|
(12.5)%
|
(12.5)%
|
|
Number of fixed wholesale accesses
|
15,797
|
16,132
|
16,132
|
(2.1)%
|
(2.1)%
|
|
Group total (3)
|
253,076
|
250,180
|
252,900
|
1.2%
|
0.1%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) Excluding customers of Mobile Virtual Network Operators (MVNOs).
(3) Number of mobile services and fixed services customers
During the first quarter of 2020, the Group revised its method of counting accesses. This change mainly results from a difference in the methodology used for aggregating bases (and not the bases themselves) and, secondarily, from a harmonization between countries and the integration of Wholesale FTTH access bases.
Previously, the Group distinguished between (i) mobile service customers, (ii) fixed broadband service customers and (iii) fixed-line telephony customers. Since January 1, 2020, the Group has made a distinction between (i) mobile accesses (bases unchanged) and (ii) fixed accesses, which include fixed broadband accesses (bases unchanged) and fixed narrowband accesses. In addition, fixed accesses now include Wholesale FTTH accesses in France and Spain (co-financed lines and leased lines).
On total accesses for the Group, this change leads to a net decrease of 13.4 million in the Group's accesses as of June 30, 2019, through (i) eliminating double counting (mainly fixed broadband customers without Switched Telephone Network (PSTN) access who were counted in the fixed broadband customer base and in the fixed-line telephony customer base), (ii) for the PSTN customer base, measured by number of accesses (and no longer by number of lines), (iii) aligning methodology between countries, and (iv) the integration of Wholesale FTTH access bases.
Data for previous periods were adjusted on this basis.
1.2.2 Group EBITDAaL
This section presents the reconciliation of revenue to Group EBITDAaL by type of expense, after presentation adjustments, as presented in Section 1.5.2 EBITDAaL and in Notes 1.2 and 1.3 to the consolidated financial statements.
|
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
20,769
|
20,703
|
20,573
|
0.3%
|
1.0%
|
|
External purchases (2)
|
(8,557)
|
(8,639)
|
(8,562)
|
(0.9)%
|
(0.1)%
|
|
Other operating income and expenses (2) (3)
|
(3)
|
151
|
146
|
na
|
na
|
|
Labor expenses (2) (3)
|
(4,342)
|
(4,375)
|
(4,320)
|
(0.7)%
|
0.5%
|
|
Operating taxes and levies (2) (3)
|
(1,232)
|
(1,206)
|
(1,207)
|
2.1%
|
2.1%
|
|
Depreciation and amortization of financed assets
|
(22)
|
(3)
|
(3)
|
ns
|
ns
|
|
Depreciation and amortization of right-of-use assets (3)
|
(642)
|
(609)
|
(609)
|
5.4%
|
5.4%
|
|
Impairment of right-of-use assets (3)
|
-
|
(0)
|
-
|
na
|
na
|
|
Interests on debts related to financed assets (4)
|
(1)
|
(0)
|
-
|
492.0%
|
492.0%
|
|
Interest on lease liabilities (3) (4)
|
(56)
|
(61)
|
(60)
|
(7.6)%
|
(6.5)%
|
|
EBITDAaL
|
5,914
|
5,960
|
5,958
|
(0.8)%
|
(0.7)%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) See Section 1.6.4 Financial glossary.
(3) Adjusted data (see Section 1.5 Financial indicators not defined by IFRS and Note 1 to the consolidated financial statements).
(4) Interest on debts related to financed assets and interest on lease liabilities are included in segment EBITDAaL. They are excluded from segment operating income and included in net finance costs presented in the consolidated financial statement.
In the first half of 2020, Orange group EBITDAaL stood at 5,914 million euros (including 5,986 million euros from telecoms activities and a loss of 72 million euros from Orange Bank activities), down 0.7% on a historical basis and 0.8% on a comparable basis compared to the first half of 2019. The telecoms activities' EBITDAaL to revenue ratio was 28.8% in the first half of 2020, down 0.5 points on a historical basis and 0.3 points on a comparable basis compared to the first half of 2019.
On a historical basis, the 0.7% decrease in Group EBITDAaL between the first half of 2019 and the first half of 2020, i.e., a drop of 44 million euros, included (i) the favorable effect of foreign exchange fluctuations for 11 million euros, mainly reflecting the change in the Egyptian pound/euro exchange rate, (ii) the unfavorable effect of changes in the scope of consolidation and other changes for 9 million euros, and (iii) organic change on a comparable basis, i.e., a decline of 46 million euros in EBITDAaL.
On a comparable basis, the 0.8% drop, i.e., 46 million euros, in Group EBITDAaL between the first half of 2019 and the first half of 2020, is mainly due to:
− a 6.3% or 100 million euros increase, in other network expenses and IT expenses (see Section 1.6.4 Financial glossary) in almost all countries, mainly due to the increase in operating and technical maintenance outsourcing expenses, as well as IT expenses, related in particular to the Covid-19 health crisis, the growth in IT & integration services business (particularly for Enterprise services), and the continued roll-out of networks and transformation programs in Africa and the Middle East;
− the 6.2% or 83 million euros growth, in other external purchases (see Section 1.6.4 Financial glossary), mainly in France, reflected (i) by the increase in purchases for resale related to the construction activity of the Public Initiative Networks (PIN), and (ii) by the effects of the Covid-19 health crisis, with purchases related to employee health and safety, partially offset by the drop in general expenses (travel, entertainment and vehicle expenses) in most countries;
− the 3.7% or 82 million euros increase, in service fees and inter-operator costs (see Section 1.6.4 Financial glossary), resulting mainly from the increase in interconnection costs, particularly in France, Spain and Poland, related to the Covid-19 health crisis;
− the 41.9% or 81 million euros growth, in other adjusted operating expenses (see Section 1.6.4 Financial glossary and Note 6.1 to the consolidated financial statements), which mainly resulted from the increase in impairment and losses on trade receivables (particularly in France and for Enterprise services) due to the Covid-19 health crisis (see Notes 5.1 and 6.1 to the consolidated financial statements), and secondarily, the counter-effect of the recognition, in the first half of 2019, of provision reversals following the favorable development of litigation;
− the 21.2% or 73 million euros decline, in other adjusted operating income (see Section 1.6.4 Financial glossary, which was particularly marked in France and Spain, due in particular to lower rebilling of network sharing costs, income received on litigations and income resulting from line damage;
− and to a lesser extent, (i) the 33 million euro increase in depreciation and amortization of right-of-use assets (effects of rent indexation, new leases, etc.), (ii) the 2.1% increase, i.e., 26 million euros, in adjusted operating taxes (see Section 1.6.4 Financial glossary), mainly in France (in particular the flat-rate tax on network enterprises, IFER), and (iii) the 18 million euro increase in depreciation and amortization of financed assets (decoders in France financed by a banking intermediary).
These unfavorable changes were partially offset by:
− the 10.1% or 347 million drop, in commercial expenses, equipment and content costs (see Section 1.6.4 Financial glossary), due to (i) the sharp decrease in commercial expenses and equipment costs in all countries except Africa & Middle East, due to the consequences of the Covid-19 health crisis (store closures), (ii) partially offset by the increase in content costs in Spain (largely related to the increase in soccer rights) and Europe;
− the 0.3% or 66 million euro growth in revenue;
− and the 0.7% or 33 million euros decline, in adjusted labor expenses (see Section 1.6.4 Financial glossary). Between the two periods, the effect of the 1.7% fall in the average number of employees (full-time equivalent, see Section 1.6.4 Financial glossary), representing a decrease of 2,306 full-time equivalent employees (mainly in France and Poland), offsets in particular the effect of wage policies in France and abroad and the payment to certain employees of specific bonuses related to the Covid-19 health crisis (in particular bonuses for the commitment of employees who continued to work on site).
During the first half of 2020, 160 million euros were recognized as the main specific cost overruns incurred in managing the health crisis. Concerning the effect of the Covid-19 pandemic on the activities and the financial position of the Group, see Section 1.1.3 Significant events.
1.2.3 Group operating income
This section presents the reconciliation of EBITDAaL to Group operating income (loss) by type of expense, after presentation adjustments, as presented in Section 1.5.2 EBITDAaL and in Notes 1.2 and 1.3 to the consolidated financial statements.
|
|
2020
|
2019
|
|
(at June 30, in millions of euros)
|
|
data on a historical basis
|
|
EBITDAaL
|
5,914
|
5,958
|
|
Significant litigations
|
(169)
|
(65)
|
|
Specific labour expenses
|
(28)
|
(46)
|
|
Fixed assets, investments and business portfolio review
|
59
|
68
|
|
Restructuring programs costs
|
(19)
|
(75)
|
|
Acquisition and integration costs
|
(10)
|
(10)
|
|
Depreciation and amortization of fixed assets
|
(3,549)
|
(3,500)
|
|
Reclassification of translation adjustment from liquidated entities
|
-
|
2
|
|
Impairment of fixed assets
|
1
|
-
|
|
Share of profits (losses) of associates and joint ventures
|
(6)
|
(4)
|
|
Elimination of interest on debts related to financed assets (1)
|
1
|
-
|
|
Elimination of interest on lease liabilities (1)
|
56
|
60
|
|
Operating income
|
2,249
|
2,388
|
(1) Interest on debts related to financed assets and on lease liabilities are included in segment EBITDAaL. They are excluded from segment operating income and included in net finance costs presented in the consolidated financial statement.
In the first half of 2020, Orange group operating income amounted to 2,249 million euros (breaking down into 2,336 million euros for the telecoms activities and a loss of 87 million euros for the Orange Bank activities) compared with 2,388 million euros in the first half of 2019 on a historical basis, a decrease of 5.8% or 139 million euros. On a historical basis, this decrease was largely attributable to:
− the 104 million euro increase in the net expense on significant litigations, corresponding to the reassessment of risk on various disputes;
− the 49 million euro increase in the depreciation and amortization of fixed assets, mainly in Africa & the Middle East (mainly due to the roll-out of mobile and fixed networks and the change in the Egyptian pound/euro exchange rate between the two half years), in Poland (in line with the roll-out of mobile and fixed networks) and for Enterprise services (in particular due to the SecureLink and SecureData acquisitions in 2019);
− and by the 44 million euro decline in EBITDAaL on a historical basis;
− partially offset by the 56 million decrease in restructuring program costs, mainly for shared services (optimization of the real estate portfolio) and in France.
1.2.4 Group net income
|
|
2020
|
2019
|
|
(at June 30, in millions of euros)
|
|
data on a historical basis
|
|
Operating income
|
2,249
|
2,388
|
|
Cost of gross financial debt except financed assets
|
(569)
|
(575)
|
|
Interests on debts related to financed assets (1)
|
(1)
|
-
|
|
Gains (losses) on assets contributing to net financial debt
|
1
|
4
|
|
Foreign exchange gain (loss)
|
(115)
|
(2)
|
|
Interests on lease liabilities (1)
|
(56)
|
(60)
|
|
Other net financial expenses
|
(3)
|
14
|
|
Effects resulting from BT stake
|
-
|
(119)
|
|
Finance costs, net
|
(742)
|
(738)
|
|
Income Tax
|
(491)
|
(513)
|
|
Consolidated net income
|
1,016
|
1,137
|
|
Net income attributable to owners of the parent company
|
927
|
1,039
|
|
Non-controlling interests
|
88
|
98
|
(1) Interest on debts related to financed assets and on lease liabilities are included in segment EBITDAaL. They are excluded from segment operating income and included in net finance costs presented in the consolidated financial statement.
Consolidated net income of the Orange group amounted to 1,016 million euros in the first half of 2020, compared with 1,137 million euros in the first half of 2019, a decrease of 121 million euros. This fall is due (i) mainly to the 139 million euro decline in operating income, and (ii) secondarily, to the slight decline of 4 million euros in financial income, (iii) partially offset by the 22 million euro decrease in current tax expense (see Note 8 to the consolidated financial statements).
The change in financial income between the two periods mainly includes (i) the counter-effect of the recognition, in the first half of 2019, of a 119 million euro expense relating to the stake in BT Group until 2019, (ii) largely offset by the recognition, in the first half of 2020, of a 115 million exchange rate loss mainly due to the effect of the revaluation of the trading derivatives held as an economic hedge of the nominal value of the subordinated notes denominated in pounds sterling and recorded in equity at their historic cost (see Notes 9.2 and 12.6 to the consolidated financial statements).
After taking into account non-controlling interests (see Note 12.4 to the consolidated financial statements), net income attributable to owners of the parent company totaled 927 million euros in the first half of 2020, compared with 1,039 million euros in the first half of 2019, a decrease of 112 million euros.
1.2.5 Group comprehensive income
The reconciliation of consolidated net income to consolidated comprehensive income is described in the consolidated statement of comprehensive income in the consolidated financial statements.
1.2.6 Group capital expenditures
|
Investments in property, plant and equipment and intangible assets (2)
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
eCAPEX
|
3,156
|
3,502
|
3,509
|
(9.9)%
|
(10.1)%
|
|
Elimination of proceeds from sales of property, plant and equipment and intangible assets (3)
|
197
|
131
|
131
|
50.6%
|
50.2%
|
|
Telecommunications licenses
|
42
|
507
|
510
|
(91.6)%
|
(91.7)%
|
|
Financed assets (4)
|
117
|
66
|
66
|
78.1%
|
78.1%
|
|
Group total
|
3,513
|
4,205
|
4,216
|
(16.5)%
|
(16.7)%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) See Note 1.4 to the consolidated financial statements.
(3) Elimination of proceeds from sales of property, plant and equipment included in Economic CAPEX (eCAPEX).
(4) Financed assets include set-up boxes in France which are financed by an intermediary bank and meet the standard criterion of a tangible asset according to IAS 16.
Between the first half of 2019 and the first half of 2020, the drop in investments in Group property, plant and equipment and intangible assets results from both the fall in expenses related to telecommunication licenses and the decrease in investments in property, plant and equipment and intangible assets excluding telecommunication licenses. Concerning the effect of the Covid-19 pandemic on the activities and the financial position of the Group, see Section 1.1.3 Significant events.
Financial investments (see Section 1.6.4 Financial glossary) of the Group totaled 33 million euros in the first half of 2020, compared with 154 million euros in the first half of 2019 (see the Consolidated statement of cash flows and Section 1.4.1 Liquidity and cash flows of telecoms activities).
1.2.6.1 Economic CAPEX
In the first half of 2020, the economic CAPEX of the Orange group amounted to 3,156 million euros (including 3,142 million euros for telecoms activities and 14 million euros from Orange Bank activities), down 10.1% on a historical basis and 9.9% on a comparable basis compared to the first half of 2019. The economic CAPEX to revenue ratio for telecoms activities was 15.1% in the first half of 2020, down 1.9 points on a historical basis and 1.7 points on comparable basis compared to the first half of 2019.
On a historical basis, the 10.1% drop in economic CAPEX of the Group between the first half of 2019 and the first half of 2020, i.e., a 353 million euro decline, is due to (i) the unfavorable effect of changes in the scope of consolidation and other changes for 7 million euros, and (ii) the organic change on a comparable basis, i.e., a decline of 346 million euros in economic CAPEX.
On a comparable basis, the 346 million euro decline in economic CAPEX of the Group between the first half of 2019 and the first half of 2020, i.e., a 9.9% drop, is mainly due to:
− the increase in external financings between the two periods. Group investments benefitted from co-financing received from other operators and subsidies, particularly in France, Spain and Poland;
− the significant change in investments over the first half of 2020, due to the Covid-19 health crisis, which led in particular to:
- significant delays in very high-speed fixed and mobile broadband network deployments (fiber optic and 4G/5G, see Section 1.1.3 Significant events), in particular in France and Spain, and to a lesser extent, in Europe (mainly Poland). In France, the growth in gross investments realized as part of the roll-out of FTTH networks between the two periods was particularly slowed by the Covid-19 health crisis,
- and more generally, (i) delays in the roll-out of other fixed and mobile networks, and (ii) postponements in IT-related investment projects and equipment projects installed at customers' premises;
− the growth in disposals of fixed assets:
- in Spain, as part of the disposal of 1,500 non-strategic mobile sites to Cellnex for 260 million euros (including 75 million euros in the first half of 2020), announced in December 2019,
- in France, with in particular the disposal of FTTH connections to SFR in the first half of 2020, following the agreement reached in May 2018 between Orange and SFR (agreement that led to Orange withdrawing from 236 municipalities within its AMII zone, to SFR's benefit),
- partially offset by the decrease in disposals carried out as part of the optimization of the real estate portfolio, mainly for shared services (and linked to the counter-effect of the significant disposals carried out in the first half of 2019 and delays in real estate restructuring projects due to the Covid-19 health crisis);
− and the decrease in economic CAPEX related to rented handsets, Livebox and equipment installed at customers' premises, mainly in France, and to a lesser extent, for Enterprise services;
− partially offset by the growth in investments in Africa & Middle East networks (Egypt, Botswana, Morocco, Burkina Faso, etc.) and mainly related to fixed and mobile very high-speed broadband networks (4G and fiber optic).
As of June 30, 2020, 43.5 million households had connectivity to very high-speed broadband (an increase of 22.7% year-on-year), including 19.3 million in France, 15.1 million in Spain, 4.6 million in Poland, and 2.5 million in Romania (following the mutual network sharing agreement with Telekom Romania);
1.2.6.2 Telecommunication licenses
In the first half of 2020, telecommunication licenses stood at 42 million euros and mainly involved (i) Romania for 30 million euros (with the renewal of the 3G license in the 2,100 MHz frequency band), and (ii) Morocco for 9 million euros (reallocation of 4G frequencies in the 800 MHz frequency band).
In the first half of 2019, telecommunication licenses amounted to 510 million euros on a historical basis, mostly related to (i) Spain for 297 million euros, (ii) Burkina Faso for 119 million euros, with the acquisition of a technologically-neutral 2G/3G/4G license, and (ii) Guinea for 82 million euros, including both the renewal of the current license with additional spectral resources and the acquisition of a 4G license, and the acquisition of a new technologically-neutral 2G/3G/4G license.
In addition, telecommunication licenses may give rise, under certain circumstances, to annual fees recognized under operating taxes and levies in the consolidated income statement.
1.3 Analysis by operating segment
The table below shows the main operating data (financial data and workforce) for the Orange group under each operating segment in the first halves of 2020, 2019 on a comparable basis and 2019 on a historical basis.
For more details on segment information, see Note 1 to the consolidated financial statements.
|
Half-years ended June 30
|
France
|
Spain
|
Europe
|
Africa & Middle East
|
|
(in millions of euros)
|
|
|
|
June 30, 2020
|
|
Revenue
|
9,024
|
2,503
|
2,729
|
2,845
|
|
EBITDAaL
|
3,301
|
728
|
730
|
935
|
|
Operating income
|
1,557
|
228
|
173
|
456
|
|
eCAPEX
|
1,635
|
392
|
369
|
449
|
|
Telecommunication licenses
|
0
|
3
|
30
|
9
|
|
Average number of employees
|
51,909
|
7,017
|
20,089
|
14,440
|
|
|
|
June 30, 2019 - Data on a comparable basis (1)
|
|
Revenue
|
8,880
|
2,624
|
2,774
|
2,742
|
|
EBITDAaL
|
3,284
|
787
|
699
|
872
|
|
eCAPEX
|
1,862
|
529
|
401
|
420
|
|
Telecommunication licenses
|
0
|
297
|
0
|
209
|
|
Average number of employees
|
54,117
|
6,884
|
21,267
|
14,463
|
|
|
|
June 30, 2019 - Data on a historical basis
|
|
Revenue
|
8,874
|
2,624
|
2,789
|
2,737
|
|
EBITDAaL
|
3,281
|
787
|
708
|
868
|
|
Operating income
|
1,649
|
254
|
170
|
435
|
|
eCAPEX
|
1,862
|
529
|
407
|
418
|
|
Telecommunication licenses
|
-
|
297
|
-
|
213
|
|
Average number of employees
|
54,133
|
6,884
|
21,072
|
14,912
|
(1) See Section 1.5.1 Data on a comparable basis.
|
|
Enterprise
|
International Carriers & Shared Services
|
Telecoms activities eliminations
|
Telecoms activities total
|
Orange Bank
|
Group eliminations
|
Group total
|
|
|
|
|
|
|
|
|
3,859
|
728
|
(918)
|
20,771
|
-
|
(1)
|
20,769
|
|
|
471
|
(179)
|
-
|
5,986
|
(72)
|
1
|
5,914
|
|
|
267
|
(345)
|
-
|
2,336
|
(87)
|
1
|
2,249
|
|
|
174
|
123
|
-
|
3,142
|
14
|
-
|
3,156
|
|
|
0
|
0
|
-
|
42
|
-
|
-
|
42
|
|
|
27,116
|
12,682
|
-
|
133,254
|
831
|
-
|
134,085
|
|
|
|
|
|
|
|
|
3,908
|
746
|
(969)
|
20,705
|
-
|
(2)
|
20,703
|
|
|
578
|
(183)
|
-
|
6,037
|
(78)
|
1
|
5,960
|
|
|
200
|
73
|
-
|
3,486
|
16
|
-
|
3,502
|
|
|
-
|
0
|
-
|
507
|
-
|
-
|
507
|
|
|
26,235
|
12,592
|
-
|
135,557
|
835
|
-
|
136,391
|
|
|
|
|
|
|
|
|
3,770
|
747
|
(966)
|
20,575
|
-
|
(2)
|
20,573
|
|
|
565
|
(174)
|
-
|
6,035
|
(78)
|
1
|
5,958
|
|
|
360
|
(393)
|
-
|
2,475
|
(88)
|
1
|
2,388
|
|
|
197
|
80
|
-
|
3,493
|
16
|
-
|
3,509
|
|
|
-
|
-
|
-
|
510
|
-
|
-
|
510
|
|
|
25,420
|
12,549
|
-
|
134,970
|
834
|
-
|
135,804
|
1.3.1 France
|
France
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
9,024
|
8,880
|
8,874
|
1.6%
|
1.7%
|
|
EBITDAaL
|
3,301
|
3,284
|
3,281
|
0.5%
|
0.6%
|
|
EBITDAaL/Revenue
|
36.6 %
|
37.0%
|
37.0%
|
|
|
|
Operating income
|
1,557
|
|
1,649
|
|
(5.6)%
|
|
eCAPEX
|
1,635
|
1,862
|
1,862
|
(12.2)%
|
(12.2)%
|
|
eCAPEX/Revenue
|
18.1 %
|
21.0%
|
21.0%
|
|
|
|
Telecommunication licenses (2)
|
0
|
0
|
-
|
94.9%
|
94.9%
|
|
Average number of employees
|
51,909
|
54,117
|
54,133
|
(4.1)%
|
(4.1)%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) See Section 1.2.6.2 Telecommunication licenses.
1.3.1.1 Revenue - France
|
France
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
9,024
|
8,880
|
8,874
|
1.6%
|
1.7%
|
|
Retail services (2)
|
5,377
|
5,376
|
5,375
|
0.0%
|
0.0%
|
|
|
Convergent services
|
2,268
|
2,165
|
2,153
|
4.7%
|
5.3%
|
|
|
Mobile services only
|
1,124
|
1,157
|
1,168
|
(2.9)%
|
(3.8)%
|
|
|
Fixed services only
|
1,986
|
2,054
|
2,054
|
(3.3)%
|
(3.3)%
|
|
|
|
Fixed only broadband services
|
1,363
|
1,337
|
1,337
|
1.9%
|
1.9%
|
|
|
|
Fixed only narrowband services
|
623
|
717
|
717
|
(13.2)%
|
(13.2)%
|
|
Wholesale
|
2,871
|
2,678
|
2,672
|
7.2%
|
7.5%
|
|
Equipment sales
|
458
|
578
|
578
|
(20.8)%
|
(20.8)%
|
|
Other revenue
|
318
|
248
|
249
|
28.1%
|
27.6%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) See Section 1.6.4 Financial glossary.
On a historical basis, the 150 million euro increase in revenues in France between the first half of 2019 and the first half of 2020 is explained by (i) the favorable effect of changes in the scope of consolidation and other changes for 6 million euros and (ii) organic growth on a comparable basis, i.e., a 144 million euro increase.
On a comparable basis, the 144 million euro increase in revenues in France between the first half of 2019 and the first half of 2020 was mainly due to strong growth in Wholesale, the increase in convergent services and the rise in other revenues. This increase is partially offset by (i) the effects of the Covid-19 health crisis resulting mainly in the fall in equipment sales and, to a lesser extent, revenue related to roaming, and (ii) the decline in traditional telephony services (narrowband).
On a comparable basis, the 144 million euro increase in revenue in France between the two periods, i.e., a 1.6% increase, is mainly attributable to:
− the 194 million euro increase in Wholesale, driven by the development of fiber optic offers, mainly related to the growth in joint financings, and the growth in leasing of lines to third party operators, but also the construction of Public Initiative Networks (although at a slower pace due to the Covid-19 health crisis), largely offsetting the effects of the fall in unbundling and national roaming;
− the 103 million euro increase in Convergent services which continue to grow, with year-on-year growth of 1.1% in the convergent customer base, boosted by the success of the Open offers and supported by growth in value. In this respect, convergent half-year ARPO (see Section 1.6.4 Financial glossary) increased 2.3% between June 30, 2019 and June 30, 2020, to reach 68.8 euros per month and per offer in the first half of 2020. Furthermore, the number of mobile telephones in households continues to grow, with 9.7 million convergent mobile customers at June 30, 2020 (growth of 2.4% year-on-year) equivalent to 1.67 mobile accesses per convergent customer;
− and to a lesser extent, the 70 million euro growth in Other revenues, driven mainly by the launch of the build-to-suit mobile site roll-outs, enabling Orange to accelerate the roll-out of its mobile network and strengthen its coverage in less dense areas and along transport routes, while limiting investments.
This increase is partially offset:
− by the 120 million euro decrease in Equipment sales revenues, sharply impacted by the Covid-19 health crisis, due to the closure of stores in France during the lockdown;
− by the drop in revenue from Fixed services only, down 68 million euros, due to the downward trend in conventional telephony (down 13.2%, i.e., 94 million euros) and the migration of customers towards convergent offers. Revenue from fixed only broadband services increased 1.9% year-on-year due to the 2.6% growth in the fixed only broadband access base year-on-year, the half-year fixed only broadband ARPO (see Section 1.6.4 Financial glossary) being relatively stable year-on-year (a slight decline of 0.1%);
− and by the drop in revenues from Mobile services only (a decline of 33 million euros year-on-year) mainly due to (i) the 3.7% decline year-on-year in the mobile only access base, connected to the competitive pressure and structural decline of prepaid offers, (ii) and the 0.9% drop in half-year mobile only ARPO (see Section 1.6.4 Financial glossary), impacted by the drop in non-contract roaming related directly to the Covid-19 health crisis.
1.3.1.2 EBITDAaL - France
On a historical basis, the 20 million euro increase in EBITDAaL in France between the first half of 2019 and the first half of 2020 reflects (i) the favorable effect of changes in the scope of consolidation and other changes for 3 million euros, partially offset by the unfavorable effect of foreign exchange fluctuations for 1 million euros, and (ii) organic change on a comparable basis, i.e., an increase of 17 million euros in EBITDAaL.
On a comparable basis, the 17 million euro increase in EBITDAaL in France between the first half of 2019 and the first half of 2020 can essentially be attributed to:
− (i) the decrease in commercial expenses and equipment costs, mainly costs of handsets and other equipment sold in line with the drop in equipment sales prompted by the Covid-19 health crisis and (ii) the 144 million euro increase in revenues;
− partially offset by (i) the increase in other external purchases, in particular purchases for resale related to the construction of Public Initiative Networks (PIN) as well as purchases related to the health and safety of employees in the context of the Covid-19 health crisis, (ii) the decline in other operating income (net of other operating expenses), related in particular to the increase in impairments and losses on trade receivables related to the Copvid-19 health crisis, (iii) the increase in interconnection costs, (iv) the increase in taxes and operating payables, relating among other things to the increase in the flat-rate tax on network enterprises (IFER, linked to the roll-out of fiber and the increase in the line unit tarifs from January 1, 2020), and (v) by the increase in depreciation of right-of-use assets and financed assets.
1.3.1.3 Operating income - France
On a historical basis, the 92 million euro decrease in operating income in France between the first half of 2019 and the first half of 2020 was mainly due to:
− recognition of a net expense on significant litigations of 167 million euros in the first half of 2020, relating to the reassessment of risk on various disputes;
− partially offset by (i) the 23 million euro increase in the gain on disposal of fixed assets, (ii) the 21 million euro reduction in restructuring program costs, and (iii) the 20 million euro increase in EBITDAaL.
1.3.1.4 Economic CAPEX - France
On both a historical basis and a comparable basis, the 227 million euro decrease in economic CAPEX in France between the first half of 2019 and the first half of 2020 can essentially be attributed to:
− (i) by the increase in co-financing received from other operators as part of fiber optic network roll-outs, and (ii) by the increase in disposals of fixed assets, with in particular the disposal of FTTH connection points to SFR during the first half of 2020, following the agreement reached in May 2018 between Orange and SFR (agreement that led to Orange withdrawing from 236 municipalities within its AMII zone, to SFR's benefit);
− partially offset by the growth in gross investments realized as part of the roll-out of FTTH networks between the two periods (growth that was nonetheless slowed by the Covid-19 health crisis).
1.3.1.5 Additional information - France
|
France
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in thousands, at the end of the period)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Convergent services
|
|
|
|
|
|
|
Number of convergent customers
|
5,796
|
5,734
|
5,734
|
1.1%
|
1.1%
|
|
Convergent ARPO (half-year, in euros) (3)
|
68.8
|
67.3
|
66.9
|
2.3%
|
2.8%
|
|
Mobile services
|
|
|
|
|
|
|
Number of mobile accesses (2)
|
21,467
|
21,697
|
21,697
|
(1.1)%
|
(1.1)%
|
|
Incl.
|
Mobile accesses of convergent customers
|
9,692
|
9,468
|
9,468
|
2.4%
|
2.4%
|
|
|
Mobile only accesses
|
11,775
|
12,228
|
12,228
|
(3.7)%
|
(3.7)%
|
|
Incl.
|
Contract customers
|
19,417
|
19,308
|
19,308
|
0.6%
|
0.6%
|
|
|
Prepaid customers
|
2,050
|
2,389
|
2,389
|
(14.2)%
|
(14.2)%
|
|
Mobile only ARPO (half-year, in euros) (3)
|
16.6
|
16.8
|
16.9
|
(0.9)%
|
(1.8)%
|
|
Fixed services
|
|
|
|
|
|
|
Number of fixed accesses (4)
|
30,674
|
31,441
|
31,441
|
(2.4)%
|
(2.4)%
|
|
Number of fixed retail accesses
|
16,044
|
16,512
|
16,512
|
(2.8)%
|
(2.8)%
|
|
Incl.
|
Number of fixed broadband accesses
|
11,755
|
11,543
|
11,543
|
1.8%
|
1.8%
|
|
|
Incl.
|
Accesses with very high-speed broadband
|
3,766
|
2,920
|
2,920
|
29.0%
|
29.0%
|
|
|
Incl.
|
Accesses of convergent customers
|
5,796
|
5,734
|
5,734
|
1.1%
|
1.1%
|
|
|
|
Fixed only accesses
|
5,959
|
5,809
|
5,809
|
2.6%
|
2.6%
|
|
Fixed only broadband ARPO (half-year, in euros) (3)
|
36.4
|
36.5
|
36.5
|
(0.1)%
|
(0.1)%
|
|
Incl.
|
Number of fixed narrowband accesses
|
4,289
|
4,969
|
4,969
|
(13.7)%
|
(13.7)%
|
|
|
Incl.
|
STN accesses
|
4,253
|
4,934
|
4,934
|
(13.8)%
|
(13.8)%
|
|
|
|
Other fixed accesses
|
36
|
35
|
35
|
2.0%
|
2.0%
|
|
Number of fixed wholesale accesses
|
14,630
|
14,929
|
14,929
|
(2.0)%
|
(2.0)%
|
|
Incl.
|
FTTH accesses
|
3,005
|
1,934
|
1,934
|
55.4%
|
55.4%
|
|
|
Copper accesses
|
11,624
|
12,995
|
12,995
|
(10.5)%
|
(10.5)%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) Excluding customers of Mobile Virtual Network Operators (MVNOs).
(3) See Section 1.6.4 Financial glossary.
(4) Change in the recognition method of fixed accesses on January 1, 2020. See Section 1.2.1.2 Number of customers.
1.3.2 Spain
|
Spain
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
2,503
|
2,624
|
2,624
|
(4.6)%
|
(4.6)%
|
|
EBITDAaL
|
728
|
787
|
787
|
(7.5)%
|
(7.5)%
|
|
EBITDAaL/Revenue
|
29.1%
|
30.0%
|
30.0%
|
|
|
|
Operating income
|
228
|
|
254
|
|
(10.3)%
|
|
eCAPEX
|
392
|
529
|
529
|
(25.9)%
|
(25.9)%
|
|
eCAPEX/Revenue
|
15.7%
|
20.2%
|
20.2%
|
|
|
|
Telecommunication licenses (2)
|
3
|
297
|
297
|
(99.1)%
|
(99.1)%
|
|
Average number of employees
|
7,017
|
6,884
|
6,884
|
1.9%
|
1.9%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) See Section 1.2.6.2 Telecommunication licenses.
1.3.2.1 Revenue - Spain
|
Spain
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
2,503
|
2,624
|
2,624
|
(4.6)%
|
(4.6)%
|
|
Retail services
|
1,779
|
1,889
|
1,890
|
(5.8)%
|
(5.8)%
|
|
|
Convergent services
|
1,020
|
1,049
|
1,049
|
(2.8)%
|
(2.8)%
|
|
|
Mobile services only
|
517
|
584
|
584
|
(11.5)%
|
(11.5)%
|
|
|
Fixed services only
|
238
|
254
|
254
|
(6.1)%
|
(6.1)%
|
|
|
IT & integration services
|
4
|
3
|
3
|
56.3%
|
56.3%
|
|
Wholesale
|
449
|
418
|
418
|
7.6%
|
7.6%
|
|
Equipment sales
|
263
|
317
|
316
|
(17.0)%
|
(17.0)%
|
|
Other revenue
|
12
|
0
|
-
|
-
|
-
|
(1) See Section 1.5.1 Data on a comparable basis.
On both a historical basis and a comparable basis, the 121 million euro decrease in revenue in Spain between the first half of 2019 and the first half of 2020 is mainly attributable to (i) the decrease in mobile services only, and to a lesser extent, the drop in convergent services, due to the polarization of offers and the overall shift in the market to low-cost offers, (ii) the decline in equipment sales, due in particular to the Covid-19 health crisis, (iii) partially offset by the growth in Wholesale, driven in large part by the growth in international traffic.
In the first half of 2020, revenue in Spain was negatively impacted by the Covid-19 health crisis, particularly during the lockdown, due to the closure of stores but also because of the bans on fixed portability and on aggressive marketing campaigns.
On both a historical and a comparable basis, the 121 million euro decrease in revenues in Spain between the two periods, i.e., a drop of 4.6% is mainly attributable to:
− the 67 million euro decline in revenues from Mobile services only mainly due to the migration of the market towards low cost offers, resulting in (i) a drop of 6.6% in the half-year mobile only ARPO year-on-year, and (ii) a decline of 4.3% in the mobile only access base year-on-year;
− the 54 million euro drop in Equipment sales, due to the significant drop in volumes related to the Covid-19 health crisis (closure of stores) and a move away from the higher-end in handsets sold;
− the 29 million euro decrease in revenues from Convergent services, mainly due in particular to (i) a still challenging competitive environment, resulting in a 3.7% drop in the convergent customer base year-on-year, while the half-year convergent ARPO remained stable (slightly up by 0.1% year-on-year), and (ii) the effects of the Covid-19 health crisis, particularly on soccer content offers following the halt to the sports season;
− and to a lesser extent, the 16 million euro drop in revenues from Fixed services only, impacted by a very competitive environment and the Covid-19 health crisis, resulting in a 2.6% decline in the fixed only broadband access base, the half-year fixed only ARPO also dropping by 3.4% year-on-year;
− partially offset by the 32 million euro growth in Wholesale revenues, driven mainly by the growth in international traffic, and despite the drop in international roaming due to restrictions on travel and the closure of borders related to the Covid-19 health crisis.
1.3.2.2 EBITDAaL - Spain
On both a historical basis and a comparable basis, the 59 million euro decrease in EBITDAaL in Spain between the first half of 2019 and the first half of 2020 can essentially be attributed to:
− (i) the 121 million euro drop in revenues, (ii) the growth in interconnection expenses, connected with the growth in Wholesale activity, (iii) the rise in content costs, due mainly to the increase in soccer rights, and (iv) the decrease in other operating income;
− partially offset (i) by the decrease in commercial expenses and equipment costs, related to the Covid-19 health crisis (with the decline in costs of terminals and other products sold, and lower distribution commissions), and to a lesser extent, (ii) by the drop in taxes and operating levies, and (iii) by the decline in depreciation of right-of-use assets, due to lower use of lease network access due to the development of the FTTH network and the increase in connection of customers to owned assets.
1.3.2.3 Operating income - Spain
On a historical basis, the 26 million euro decrease in operating income in Spain between the first half of 2019 and the first half of 2020 mainly resulted from the 59 million euro decrease in EBITDAaL, partially offset (i) by the 22 million euro increase in gains (losses) on disposal of fixed assets and, to a lesser extent, (ii) the 6 million euro decrease in depreciation and amortization of fixed assets and (iii) the 6 million euro drop in restructuring program costs.
1.3.2.4 Economic CAPEX - Spain
On both a historical basis and a comparable basis, the 137 million euro decrease in economic CAPEX in Spain between the first half of 2019 and the first half of 2020 resulted from (i) the increase in disposals of fixed assets, mainly as part of the disposal of 1,500 non-strategic mobile sites to Cellnex for 260 million euros (of which 75 million euros in the first half of 2020), and (ii) lower investment in the fixed and mobile networks due to roll-out delays related to the Covid-19 health crisis.
1.3.2.5 Additional information - Spain
|
Spain
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in thousands, at the end of the period)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Convergent services
|
|
|
|
|
|
|
Number of convergent customers
|
2,949
|
3,062
|
3,062
|
(3.7)%
|
(3.7)%
|
|
Convergent ARPO (half-year, in euros) (3)
|
57.9
|
57.8
|
57.8
|
0.1%
|
0.1%
|
|
Mobile services
|
|
|
|
|
|
|
Number of mobile accesses (2)
|
15,863
|
16,386
|
16,386
|
(3.2)%
|
(3.2)%
|
|
Incl.
|
Mobile accesses of convergent customers
|
5,787
|
5,857
|
5,857
|
(1.2)%
|
(1.2)%
|
|
|
Mobile only accesses
|
10,076
|
10,529
|
10,529
|
(4.3)%
|
(4.3)%
|
|
Incl.
|
Contract customers
|
13,651
|
13,635
|
13,635
|
0.1%
|
0.1%
|
|
|
Prepaid customers
|
2,212
|
2,751
|
2,751
|
(19.6)%
|
(19.6)%
|
|
Mobile only ARPO (half-year, in euros) (3)
|
11.3
|
12.1
|
12.1
|
(6.6)%
|
(6.6)%
|
|
Fixed services
|
|
|
|
|
|
|
Number of fixed accesses (4)
|
4,648
|
4,727
|
4,727
|
(1.7)%
|
(1.7)%
|
|
Number of fixed retail accesses
|
3,966
|
4,106
|
4,106
|
(3.4)%
|
(3.4)%
|
|
Incl.
|
Number of fixed broadband accesses
|
3,966
|
4,106
|
4,106
|
(3.4)%
|
(3.4)%
|
|
|
Incl.
|
Accesses with very high-speed broadband
|
3,192
|
3,068
|
3,068
|
4.0%
|
4.0%
|
|
|
Incl.
|
Accesses of convergent customers
|
2,949
|
3,062
|
3,062
|
(3.7)%
|
(3.7)%
|
|
|
|
Fixed only accesses
|
1,017
|
1,044
|
1,044
|
(2.6)%
|
(2.6)%
|
|
Fixed only broadband ARPO (half-year, in euros) (3)
|
30.1
|
31.2
|
31.2
|
(3.4)%
|
(3.4)%
|
|
Number of fixed wholesale accesses
|
683
|
622
|
622
|
9.8%
|
9.8%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) Excluding customers of Mobile Virtual Network Operators (MVNOs).
(3) See section 1.6.4 Financial glossary.
(4) Change in the recognition method of fixed accesses on January 1, 2020 (see Section 1.2.1.2 Number of customers).
1.3.3 Europe
|
Europe
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
2,729
|
2,774
|
2,789
|
(1.6)%
|
(2.1)%
|
|
EBITDAaL
|
730
|
699
|
708
|
4.3%
|
3.0%
|
|
EBITDAaL/Revenue
|
26.7%
|
25.2%
|
25.4%
|
|
|
|
Operating income
|
173
|
|
170
|
|
1.9%
|
|
eCAPEX
|
369
|
401
|
407
|
(8.2)%
|
(9.5)%
|
|
eCAPEX/Revenue
|
13.5%
|
14.5%
|
14.6%
|
|
|
|
Telecommunication licenses (2)
|
30
|
0
|
-
|
ns
|
ns
|
|
Average number of employees
|
20,089
|
21,267
|
21,072
|
(5.5)%
|
(4.7)%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) See Section 1.2.6.2 Telecommunication licenses.
1.3.3.1 Revenue - Europe
|
Europe
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
2,729
|
2,774
|
2,789
|
(1.6)%
|
(2.1)%
|
|
Retail services
|
1,817
|
1,766
|
1,768
|
2.9%
|
2.7%
|
|
|
Convergent services
|
357
|
288
|
293
|
23.9%
|
21.8%
|
|
|
Mobile services only
|
1,008
|
1,058
|
1,065
|
(4.7)%
|
(5.3)%
|
|
|
Fixed services only
|
308
|
321
|
326
|
(3.9)%
|
(5.6)%
|
|
|
IT & integration services
|
143
|
99
|
84
|
45.0%
|
71.4%
|
|
Wholesale
|
506
|
523
|
530
|
(3.2)%
|
(4.5)%
|
|
Equipment sales
|
348
|
397
|
401
|
(12.3)%
|
(13.3)%
|
|
Other revenue
|
58
|
89
|
90
|
(34.2)%
|
(34.7)%
|
(1) See Section 1.5.1 Data on a comparable basis.
On a historical basis, the 60 million euro decrease in revenues in Europe between the first half of 2019 and the first half of 2020 includes (i) the negative effect of foreign exchange fluctuations for 35 million euros (mainly due to the change in the Polish zloty/euro exchange rate), partially offset by the favorable effects of changes in the scope of consolidation and other changes for 19 million euros (resulting chiefly from the acquisition of BKM in Belgium on July 30, 2019), and (iii) organic change on a comparable basis, i.e., a decrease of 44 million euros in revenue.
On a comparable basis, the 44 million euro decrease in revenue in Europe between the two periods, i.e., a 1.6% drop, is mainly attributable to the following:
− (i) the fall in equipment sales in almost all countries, (ii) the decrease in mobile services only, mainly in Belgium, Romania and Slovakia, (iii) the decline in other revenues in Poland, to a lesser extent, (iv) the decrease in Wholesale and (v) the downward trend in fixed only narrowband services in Poland;
− partially offset by the growth in convergent services, in all countries, and to a lesser extent, by the increase in IT & integration services.
On a comparable basis, this 44 million euro decrease in revenues between the two periods resulted mainly from the drop in revenues from Romania, Belgium, and to a lesser extent, Slovakia, partially offset by the increase in revenues in Poland.
In the first half of 2020, revenues in Europe were impacted by the Covid-19 health crisis, in particular Equipment sales, down 49 million euros between the two periods, in almost all countries (except for Moldova), mainly due to the closure of stores during lockdown. The pandemic also impacted international roaming, down due to the closure of borders and restrictions on travel in certain countries.
The drop in revenues in Europe between the two periods is mainly due to:
− the 49 million euro drop in revenues from Mobile services only, related to the slight decline of 0.5% year-on-year in the mobile only access base (in particular in the central European countries) under the combined effects of fewer prepaid access sales and customer migration to convergent services. In addition, the half-year mobile only ARPO has fallen in almost all countries, partly due to lower revenue from international roaming;
− a 30 million euro decrease in Other revenues, mainly relating to (i) Belgium and Romania, linked to the lower activity as a result of the Covid-19 health crisis, and (ii) Poland, due to lower energy sales;
− to a lesser extent, (i) the 17 million euro decrease in Wholesale revenues, particularly due to the decline in wholesale mobile related to the Covid-19 health crisis, in almost all countries, resulting mainly from lower SMS volumes and roaming in Belgium, as well as the lower call termination rates (mainly in Romania), and (ii) the 12 million euro decrease in Fixed services only, chiefly related to the downward trend in traditional telephony in Poland, and the migration of customers to convergent offers.
This decline was partially offset by:
− the 69 million euro increase in revenues of Convergent services, up in all countries, with a 15.4% year-on-year increase in the convergent customer base (mainly in Poland and Belgium, with good performance from Love offers), related to the migration of customers to convergent services. This volume growth also supported growth of 3.4% in half-year convergent ARPO in Poland;
− and the 44 million euro increase in revenue from IT & integration services, in particular in Poland, and to a lesser extent in Romania, due to the extension of IT services and videoconference services in this country.
1.3.3.2 EBITDAaL - Europe
On a historical basis, the 22 million euro increase in EBITDAaL in Europe between the first half of 2019 and the first half of 2020 included (i) the unfavorable effect of foreign exchange fluctuations for 8 million euros, (ii) the negative effect of changes in the scope of consolidation and other changes for 1 million euros, (iii) more than offset by the organic change on a comparable basis, i.e., an increase of 30 million euros in EBITDAaL.
On a comparable basis, the 30 million euro increase in EBITDAaL in Europe between the first half of 2019 and the first half of 2020 can essentially be attributed to:
− the drop in commercial expenses, equipment and content costs, mainly due to the decline in the cost of handsets and other equipment sold prompted by the Covid-19 health crisis;
− the decrease in labor expenses, (i) mainly in Poland, with, on the one hand, the effect of the drop in the average number of employees (full-time equivalents), and on the other, the effect of a 14 million euro reversal of pension provisions with respect to the amendment of the Seniority awards plan, and (ii) to a lesser extent, in Belgium;
− partially offset by the 44 million euro decrease in revenues.
1.3.3.3 Operating income - Europe
On a historical basis, the 3 million euro increase in operating income in Europe between the first half of 2019 and the first half of 2020 was mainly due to the 22 million euro growth in EBITDAaL, partially offset by (i) the 13 million euro increase in depreciation and amortization of fixed assets, mainly in Poland, and the 8 million euro decline in gains (losses) from disposals of fixed assets.
1.3.3.4 Economic CAPEX - Europe
On a historical basis, the 39 million euro drop in economic CAPEX in Europe between the first half of 2019 and the first half of 2020 is due to (i) the adverse effect of foreign exchange fluctuations, i.e., 6 million euros, and (ii) the organic change on a comparable basis, i.e., a decline of 33 million euros in economic CAPEX.
On a comparable basis, the 33 million euro drop in economic CAPEX in Europe between the first half of 2019 and the first half of 2020 resulted mainly from the effects of the Covid-19 health crisis, having led to delays (i) in investments relating to fixed broadband networks and IT projects, mainly in Poland, and (ii) in investments linked to mobile networks, particularly impacted by travel restrictions.
1.3.3.5 Additional information - Europe
|
Europe
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in thousands, at the end of the period)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Convergent services
|
|
|
|
|
|
|
Number of convergent customers
|
2,068
|
1,792
|
1,792
|
15.4%
|
15.4%
|
|
Mobile services
|
|
|
|
|
|
|
Number of mobile accesses (2)
|
34,235
|
33,955
|
33,955
|
0.8%
|
0.8%
|
|
Incl.
|
Mobile accesses of convergent customers
|
3,754
|
3,329
|
3,329
|
12.8%
|
12.8%
|
|
|
Mobile only accesses
|
30,481
|
30,625
|
30,625
|
(0.5)%
|
(0.5)%
|
|
Incl.
|
Contract customers
|
23,358
|
22,562
|
22,562
|
3.5%
|
3.5%
|
|
|
Prepaid customers
|
10,877
|
11,393
|
11,393
|
(4.5)%
|
(4.5)%
|
|
Fixed services
|
|
|
|
|
|
|
Number of fixed accesses (3)
|
6,054
|
6,305
|
6,305
|
(4.0)%
|
(4.0)%
|
|
Number of fixed retail accesses
|
5,569
|
5,723
|
5,723
|
(2.7)%
|
(2.7)%
|
|
Incl.
|
Number of fixed broadband accesses
|
3,563
|
3,355
|
3,355
|
6.2%
|
6.2%
|
|
|
Incl.
|
Accesses with very high-speed broadband
|
1,203
|
914
|
914
|
31.6%
|
31.6%
|
|
|
Incl.
|
Accesses of convergent customers
|
2,068
|
1,792
|
1,792
|
15.4%
|
15.4%
|
|
|
|
Fixed only accesses
|
1,495
|
1,563
|
1,563
|
(4.3)%
|
(4.3)%
|
|
Incl.
|
Number of fixed narrowband accesses
|
2,005
|
2,368
|
2,368
|
(15.3)%
|
(15.3)%
|
|
Number of fixed wholesale accesses
|
485
|
582
|
582
|
(16.6)%
|
(16.6)%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) Excluding customers of Mobile Virtual Network Operators (MVNOs).
(3) Change in the recognition method of fixed accesses on January 1, 2020 (see Section 1.2.1.2 Number of customers).
1.3.4 Africa & Middle East
|
Africa & Middle East
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
2,845
|
2,742
|
2,737
|
3.8%
|
3.9%
|
|
EBITDAaL
|
935
|
872
|
868
|
7.2%
|
7.7%
|
|
EBITDAaL/Revenue
|
32.9%
|
31.8%
|
31.7%
|
|
|
|
Operating income
|
456
|
|
435
|
|
4.7%
|
|
eCAPEX
|
449
|
420
|
418
|
6.8%
|
7.4%
|
|
eCAPEX/Revenue
|
15.8%
|
15.3%
|
15.3%
|
|
|
|
Telecommunication licenses (2)
|
9
|
209
|
213
|
(95.5)%
|
(95.6)%
|
|
Average number of employees
|
14,440
|
14,463
|
14,912
|
(0.2)%
|
(3.2)%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) See Section 1.2.6.2 Telecommunication licenses.
Africa & Middle East continue to suffer political or economic instability and sometimes tax or regulatory pressures that could affect the business and results of Group subsidiaries and holdings, and may continue to affect them in the future. In some cases, these situations may lead the Group to recognize impairments on its assets (see Note 7 to the consolidated financial statements). For further information on the risk factors, see Section 2.1 Risk factors of the 2019 Universal Registration Document.
1.3.4.1 Revenue - Africa & Middle East
|
Africa & Middle East
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
2,845
|
2,742
|
2,737
|
3.8%
|
3.9%
|
|
Retail services
|
2,444
|
2,287
|
2,288
|
6.8%
|
6.8%
|
|
|
Mobile services only
|
2,164
|
2,039
|
2,042
|
6.1%
|
5.9%
|
|
|
Fixed services only
|
270
|
242
|
240
|
11.4%
|
12.2%
|
|
|
IT & integration services
|
11
|
6
|
6
|
73.3%
|
73.1%
|
|
Wholesale
|
342
|
392
|
391
|
(12.7)%
|
(12.5)%
|
|
Equipment sales
|
40
|
46
|
45
|
(13.1)%
|
(11.0)%
|
|
Other revenue
|
19
|
17
|
13
|
13.5%
|
52.6%
|
(1) See Section 1.5.1 Data on a comparable basis.
On a historical basis, the 108 million euro increase in Africa & Middle East revenues between the first half of 2019 and the first half of 2020 reflects:
− (i) by the positive effects of foreign exchange fluctuations of 43 million euros, mainly due to fluctuations in the Egyptian pound, the Jordanian dinar, and the Moroccan dirham, against the euro, (ii) partially offset by the negative effect of changes in the scope of consolidation and other changes for 38 million euros, mainly relating to the disposal of Orange Niger on November 22, 2019;
− and organic change on a comparable basis i.e., a 103 million euro increase in revenue.
On a comparable basis, the 103 million euro increase in Africa & Middle-East revenues between the first half of 2019 and the first half of 2020 is mainly explained by growth in the business (i) of the Côte d'Ivoire sub-group (primarily driven by Côte d'Ivoire and Burkina Faso), (ii) of Egypt, and (iii) of the Sonatel sub-group (primarily driven by Guinea).
The growth in revenues between the two periods was mainly driven by the 125 million euro increase in Mobile services only, linked to the growth drivers of data services, up 26.7% year-on-year, and Orange Money, up 17.2% year-on-year, despite the Covid-19 health crisis having resulted in regulatory restrictions put in place by central banks for mobile payment services. Furthermore, the mobile access base continues to grow and posted an increase of 3.0% year-on-year.
To a lesser extent, the revenues from Fixed services only grew 28 million euros between the two periods, driven by the growth in broadband services, which increased 36 million euros (i.e., up 27.8% year-on-year), with a base of 1.4 million accesses as of June 30, 2020 (growth of 31.6% year-on-year).
These positive changes were partially offset by the effects of the Covid-19 health crisis in the first half of 2020, regarding (i) mainly Wholesale revenues, which fell by 50 million euros between the two periods, reflecting in particular the drop in incoming international traffic volumes, and (ii) to a lesser extent, Equipment sales, down due to the closure of distribution points during the lockdowns.
1.3.4.2 EBITDAaL - Africa & Middle-East
On a historical basis, the 67 million euro increase in EBITDAaL in Africa & Middle East between the first half of 2019 and the first half of 2020 included (i) the negative effect of changes in the scope of consolidation and other changes for 9 million euros, reflecting the disposal of Orange Niger on November 22, 2019, more than offset by (ii) the unfavorable effect of foreign exchange fluctuations for 13 million euros, and (iii) organic change on a comparable basis, i.e., an increase of 63 million euros in EBITDAaL.
On a comparable basis, the 63 million euro increase in EBITDAaL in Africa & Middle East between the first half of 2019 and the first half of 2020 is primarily explained by:
− the 103 million euro growth in revenues and, to a lesser extent, the drop in interconnection costs;
− partially offset by (i) the growth in other network expenses and IT expenses, due to the continued network roll-outs in all countries, (ii) the increase in commercial expenses, related to the growth in activity (in particular Orange Money), despite the closure of distribution points and the cancellation of trigger campaigns due to the Covid-19 health crisis, and (iii) the rise in other operating expenses.
1.3.4.3 Operating income - Africa & Middle-East
On a historical basis, the 20 million euro increase in operating income in Africa & Middle East between the first half of 2019 and the first half of 2020 mainly resulted from (i) the 67 million euro increase in EBITDAaL, partially offset by (ii) the 38 million euro increase in depreciation and amortization of fixed assets, due in particular to the roll-out of mobile and fixed networks and the change between the two half-year periods in the Egyptian pound/euro exchange rate.
1.3.4.4 Economic CAPEX - Africa and Middle-East
On a historical basis, the 31 million euro increase in economic CAPEX in Africa & Middle East reflects (i) the positive effect of foreign exchange fluctuations, i.e., 5 million euros, partially offset by unfavorable effects of changes in the scope of consolidation and other changes for 2 million euros, and (ii) organic change on a comparable basis representing a 29 million euro increase in economic CAPEX.
On a comparable basis, the 29 million euro increase in economic CAPEX for Africa & Middle-East between the first half of 2019 and the first half of 2020 was mainly attributable to increased investments in very high-speed mobile and fixed broadband networks (4G and FTTH). There were 27.9 million 4G customers at June 30, 2020, an increase of 40.4% year-on-year. The number of very high-speed broadband connectable households also grew 79.1% year-on-year and totaled 1.2 million as of June 30, 2020.
1.3.4.5 Additional information - Africa & Middle East
|
Africa & Middle East
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in thousands, at the end of the period)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Mobile services
|
|
|
|
|
|
|
Number of mobile accesses (2)
|
123,516
|
119,884
|
122,603
|
3.0%
|
0.7%
|
|
Incl.
|
Contract customers
|
5,793
|
4,992
|
5,052
|
16.0%
|
14.7%
|
|
|
Prepaid customers
|
117,723
|
114,892
|
117,551
|
2.5%
|
0.1%
|
|
Fixed services
|
|
|
|
|
|
|
Number of fixed accesses (3)
|
2,277
|
1,961
|
1,963
|
16.1%
|
16.0%
|
|
Number of fixed retail accesses
|
2,277
|
1,961
|
1,963
|
16.1%
|
16.0%
|
|
Incl.
|
Number of broadband accesses
|
1,441
|
1,094
|
1,096
|
31.6%
|
31.5%
|
|
|
Number of fixed narrowband accesses
|
836
|
867
|
867
|
(3.5)%
|
(3.5)%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) Excluding customers of Mobile Virtual Network Operators (MVNOs).
(3) Change in the recognition method of fixed accesses on January 1, 2020 (see Section 1.2.1.2 Number of customers).
1.3.5 Enterprise
|
Enterprise
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
3,859
|
3,908
|
3,770
|
(1.3)%
|
2.3%
|
|
EBITDAaL
|
471
|
578
|
565
|
(18.5)%
|
(16.7)%
|
|
EBITDAaL / Revenue
|
12.2%
|
14.8%
|
15.0%
|
|
|
|
Operating income
|
267
|
|
360
|
|
(25.8)%
|
|
eCAPEX
|
174
|
200
|
197
|
(13.0)%
|
(11.9)%
|
|
eCAPEX/Revenue
|
4.5%
|
5.1%
|
5.2%
|
|
|
|
Average number of employees
|
27,116
|
26,235
|
25,420
|
3.4%
|
6.7%
|
(1) See Section 1.5.1 Data on a comparable basis.
1.3.5.1 Revenue - Enterprise
|
Enterprise
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
3,859
|
3,908
|
3,770
|
(1.3)%
|
2.3%
|
|
Fixed services only
|
1,958
|
1,986
|
1,978
|
(1.4)%
|
(1.0)%
|
|
|
Voice services (2)
|
632
|
650
|
649
|
(2.8)%
|
(2.6)%
|
|
|
Data services (3)
|
1,326
|
1,335
|
1,329
|
(0.7)%
|
(0.3)%
|
|
IT & integration services
|
1,475
|
1,448
|
1,318
|
1.9%
|
12.0%
|
|
Services and mobile equipment (4)
|
426
|
475
|
474
|
(10.3)%
|
(10.3)%
|
|
|
Mobile services only
|
327
|
368
|
367
|
(11.0)%
|
(11.0)%
|
|
|
Wholesale
|
21
|
18
|
18
|
20.1%
|
20.1%
|
|
|
Equipment sales
|
77
|
89
|
89
|
(13.3)%
|
(13.3)%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) Voice services include (i) legacy voice offerings (PSTN access), (ii) Voice over Internet Protocol (VoIP) products, (iii) audio conference services, and (iv) incoming traffic for call centers.
(3) Data services include (i) legacy data solutions still offered by Orange Business Services (Frame Relay, Transrel, leased lines, narrowband), (ii) services having reached a certain maturity such as IP-VPN, and broadband infrastructure products such as satellite or fiber optic access, (iii) satellite TV broadcast services and (iv) Business Everywhere roaming offers.
(4) Services and mobile equipment include (i) Mobile services only, wholesale, corresponding to incoming enterprise mobile traffic invoiced to other carriers, and (ii) mobile equipment sales invoiced to enterprises.
On a historical basis, the 88 million euro increase in Enterprise revenue between the first half of 2019 and the first half of 2020 resulted from (i) the positive effects of changes in the scope of consolidation and other changes for 128 million euros, mainly the result of the SecureLink acquisition on July 8, 2019, and (ii) the positive effect of foreign exchange fluctuations for 10 million euros, (iii) partially offset by organic change on a comparable basis, namely, a 49 million euro decline in revenue.
On a comparable basis, the 49 million euro drop in Enterprise revenue between the first half of 2019 and the first half of 2020 resulted mainly from (i) the decline in Services and mobile equipment, impacted by the Covid-19 health crisis, (ii) the fall in voice services and, (iii) to a lesser extent, the decline in data services, (iv) partially offset by the rise in IT & integration services.
Between the two periods, Services and mobile equipment suffered the effects of the Covid-19 health crisis, falling by 49 million euros, mainly related to revenues from mobile services only (roaming), and, to a lesser degree, mobile equipment sales. The 18 million euro decrease in Voice services revenue reflects the underlying decline of voice services, particularly traditional fixed-line telephony (down 10.3% year-on-year), despite the 81.0% growth in audioconference services, the use of which has expanded during the Covid-19 health crisis. To a lesser extent, the 10 million euro drop in Data services revenue between the two periods stemmed mainly from the 10.6%
decline in revenue from satellite television broadcasting services (Globecast) because of postponements and cancellations of sporting and cultural events due to Covid-19.
This change was partly offset by the 28 million euro increase in IT & integration services revenue between the two periods due in large part to the growth in Cloud (an 8.0% increase year-on-year) and security services (11.4% growth year-on-year).
1.3.5.2 EBITDAaL - Enterprise
On a historical basis, the 94 million euro decrease in Enterprise EBITDAaL between the first half of 2019 and the first half of 2020 included (i) the favorable effect of changes in the scope of consolidation and other changes for 6 million euros, and (ii) the favorable effect of foreign exchange fluctuations for 7 million euros, (iii) more than offset by organic change on a comparable basis, i.e., a 107 million euro decline in EBITDAaL.
On a comparable basis, the 107 million euro decrease in Enterprise EBITDAaL between the first half of 2019 and the first half of 2020 can essentially be attributed to:
− (i) the 49 million euro decline in revenue, (ii) the increase in labor expenses, due largely to the increase in the average number of full-time equivalent employees, linked to growth in IT & integration services, (iii) the increase in other network expenses and IT expenses corresponding to a rise in infrastructure operating and maintenance costs and IT applications, and (iv) the increase in impairment and losses on trade receivables related to the Covid-19 health crisis;
− partly offset by (i) the decline in commercial expenses related to reduced business and (ii) the decline in other external purchases, related in part to the Covid-19 health crisis.
1.3.5.3 Operating income - Enterprise
On a historical basis, the 93 million euro decrease in Enterprise operating income between the first half of 2019 and the first half of 2020 was mainly due to the 94 million euro decline in Enterprise EBITDAaL.
1.3.5.4 Economic CAPEX - Enterprise
On a historical basis, the 23 million euro decrease in Enterprise economic CAPEX between the first half of 2019 and the first half of 2020 included (i) the favorable effect of foreign exchange fluctuations for 2 million euros, and (ii) the favorable effect of changes in the scope of consolidation and other changes for 1 million euros, (iii) more than offset by organic change on a comparable basis, for a 26 million euro decline in economic CAPEX.
On a comparable basis, the 26 million euro decrease in Enterprise economic CAPEX between the first half of 2019 and the first half of 2020 may be attributed chiefly to (i) postponements of projects (real estate and customer projects), due partly to the Covid-19 health crisis, and (ii) to the discontinuation of a major customer project with the resale of the assets to the customer.
1.3.5.5 Additional information - Enterprise
|
Enterprise
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in thousands, at the end of the period)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Mobile services
|
|
|
|
|
|
|
Number of mobile accesses in France (2)
|
12,875
|
12,233
|
12,233
|
5.2%
|
5.2%
|
|
Fixed services
|
|
|
|
|
|
|
Number of fixed accesses in France (3)
|
1,467
|
1,591
|
1,591
|
(7.8)%
|
(7.8)%
|
|
Number of fixed retail accesses
|
1,467
|
1,591
|
1,591
|
(7.8)%
|
(7.8)%
|
|
Incl.
|
Number of fixed broadband accesses
|
246
|
255
|
255
|
(3.4)%
|
(3.4)%
|
|
|
Number of fixed narrowband accesses
|
1,220
|
1,336
|
1,336
|
(8.6)%
|
(8.6)%
|
|
Number of IP-VPN accesses worldwide (4)
|
360
|
359
|
359
|
0.5%
|
0.5%
|
|
Incl.
|
Number of IP-VPN accesses in France (4)
|
305
|
301
|
301
|
1.3%
|
1.3%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) Contract customers. Excluding customers of Mobile Virtual Network Operators (MVNOs).
(3) Change in the recognition method of fixed accesses on January 1, 2020 (see Section 1.2.1.2 Number of customers).
(4) Access of customers outside the Orange group, not including operators’ market.
1.3.6 International Carriers & Shared Services
|
International Carriers & Shared Services
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
728
|
746
|
747
|
(2.4)%
|
(2.4)%
|
|
EBITDAaL
|
(179)
|
(183)
|
(174)
|
1.9%
|
(2.9)%
|
|
EBITDAaL / Revenue
|
(24.6)%
|
(24.5)%
|
(23.3)%
|
|
|
|
Operating income
|
(345)
|
|
(393)
|
|
12.3%
|
|
eCAPEX
|
123
|
73
|
80
|
68.9%
|
55.7%
|
|
eCAPEX/Revenue
|
16.9%
|
9.8%
|
10.6%
|
|
|
|
Average number of employees
|
12,682
|
12,592
|
12,549
|
0.7%
|
1.1%
|
(1) See Section 1.5.1 Data on a comparable basis.
1.3.6.1 Revenue - International Carriers & Shared Services
|
International Carriers & Shared Services
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Revenue
|
728
|
746
|
747
|
(2.4)%
|
(2.4)%
|
|
Wholesale
|
530
|
543
|
542
|
(2.4)%
|
(2.3)%
|
|
Other revenue
|
199
|
203
|
205
|
(2.4)%
|
(2.9)%
|
(1) See Section 1.5.1 Data on a comparable basis.
On both a historical basis and a comparable basis, the 18 million euro decrease in International Carriers & Shared Services revenue between the first half of 2019 and the first half of 2020 was attributable to:
− the 13 million euro decline in Wholesale, particularly services to international carriers (roaming), which were hit hard by the Covid-19 health crisis, with the curtailment of international travel and reduced flow on voice corridors.
− and by the 5 million euro drop in Other revenues, due in particular (i) to the fall in cinema revenues (Orange Studio), impacted by the closure of cinemas during the lockdown and restrictions related to the Covid-19 health crisis, and (ii) to the decline in Orange Marine's installation activities, which were also restricted by the Covid-19 health crisis.
1.3.6.2 EBITDAaL - International Carriers & Shared Services
On a historical basis, the 5 million euro decrease in International Carriers & Shared Services EBITDAaL between the first half of 2019 and the first half of 2020 is attributable to (i) the unfavorable effect of changes in the scope of consolidation and other changes for 8 million euros, (ii) partly offset by organic change on a comparable basis, for a 4 million euro increase in EBITDAaL.
On a comparable basis, the 4 million euro increase in International Carriers & Shared Services EBITDAaL between the first half of 2019 and the first half of 2020 stemmed mainly from:
− the decline in other external purchases, mainly related to the drop in general expenses of shared services due to the Covid-19 health crisis (savings on travel, cancellation of various events, decrease in activity, etc.) and the fall in labor expenses;
− partially offset by (i) the decrease in other operating income (net of other operating expenses), with in particular the effect and counter-effect of various litigations between the two periods, and (ii) the 18 million euro fall in revenue.
1.3.6.3 Operating income - International Carriers & Shared Services
On a historical basis, the 48 million euro growth in the operating income for International Carriers & Shared Services between the first half of 2019 and the first half of 2020 is mainly attributable to (i) the counter-effect of the recognition, in the first half of 2019, of a 65 million euro expense on significant litigation, (ii) the 23 million euro decline in restructuring program costs, mainly due to the optimization of the real estate portfolio, and (iii) the 14 million euro decrease in specific labor expenses relating to the French "Part-Time for Seniors" program (TPS, pursuant to agreements on the employment of seniors in France), (iv) partially offset by the drop in gains (losses) from disposals on fixed assets between the two periods (counter-effect of the significant disposals carried out in the first half of 2019 as part of the optimization of the real estate portfolio).
1.3.6.4 Economic CAPEX - International Carriers & Shared Services
On a historical basis, the 44 million euro increase in the economic CAPEX of International Carriers & Shared Services between the first half of 2019 and the first half of 2020 included (i) the unfavorable effect of changes in the scope of consolidation and other changes for 6 million euros, (ii) more than offset by organic change on a comparable basis, for a 50 million euro increase in economic CAPEX.
On a comparable basis, the 50 million euro increase in economic CAPEX of International Carriers & Shared Services between the first half of 2019 and the first half of 2020 resulted mainly from the fall in disposals of fixed assets carried out between the two periods (counter-effect of the significant disposals carried out in the first half of 2019 as part of the optimization of the real estate portfolio, and secondarily, delays in real estate restructuring projects due to the Covid-19 health crisis in the first half of 2020).
1.3.7 Orange Bank
|
Orange Bank
|
2020
|
2019
|
2019
|
Change (%)
|
Change (%)
|
|
(at June 30, in millions of euros)
|
|
data on a comparable basis (1)
|
data on a historical basis
|
data on a comparable basis (1)
|
data on a historical basis
|
|
Net banking income (NBI) (2)
|
34
|
15
|
15
|
119.0%
|
119.0%
|
|
Cost of bank credit risk (3)
|
(11)
|
(4)
|
(4)
|
180.5%
|
180.5%
|
|
Operating income
|
(87)
|
|
(88)
|
|
0.9%
|
|
eCAPEX
|
14
|
16
|
16
|
(14.5)%
|
(14.5)%
|
|
Average number of employees
|
831
|
835
|
834
|
(0.5)%
|
(0.5)%
|
(1) See Section 1.5.1 Data on a comparable basis.
(2) Net Banking Income (NBI) recognized as other operating income (see Notes 1.2 and 1.3 to the consolidated financial statements).
(3) Cost of bank credit risk recognized in other operating expenses (see Notes 1.2 and 1.3 to the consolidated financial statements).
Orange Bank continued its roll-out (i) in France, with the expansion of its mobile financial services and the consolidation of Orange Courtage, a broker of insurance programs that align with Orange and, (ii) in Spain, with the roll-out of its everyday banking service in Orange stores and the launch of a new personal loan product (see Section 1.1.3 Significant events).
As of June 30, 2020, Orange Bank had 1 million customers who were acquired through Orange stores, Groupama branches and digital channels.
1.3.7.1 Operating activities
Segment information for Orange Bank (operating income, investments in property, plant and equipment and intangible assets) is presented in Notes 1.2 and 1.3 to the consolidated financial statements.
On a historical basis, Orange Bank's operating income was a negative 87 million euros in the first half of 2020, and was stable overall compared to the first half of 2019. This change was chiefly attributable to:
− the 18 million euro increase in Net Banking Income (NBI), due particularly to (i) the growth of NBI from the new Orange Bank service, and (ii) a decline in acquisition costs;
− partially offset by (i) the increase in external purchases related in particular to the expansion of Orange Bank's services in Spain, and (ii) an increase in the cost of risk of bank credit caused by the deterioration of the economic and business environment resulting from the Covid-19 health crisis (shutdown of Orange stores and Groupama branches during the lockdown period), the consequence of which was a production of loans and borrowings focused on the digital channels.
On both a historical basis and a comparable basis, the economic CAPEX of Orange Bank declined by 2 million euros between the first half of 2019 and the first half of 2020 due to a fall in investment in France.
1.3.7.2 Assets, liabilities and cash flows
The segment information for Orange Bank (operating income, investments in property, plant and equipment and intangible assets, assets, liabilities and cash flows) is presented in Note 1 to the consolidated financial statements, and the activities of Orange Bank (financial assets and liabilities) are described in Note 11 to the consolidated financial statements.
For further information on the risks relating to Orange Bank activities, see Section 2.1.3 Financial risks of the 2019 Universal Registration Document.
1.4 Cash flow and financial debt of telecoms activities
To ensure the transparency of the financial statements and separate out the performances of the telecoms activities and the Orange Bank activities, financial analyzes and comments are split to reflect these two scopes of operation (see Note 1 to the consolidated financial statements). Therefore, Section 1.4 Cash flow and financial debt of telecoms activities covers telecoms activities, and Section 1.3.7 Orange Bank is dedicated to Orange Bank's activities.
Concerning the effect of the Covid-19 pandemic on the activities and the financial position of the Group, see Section 1.1.3 Significant events.
1.4.1 Liquidity and cash flows of telecoms activities
1.4.1.1 Organic cash flow (telecoms activities)
Organic cash flow from telecoms activities is not a financial aggregate defined by IFRS standards. For further information on the calculation of organic cash flow from telecoms activities and the reasons why the Orange group uses this aggregate, see Section 1.5 Financial indicators not defined by IFRS and Section 1.6.4 Financial glossary.
Organic cash flow from telecoms activities stood at 255 million euros in the first half of 2020, up from 92 million euros in the first half of 2019 (see Note 1.7 to the consolidated financial statements).
|
Organic cash flow from telecoms activities
|
2020
|
2019
|
|
(at June 30, in millions of euros)
|
|
data on a historical basis
|
|
EBITDAaL of telecoms activities
|
5,986
|
6,035
|
|
eCAPEX of telecoms activities
|
(3,142)
|
(3,493)
|
|
EBITDAaL - eCAPEX of telecoms activities
|
2,844
|
2,542
|
|
Increase (decrease) in eCAPEX suppliers (1)
|
(340)
|
(252)
|
|
Decrease (increase) in working capital requirement (2)
|
(1,017)
|
(574)
|
|
Interest paid and interest rate effects on derivatives, net (net of dividends received) (3)
|
(559)
|
(704)
|
|
Income tax paid
|
(527)
|
(640)
|
|
Other operating items (4)
|
(147)
|
(280)
|
|
Organic cash flow from telecoms activities
|
255
|
92
|
(1) Including investing donations received in advance.
(2) See Section 1.6.4 Financial glossary.
(3) Excluding interest expenses paid on lease liabilities for 62 million euros in the first half of 2020 and 46 million euros in the first half of 2019 (see Note 1.7 to the consolidated financial statements).
(4) Including (i) disbursements related to "Temps Partiel Séniors" (TPS, measures relating to the French part-time for seniors plans) and restructuring and integration costs, (ii) repayment of lease liabilities, and (iii) elimination of non-monetary effects.
Between the first half of 2019 and the first half of 2020, the 163 million euro increase in organic cash flow from telecoms activities was attributed mainly to:
− the 351 million euro decline in economic CAPEX of telecoms activities, due mainly to (i) the Covid-19 health crisis (with the slowdown in the roll-out of fixed and mobile networks), (ii) the increase in joint financing received from other carriers, and (iii) the increase in disposals of fixed assets (see Section 1.2.6.1 Economic CAPEX);
− and to a lesser extent, (i) the 145 million euro decrease in net interest paid and the rate effect of net derivatives (excluding interest paid on lease liabilities and net of dividends received) and (ii) the 113 million euro decrease in income tax paid;
− partially offset by the 443 million euro change in working capital between the two periods. This change resulted mainly from (i) the increase in receivables related to the construction, operation and marketing of fiber optic networks in France, and to a lesser extent, (ii) the increase in overdue payments from customers due in particular to the Covid-19 health crisis, and (iii) initiatives to support suppliers in France amid the Covid-19 health crisis, (iv) partially offset by the effects of the overall slowdown in business activity during the Covid-19 health crisis on the change in working capital (see Section 1.1.3 Significant events and Notes 5.1 and 6.3 to the consolidated financial statements).
1.4.1.2 Cash flows from telecoms activities
Cash flows fom telecoms activities are presented in Note 1.7 to the consolidated financial statements.
|
Simplified statement of cash flows of telecoms activities (1)
|
2020
|
2019
|
|
(at June 30, in millions of euros)
|
|
data on a historical basis
|
|
Net cash provided by operating activities
|
4,375
|
4,541
|
|
Net cash used in investing activities
|
(3,280)
|
(4,153)
|
|
Net cash used in financing activities
|
(1,158)
|
263
|
|
Cash change in cash and cash equivalents
|
(62)
|
651
|
|
Cash and cash equivalents in the opening balance
|
6,112
|
5,081
|
|
Cash change in cash and cash equivalents
|
(62)
|
651
|
|
Non-cash change in cash and cash equivalents
|
(19)
|
2
|
|
Cash and cash equivalents in the closing balance
|
6,031
|
5,734
|
(1) See Note 1.7 to the consolidated financial statements.
Net operating cash flow from telecoms activities
Between the first half of 2019 and the first half of 2020, the 166 million euro decrease in net operating cash flow from telecoms activities was mainly attributable to:
− (i) the 443 million euro change in working capital between the two periods (see above), and (ii) to a lesser extent, the 139 million euro decline in operating income;
− partially offset by the combined decrease of (i) 129 million euros in net interest paid and rate effect of net derivatives (net of dividends paid), (ii) 113 million euros in operating taxes and levies paid, and (iii) 113 million euros in income tax paid (see Note 1.7 to the consolidated financial statements).
Net investing cash flow from telecoms activities
Between the first half of 2019 and the first half of 2020, the 873 million euro decrease in net investing cash flow from telecoms activities resulted primarily from:
− the 379 million euro reduction in investments and other financial assets, related mainly to the counter-effect of the increase in cash received in the first half of 2019 and corresponding to bond issues completed during the half-year;
− the 361 million euro decrease in acquisitions and disposals of property, plant and equipment and intangible assets (net of change in fixed asset payables), related mainly to (i) the overall decline in economic CAPEX in the first half of 2020 due to the Covid-19 health crisis, particularly with the slowdown in the roll-out of fixed and mobile networks, and (ii) the drop in telecommunication licenses paid during the two periods (see Section 1.2.6 Group investments);
− and the counter-effect of the acquisitions of investment securities (net of cash acquired) completed in the first half of 2019 for 151 million euros (mainly SecureData and BlueSoft).
Net financing cash flow from telecoms activities
Between the first half of 2019 and the first half of 2020, the 1,421 million euro decline in net financing cash flow from telecoms activities resulted mainly from the 2,856 million euro reduction in medium- and long-term debt issues (see Note 9.5 to the consolidated financial statements), partially offset by:
− the 529 million euro reduction in dividends paid by Orange SA, following the reduction in the dividend for fiscal year 2019 on account of the Covid-19 health crisis (see Section 1.1.3 Significant events and Note 12.3 to the consolidated financial statements);
− the change in bank overdrafts and short-term borrowings for 519 million euros, due to the 500 million euro purchase in February 2020 of subordinated notes that had been reclassified as short-term borrowings at December 31, 2019 (see Note 1.7 to the consolidated financial statements);
− and the net change in cash collateral for 258 million euros.
1.4.2 Net financial debt of telecoms activities
Net financial debt (see Note 9.4 to the consolidated financial statements) and the ratio of net financial debt to EBITDAaL of telecoms activities are financial indicators that are not defined by IFRS. For further information on the calculation of these indicators and the reasons why the Orange group uses them, see Section 1.5 Financial indicators not defined by IFRS and Section 1.6.4 Financial glossary. Net financial debt as defined and used by Orange does not include Orange Bank activities, for which this concept is not relevant.
For further information on the risks relating to the Orange group’s financial debt, see Section 2.1.3 Financial risks of the 2019 Universal Registration Document.
|
|
June 30, 2020
|
December 31, 2019
|
|
(in millions of euros)
|
|
data on a historical basis
|
|
Net financial debt (1)
|
26,420
|
25,466
|
|
Ratio of Net financial debt / EBITDAaL of telecoms activities (1)
|
2.04
|
1.96
|
(1) See Section 1.5 Financial indicators not defined by IFRS.
Between December 31, 2019, and June 30, 2020, net financial debt rose by 954 million euros.
|
Change in net financial debt
|
Decrease /
(Increase)
|
|
(at June 30, in millions of euros)
|
|
Net financial debt as of December 31, 2019
|
(25,466)
|
|
Organic cash flow from telecoms activities (1)
|
255
|
|
Telecommunication licenses paid
|
(134)
|
|
Significant litigations paid (and received)
|
(18)
|
|
Acquisitions and disposals of investment securities (net of cash acquired or sold)
and changes in ownership interests with no gain or loss of control
|
(18)
|
|
Coupon and other fees on subordinated notes (2)
|
(186)
|
|
Dividends paid to owners of the parent company (3)
|
(532)
|
|
Dividends paid to non-controlling interests
|
(164)
|
|
Other financial items
|
(157)
|
|
|
Orange Bank capital increase subscribed by the Group (4)
|
(89)
|
|
|
Other (5)
|
(68)
|
|
Decrease (increase) in net financial debt
|
(954)
|
|
Net financial debt as of June 30, 2020
|
(26,420)
|
(1) See Section 3.1.4.1 Organic cash flow (telecoms activities) and Note 1.7 to the consolidated financial statements.
(2) See Note 12.6 to the consolidated financial statements.
(3) The Shareholders' Meeting held on May 19, 2020, approved the payment of a dividend of 0.50 euro per share in respect of the 2019 fiscal year instead of a dividend of 0.70 euro per share announced during the presentation of the 2019 consolidated income in February 2020. Taking into account the interim dividend of 0.30 euro per share, paid on December 4, 2019, for a total of 796 million euros, the 0.20 euro per share balance of the dividend to be paid was paid on June 4, 2020, for an amount of 532 million euros (see Section 1.1.3 Significant events and Note 12.3 to the consolidated financial statements).
(4) See Note 1.7 to the consolidated financial statements.
(5) Including the effect of recognizing payables on financed assets.
At June 30, 2020, the liquidity position of the telecoms activities was 16,523 million euros (see Note 10.1 to the consolidated financial statements). The changes in financial assets, liabilities and financial result excluding Orange Bank activities are detailed in Note 9 to the consolidated financial statements.
1.5 Financial indicators not defined by IFRS
In this document, in addition to the financial indicators reported in accordance with the IFRS (International Financial Reporting Standards), Orange publishes financial indicators that are not defined by IFRS. As described below, these figures are presented as additional information and are not meant to be substitutes for or to be confused with financial indicators as defined by IFRS.
1.5.1 Data on a comparable basis
In order to allow investors to track the annual changes in the Group’s operations, data on a comparable basis are presented for the previous period. The transition from data on a historical basis to data on a comparable basis consists of keeping the results for the year ended and restating the previous year in order to present financial data with comparable methods, scope of consolidation and exchange rates over comparable periods. Orange provides the details of the effect of changes in method, scope of consolidation and exchange rates on its key operating indicators in order to isolate the intrinsic business effect. The method used is to apply to the data of the corresponding period of the preceding year the methods and the scope of consolidation for the period ended, as well as the average exchange rates used for the Consolidated income statement for the period ended.
Orange’s management believes that the presentation of these indicators on a comparable basis is pertinent, as these are indicators used internally by the Group for monitoring its operating activities. Changes in data on a comparable basis better reflect organic business changes.
Data on a comparable basis are not financial indicators defined by IFRS and may not be comparable to similarly-titled indicators used by other companies. It is provided as additional information only and should not be considered as a substitute for an analysis of the Group’s historical data for the past year or previous periods.
Group
The table below presents, for the Orange group, the transition from data on a historical basis to data on a comparable basis for the first half of 2019, for the main operating data.
|
First half year 2019 / Group
|
Revenue
|
EBITDAaL
|
eCAPEX
|
Average number of employees
|
|
(at June 30, 2019, in millions of euros)
|
|
Data on a historical basis
|
20,573
|
5,958
|
3,509
|
135,804
|
|
Foreign exchange fluctuations (1)
|
18
|
11
|
(0)
|
-
|
|
|
Egyptian pound (EGP)
|
43
|
13
|
6
|
-
|
|
|
US dollar (USD)
|
20
|
5
|
2
|
-
|
|
|
Polish zloty (PLN)
|
(35)
|
(8)
|
(6)
|
-
|
|
|
Others
|
(10)
|
1
|
(2)
|
-
|
|
Changes in the scope of consolidation and other changes
|
112
|
(9)
|
(7)
|
587
|
|
|
Acquisition of SecureLink
|
122
|
8
|
2
|
709
|
|
|
Acquisition of BKM
|
19
|
(1)
|
-
|
194
|
|
|
Acquisition of SecureData
|
5
|
-
|
-
|
106
|
|
|
Disposal of Orange Niger
|
(34)
|
(9)
|
(1)
|
(410)
|
|
|
Others
|
0
|
(7)
|
(8)
|
(12)
|
|
Data on a comparable basis
|
20,703
|
5,960
|
3,502
|
136,391
|
(1) Foreign exchange fluctuations between the average exchange rates for the first half of 2019 and the average exchange rates for the first half of 2020.
The changes included in the transition from data on a historical basis to data on a comparable basis for the first half of 2019 primarily include:
− foreign exchange fluctuations between the average exchange rates for the first half of 2019 and the average exchange rates for the first half of 2020;
− and changes in the scope of consolidation and other changes, with, primarily:
- the acquisition of SecureLink (Enterprise) on July 8, 2019, taking effect on January 1, 2019, on a comparable basis,
- the acquisition of BKM (Europe) on July 30, 2019, taking effect on January 1, 2019, on a comparable basis,
- the acquisition of SecureData (Enterprise) on January 31, 2019, taking effect on January 1, 2019, on a comparable basis,
- and the disposal of Orange Niger (Africa & Middle East) on November 22, 2019, taking effect on January 1, 2019, on a comparable basis.
Segments
The table below presents, for each Orange group operating segment, the transition from data on a historical basis to data on a comparable basis for the first half of 2019, for the main operating data.
|
First half year 2019 / Segments
|
Revenue
|
EBITDAaL
|
eCAPEX
|
Average number of employees
|
|
(at June 30, 2019, in millions of euros)
|
|
France
|
|
|
|
|
|
Data on a historical basis
|
8,874
|
3,281
|
1,862
|
54,133
|
|
Foreign exchange fluctuations (1)
|
-
|
(1)
|
-
|
-
|
|
Changes in the scope of consolidation and other changes (2)
|
6
|
3
|
0
|
(16)
|
|
Data on a comparable basis
|
8,880
|
3,284
|
1,862
|
54,117
|
|
Spain
|
|
|
|
|
|
Data on a historical basis
|
2,624
|
787
|
529
|
6,884
|
|
Foreign exchange fluctuations (1)
|
-
|
-
|
-
|
-
|
|
Changes in the scope of consolidation and other changes (2)
|
(0)
|
0
|
0
|
(0)
|
|
Data on a comparable basis
|
2,624
|
787
|
529
|
6,884
|
|
Europe
|
|
|
|
|
|
Data on a historical basis
|
2,789
|
708
|
407
|
21,072
|
|
Foreign exchange fluctuations (1)
|
(35)
|
(8)
|
(6)
|
-
|
|
Changes in the scope of consolidation and other changes (2)
|
19
|
(1)
|
0
|
195
|
|
|
Acquisition of BKM
|
19
|
(1)
|
-
|
194
|
|
|
Other changes (2)
|
0
|
0
|
0
|
1
|
|
Data on a comparable basis
|
2,774
|
699
|
401
|
21,267
|
|
Africa & Middle East
|
|
|
|
|
|
Data on a historical basis
|
2,737
|
868
|
418
|
14,912
|
|
Foreign exchange fluctuations (1)
|
43
|
13
|
5
|
-
|
|
Changes in the scope of consolidation and other changes (2)
|
(38)
|
(9)
|
(3)
|
(449)
|
|
|
Disposal of Orange Niger
|
(34)
|
(9)
|
(1)
|
(410)
|
|
|
Other changes (2)
|
(4)
|
(0)
|
(2)
|
(39)
|
|
Data on a comparable basis
|
2,742
|
872
|
420
|
14,463
|
|
Enterprise
|
|
|
|
|
|
Data on a historical basis
|
3,770
|
565
|
197
|
25,420
|
|
Foreign exchange fluctuations (1)
|
10
|
7
|
1
|
-
|
|
Changes in the scope of consolidation and other changes (2)
|
128
|
7
|
2
|
815
|
|
|
Acquisition of SecureLink
|
122
|
8
|
2
|
709
|
|
|
Acquisition of SecureData
|
5
|
-
|
-
|
106
|
|
|
Other changes (2)
|
1
|
(1)
|
0
|
(0)
|
|
Data on a comparable basis
|
3,908
|
578
|
200
|
26,235
|
|
International Carriers & Shared Services
|
|
|
|
|
|
Data on a historical basis
|
747
|
(174)
|
80
|
12,549
|
|
Foreign exchange fluctuations (1)
|
(1)
|
(0)
|
0
|
-
|
|
Changes in the scope of consolidation and other changes (2)
|
(0)
|
(9)
|
(7)
|
43
|
|
Data on a comparable basis
|
746
|
(183)
|
73
|
12,592
|
|
Orange Bank
|
|
|
|
|
|
Data on a historical basis
|
-
|
(78)
|
16
|
834
|
|
Foreign exchange fluctuations (1)
|
-
|
-
|
-
|
-
|
|
Changes in the scope of consolidation and other changes (2)
|
-
|
(0)
|
0
|
1
|
|
Data on a comparable basis
|
-
|
(78)
|
16
|
835
|
(1) Foreign exchange fluctuations between the average exchange rates for the first half of 2019 and the average exchange rates for the first half of 2020.
(2) Including the effect of internal reorganizations between segments which have no effect at Group level.
1.5.2 EBITDAaL
EBITDAaL (or "EBITDA after leases") relates to operating income (i) before depreciation and amortization of fixed assets, effects resulting from business combinations, reclassification of translation adjustment from liquidated entities, impairment of goodwill and fixed assets, share of profits (losses) of associates and joint ventures, (ii) after interest on lease liabilities and interest on debts related to financed assets, and (iii) adjusted for significant litigation, specific labor expenses, fixed assets, investments and businesses portfolio review, restructuring programs costs, acquisition and integration costs and, where appropriate, other specific items that are systematically specified in relation to income and/or expenses (see Note 1 to the consolidated financial statements).
The reconciliation between EBITDAaL and consolidated net income is shown below.
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
data on a historical basis
|
|
(at June 30, in millions of euros)
|
Adjusted data
|
Presentation adjustments (1)
|
Consolidated income statement
|
Adjusted data
|
Presentation adjustments (1)
|
Consolidated income statement
|
|
Revenue
|
20,769
|
-
|
20,769
|
20,573
|
-
|
20,573
|
|
External purchases
|
(8,557)
|
-
|
(8,557)
|
(8,562)
|
-
|
(8,562)
|
|
Other operating income
|
271
|
-
|
271
|
341
|
-
|
341
|
|
Other operating expenses
|
(274)
|
(174)
|
(448)
|
(195)
|
(6)
|
(201)
|
|
Labor expenses
|
(4,342)
|
(33)
|
(4,376)
|
(4,320)
|
(114)
|
(4,434)
|
|
Operating taxes and levies
|
(1,232)
|
-
|
(1,232)
|
(1,207)
|
-
|
(1,207)
|
|
Gains (losses) on disposal of fixed assets, investments and activities
|
-
|
59
|
59
|
-
|
68
|
68
|
|
Restructuring costs
|
-
|
(13)
|
(13)
|
-
|
(52)
|
(52)
|
|
Depreciation and amortization of financed assets
|
(22)
|
-
|
(22)
|
(3)
|
-
|
(3)
|
|
Depreciation and amortization of right-of-use assets
|
(642)
|
-
|
(642)
|
(609)
|
-
|
(609)
|
|
Impairment of right-of-use assets
|
-
|
(6)
|
(6)
|
-
|
(24)
|
(24)
|
|
Interest on debts related to financed assets (2)
|
(1)
|
1
|
-
|
-
|
-
|
-
|
|
Interest on lease liabilities (2)
|
(56)
|
56
|
-
|
(60)
|
60
|
-
|
|
EBITDAaL
|
5,914
|
(111)
|
-
|
5,958
|
(68)
|
-
|
|
Significant litigations
|
(169)
|
169
|
-
|
(65)
|
65
|
-
|
|
Specific labour expenses
|
(28)
|
28
|
-
|
(46)
|
46
|
-
|
|
Fixed assets, investments and business portfolio review
|
59
|
(59)
|
-
|
68
|
(68)
|
-
|
|
Restructuring programs costs
|
(19)
|
19
|
-
|
(75)
|
75
|
-
|
|
Acquisition and integration costs
|
(10)
|
10
|
-
|
(10)
|
10
|
-
|
|
Depreciation and amortization of fixed assets
|
(3,549)
|
-
|
(3,549)
|
(3,500)
|
-
|
(3,500)
|
|
Reclassification of translation adjustment from liquidated entities
|
-
|
-
|
-
|
2
|
-
|
2
|
|
Impairment of fixed assets
|
1
|
-
|
1
|
-
|
-
|
-
|
|
Share of profits (losses) of associates and joint ventures
|
(6)
|
-
|
(6)
|
(4)
|
-
|
(4)
|
|
Elimination of interest on debts related to financed assets (2)
|
1
|
(1)
|
-
|
-
|
-
|
-
|
|
Elimination of interest on lease liabilities (2)
|
56
|
(56)
|
-
|
60
|
(60)
|
-
|
|
Operating income
|
2,249
|
0
|
2,249
|
2,388
|
-
|
2,388
|
|
Finance costs, net
|
-
|
-
|
(742)
|
-
|
-
|
(738)
|
|
Income Tax
|
-
|
-
|
(491)
|
-
|
-
|
(513)
|
|
Consolidated net income
|
-
|
-
|
1,016
|
-
|
-
|
1,137
|
|
Net income attributable to owners of the parent company
|
-
|
-
|
927
|
-
|
-
|
1,039
|
|
Non-controlling interests
|
-
|
-
|
88
|
-
|
-
|
98
|
(1) The presentation adjustments allow reassignment of specific line items identified in the segment information (see Note 1 to the consolidated financial statements) to the lines for operating income and expenses presented in the Consolidated income statement.
(2) Interest on debts related to financed assets and on lease liabilities are included in segment EBITDAaL. They are excluded from segment operating income and included in net finance costs presented in the consolidated financial statements.
Orange's management considers that the presentation of the indicator EBITDAaL is relevant because, by including lease expenses in its calculation, this indicator enables better reflection of the operational performance of operating segments, while retaining consistency with the adjusted EBITDA indicator used in segment information until 31 December 2018. This is the operational performance indicator used internally by the Group since 1 January 2019 to (i) manage and assess its operating results and segment results, and (ii) implement its investments and resource allocation strategy. EBITDAaL, or similar management indicators used by Orange’s competitors, are indicators that are often disclosed and widely used by analysts, investors and other players in the telecommunications industry.
EBITDAaL is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies. They are provided as additional information only and should not be considered as a substitute for operating income or cash provided by operating activities.
1.5.3 eCAPEX
eCAPEX (or "economic CAPEX") relates both to (i) investments in property, plant and equipment and intangible assets, excluding telecommunications licenses and financed assets, less the price of disposal of property, plant and equipment and intangible assets, and (ii) acquisitions of property, plant and equipment and intangible assets excluding telecommunications licenses and change in fixed asset payables, less the price of disposal of property, plant and equipment and intangible assets.
The table below shows the transition of (i) investments in property, plant and equipment and intangible assets as presented in Note 1.4 to the consolidated financial statements, and (ii) acquisitions of property, plant and equipment and intangible assets, excluding trade payables, as presented in the Consolidated statement of cash flows, (iii) to eCAPEX.
|
|
2020
|
2019
|
|
(at June 30, in millions of euros)
|
|
data on a historical basis
|
|
Investments in property, plant and equipment and intangible assets
|
3,513
|
4,216
|
|
Financed assets
|
(117)
|
(66)
|
|
Purchases of property, plant and equipment and intangible assets (1)
|
3,395
|
4,150
|
|
Proceeds from sales of property, plant and equipment and intangible assets
|
(197)
|
(131)
|
|
Telecommunications licenses
|
(42)
|
(510)
|
|
eCAPEX
|
3,156
|
3,509
|
(1) See Consolidated statement of cash flows. Excluded changes in fixed assets trade payables. Investments financed through finance leases have no effect on cash flow upon acquisition.
Orange’s management considers that presenting economic CAPEX is relevant because this indicator (i) does not include investments in telecommunications licenses (the acquisition of these licenses is not part of the daily monitoring of operating investments) and financed assets (no effect on cash flow upon acquisition), and (ii) allows, in a context of asset rotation primarily linked to the fiber-optic economic model, to measure more accurately the actual amount of investments by excluding the proceeds from sales of property, plant and equipment and intangible assets that have been sold. It is the indicator used internally by the Group from January 1, 2019 in allocating resources, in order to measure the operating efficiency of the use of investments for each of its operating segments.
eCAPEX is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies. It is provided as additional information only and should not be considered as a substitute for purchases of or investments in property, plant and equipment and intangible assets.
1.5.4 EBITDAaL - eCAPEX
The "EBITDAaL - eCAPEX" indicator corresponds to EBITDAaL (see Section 1.5.2 EBITDAaL) less eCAPEX (see Section 1.5.3 eCAPEX).
Orange’s management considers that presenting the "EBITDAaL - eCAPEX" indicator is relevant because it is the operational performance indicator used internally by the Group from 1 January 2019 to (i) manage and assess its operating results and segment results, and (ii) implement its investments and resource allocation strategy.
"EBITDAaL - eCAPEX" indicator is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies. It is provided as additional information only and should not be considered as a substitute for analysis of net cash provided by operating activities and net cash allocated to the Group’s investing activities.
1.5.5 Organic cash flow from telecoms activities
Organic cash flow from telecoms activities refers to net cash flow generated by the activity, minus (i) repayments of lease liabilities and debts related to financial assets, and (ii) purchases and sales of property plant and equipment and intangible assets, net of fixed asset payables, (iii) excluding telecommunications licenses paid and the effect of the main litigations paid (and received).
The following table presents, for telecoms activities, the transition from net cash provided by operating activities to organic cash flow from telecoms activities as presented in Note 1.7 to the consolidated financial statements.
|
Organic cash flow from telecoms activities
|
2020
|
2019
|
|
(at June 30, in millions of euros)
|
|
data on a historical basis
|
|
Net cash provided by operating activities (telecoms activities)
|
4,375
|
4,541
|
|
Purchases and sales of property, plant and equipment and intangible assets
|
(3,615)
|
(3,976)
|
|
Lease liabilities repayment
|
(633)
|
(676)
|
|
Debts relating to financed assets repayments
|
(24)
|
(5)
|
|
Elimination of telecommunication licenses paid
|
134
|
230
|
|
Elimination of significant litigation paid (and received)
|
18
|
(23)
|
|
Organic cash flow from telecoms activities
|
255
|
92
|
Orange’s management believes that the presentation of organic cash flow from telecoms activities is relevant for measuring the Groups’ capacity to free up cash through its telecoms activities taken as a whole, excluding the main elements which are not under its control and which may vary from one year to the next, which is the case of these disbursements (and receipts) relating to the main litigations and disbursements related to telecommunications license acquisitions. It is a more comprehensive indicator than "EBITDAaL - eCAPEX" (used internally to manage and assess operating and segment results and to implement its investment and resource allocation strategy), since it includes the effects of financial costs, income tax and changes in working capital. It is for this reason that this indicator has been chosen by Orange for its Engage 2025 Strategic Plan as a key performance indicator for telecoms activities. This indicator is commonly used by companies in the telecommunications sector.
Organic cash flow from telecoms activities is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies. It is not a replacement for cash generated by operating activities or allocated to investing activities.
1.5.6 Net financial debt
Net financial debt as defined and used by Orange does not include Orange Bank activities, for which this concept is not relevant. It consists of (i) financial liabilities excluding operating payables (translated into euros at the year-end closing rate) including derivative instruments (assets and liabilities), (ii) less cash collateral paid, cash, cash equivalents and financial assets at fair value. Furthermore, financial instruments designated as cash flow hedges included in net financial debt are set up to hedge in particular items that are not included therein, such as future cash flows. Effects of these hedges are carried in other comprehensive income. As a consequence, the portion of these components related to unmatured hedging instruments is added to gross financial debt to offset this temporary difference.
The breakdown of net financial debt is shown in Note 9.4 to the consolidated financial statements.
Net financial debt is an indicator of financial position used by the Group. Net financial debt is a frequently disclosed indicator. It is widely used by analysts, investors, rating agencies and most Groups in all business sectors in Europe.
Net financial debt is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies. It is provided as additional information only and should not be considered as a substitute for an analysis of all the group’s assets and liabilities.
1.5.7 Ratio of net financial debt to EBITDAaL of telecoms activities
The ratio of net financial debt to EBITDAaL of telecoms activities is calculated based on the ratio of the Group’s net financial debt (see Section 1.5.6 Net financial debt) to EBITDAaL of telecoms activities (see Section 1.5.2 EBITDAaL) over the previous 12 months. As the net financial debt (as defined and used by Orange) does not include Orange Bank activities, for which this concept is not relevant, the net financial debt is divided by the EBITDAaL of telecoms activities. In addition, when changes in scope significantly affect the Group’s net financial debt at the end of the period, the calculation of the ratio of net financial debt to EBITDAaL of telecoms activities is adjusted to take into account the EBITDAaL of those entities over the previous 12 months.
|
|
June 30, 2020
|
December 31, 2019
|
|
(in millions of euros)
|
|
data on a historical basis
|
|
Net financial debt (a)
|
26,420
|
25,466
|
|
EBITDAaL of telecoms activities (b) (1)
|
12,969
|
13,019
|
|
Ratio of net financial debt / EBITDAaL of telecoms activities (a/b)
|
2.04
|
1.96
|
(1) EBITDAaL calculated over the previous 12 months on a historical basis.
The ratio of net financial debt to EBITDAaL of telecoms activities is used by Orange to measure the Group’s ability to repay its debt, and more broadly to measure its financial strength. This ratio is commonly used by companies in the telecommunications sector.
Ratio of net financial debt to EBITDAaL of telecoms activities is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies.
1.6 Additional information
1.6.1 Litigation and unrecognized contractual commitments
The main events that took place in the first half of 2020 affecting litigation and unrecognized contractual commitments are described in Note 13 to the consolidated financial statements.
1.6.2 Related party transactions
During the first half of 2020, no transaction materially influenced the amounts of related party transactions reported as at December 31, 2019 (see Note 14 to the consolidated financial statements).
1.6.3 Subsequent events
The main events occurring after June 30, 2020 are described in Note 15 to the consolidated financial statements.
1.6.4 Financial glossary
Average number of employees (full-time equivalents): average number of active employees over the reporting period, prorated for their work time, including both permanent contracts and fixed-term contracts.
Change in working capital requirement: change in working capital requirement is made up of:
− the Change in working capital requirement for operations, which is made up of (i) the changes in gross inventories, (ii) the change in gross trade receivables, (iii) the change in trade payables for other goods and services, and (iv) the change in customer contract assets and liabilities;
− Change in working capital requirements excluding operations, which includes the change in other assets and liabilities (excluding receivables and payables related to operating taxes and levies).
Commercial, equipment expenses and content rights: see External purchases.
Convergent ARPO: average revenue per customer from convergent offers (Average Revenue Per Offer, ARPO) for the period are calculated by dividing (i) the revenue from retail convergent offers invoiced to customers (excluding the effect of spreading the equipment subsidy pursuant to IFRS 15) over the period in question, by (ii) the weighted average number of customers of retail convergent offers over the same period. The monthly average is the arithmetic average of the number of customers at the beginning and end of the month. The weighted average number of customers is the average of monthly averages over the period in question. Convergent ARPO is expressed in monthly revenue per convergent offer customer.
Convergent services: see Revenue.
Data on a comparable basis: data with comparable methods, scope of consolidation and exchange rates are presented for the preceding period (see Section 1.5.1 Data on a comparable basis). The transition from data on a historical basis to data on a comparable basis consists of keeping the results for the year ended and restating the previous year in order to present financial data with comparable methods, scope of consolidation and exchange rates over comparable periods. The method used is to apply to the data of the corresponding period of the preceding year the methods and the scope of consolidation for the period ended, as well as the average exchange rates used for the Consolidated income statement for the period ended. Changes in data on a comparable basis reflect organic business changes. Data on a comparable basis is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies (see Section 1.5 Financial indicators not defined by IFRS).
Data on a historical basis: data for past periods as reported in the consolidated financial statements of the current financial period.
EBITDAaL or "EBITDA after leases": operating income (i) before depreciation and amortization of fixed assets, effects resulting from business combinations, reclassification of translation adjustment from liquidated entities, impairment of goodwill and fixed assets, share of profits (losses) of associates and joint ventures, (ii) after interest on lease liabilities and interest on debts related to financed assets, and (iii) adjusted for significant litigation, specific labor expenses, fixed assets, investments and businesses portfolio review, restructuring programs costs, acquisition and integration costs and, where appropriate, other specific items that are systematically specified in relation to income and/or expenses (see Note 1 to the consolidated financial statements). EBITDAaL is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies (see Section 1.5 Financial indicators not defined by IFRS).
EBITDAaL - eCAPEX: EBITDAaL (see definition) less eCAPEX (see definition). The "EBITDAaL - eCAPEX" indicator is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies (see Section 1.5 Financial indicators not defined by IFRS).
eCAPEX or "economic CAPEX": acquisitions of property, plant and equipment and intangible assets, excluding telecommunication licenses and financed assets, less the price of disposal of fixed assets (see Note 1.4 to the consolidated financial statements). e-CAPEX is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies (see Section 1.5 Financial indicators not defined by IFRS).
Economic CAPEX: see eCAPEX.
Equipment sales: see Revenue.
External data: data after elimination of internal flows between the consolidation scopes taken into consideration.
External purchases: external purchases include the following operating expenses, excluding leases that fall within the scope of application of IFRS 16:
− Commercial and equipment expenses and content rights: cost of handsets and other equipment sold, retail fees and commissions, advertising, promotional, sponsoring and rebranding expenses, and content costs;
− Service fees and inter-operator costs: network expenses and interconnection costs;
− Other network expenses and IT expenses: outsourcing expenses for operations and technical maintenance, IT expenses;
− and Other external purchases: overheads, real estate fees, purchases of other services and service fees, purchases of equipment and other supplies held in inventory, call center outsourcing expenses and other external services, net of capitalized goods and services produced.
Financial investments: acquisitions of investment securities (net of cash acquired) and changes in ownership interests with no gain of control in subsidiaries.
Fixed only broadband ARPO: average revenue per customer of fixed only offers (Average Revenue Per Offer, ARPO) for the period are calculated by dividing (i) the revenue from fixed only broadband services invoiced to customers (excluding the effect of the spreading of the equipment subsidy pursuant to IFRS 15) over the period in question, by (ii) the weighted average number of customers of fixed only broadband offers over the same period. The monthly average is the arithmetic average of the number of customers at the beginning and end of the month. The weighted average number of customers is the average of monthly averages over the period in question. Fixed only broadband ARPO is expressed in monthly revenue per fixed only customer.
Fixed services only: see Revenue.
Investments in property, plant and equipment and intangible assets: see eCAPEX.
IT & integration services: see Revenue.
Labor expenses: wages and employee benefit expenses (net of capitalized costs), employee profit- sharing expenses, and expenses relating to share- based compensation.
Mobile only ARPO: average revenue per customer of mobile only offers (Average Revenue Per Offer, ARPO) for the period are calculated by dividing (i) the revenue from mobile services only invoiced to customers (excluding machine-to-machine and excluding the effect of spreading the equipment subsidy pursuant to IFRS 15) over the period in question, by (ii) the weighted average number of customers of mobile only offers (excluding machine-to-machine) over the same period. The monthly average is the arithmetic average of the number of customers at the beginning and end of the month. The weighted average number of customers is the average of monthly averages over the period in question. Mobile only ARPO is expressed in monthly revenue per mobile only customer.
Mobile services only: see Revenue.
Net financial debt: net financial debt as defined and used by Orange does not incorporate the Orange Bank activities for which this concept is not relevant. It consists of (i) financial liabilities excluding operating payables (translated into euros at the year-end closing rate) including derivative instruments (assets and liabilities), (ii) less cash collateral paid, cash, cash equivalents and financial assets at fair value. Furthermore, financial instruments designated as cash flow hedges included in net financial debt are set up to hedge in particular items that are not included therein, such as future cash flows. Effects of these hedges are carried in other comprehensive income. As a consequence, the portion of these components related to unmatured hedging instruments is added to gross financial debt to offset this temporary difference (see Note 9.4 to the consolidated financial statements). Net financial debt is not a financial indicator defined by IFRS and may not be comparable to similarly-titled indicators used by other companies (see Section 1.5 Financial indicators not defined by IFRS).
Number of employees (active employees at end of period): number of employees working on the last day of the reporting period, including both permanent contracts and fixed-term contracts.
Operating taxes and levies: taxes and levies including the Territorial Economic Contribution (CET) and the Flat-rate Tax on Network Enterprises (IFER) in France, fees for the use of frequencies and levies on telecommunication services.
Organic cash flow (telecoms activities): within the scope of the telecoms activities, net cash generated by the operating activities, minus (i) lease liabilities repayments and debts related to financed assets repayments, and (ii) purchases and sales of property, plant and equipment and intangible assets, net of change in the fixed assets payables, (iii) excluding effect of telecommunication licenses paid and significant principal litigations paid or received (see Note 1.7 to the consolidated financial statements). Operating Cash Flow from telecoms activities is not a financial aggregate defined by IFRS and may not be comparable to similarly-titled indicators used by other companies (see Section 1.5 Financial indicators not defined by IFRS).
Other external purchases: see External purchases.
Other network expenses and IT expenses: see External purchases.
Other operating expenses: see Other operating income and expenses.
Other operating expenses: see Other operating income and expenses.
Other operating income and expenses: other operating income net of other operating expenses. Other operating income and expenses include:
− Other operating income: primarily net banking income (NBI, net balance of income and expenses from banking operations), tax credits and subsidies, income from universal service, brand royalties and management fees invoiced to certain unconsolidated entities, income on impaired trade receivables, rebilling of network sharing costs, income relating to line damage;
− Other operating expenses: mainly impairments and losses on trade receivables of telecoms activities, universal service charges, disputes, operating foreign exchange gains/losses, the cost of bank credit risk, and acquisition costs.
Other revenue: see Revenue.
Retail services: aggregation of Convergent services, Mobile services only, Fixed services only and IT & integration services.
Revenue: revenue (see Note 1.1 to the consolidated financial statements) includes:
− Convergent Services: revenue of convergent services includes revenue invoiced to retail customers of convergent offers (excluding equipment sales, see the definition of this term) defined as the combination of at least a fixed broadband access (xDSL, FTTx, cable, 4G fixed) and a mobile contract;
− Mobile services only: revenue of mobile services only includes revenue invoiced to customers of mobile offers (incoming and outgoing calls: voice, SMS and data), excluding convergent services and equipment sales (see the definitions of these terms);
− Fixed services only: revenue of fixed services only includes revenue invoiced to customers of fixed services excluding convergent services and equipment sales (see the definitions of these terms). It includes conventional fixed telephony, fixed broadband services, business solutions and networks; (with the exception of France, for which essential business solutions and networks are supported by the Enterprise operating segment);
− IT & integration services: revenue of IT & integration services include the unified communication and collaboration services (Local Area Network and telephony, consultancy, integration, project management, video-conference offers), hosting and
infrastructure services (including Cloud computing), applications services (customer relations management and other applications services), security services, services related to Machine-to-Machine activities (excluding connectivity), as well as sales of equipment related to the above products and services;
− Wholesale: revenue from other carrier include (i) mobile services to carriers, which groups together in particular incoming mobile traffic, visitor roaming, network sharing, national roaming and virtual mobile network operators (MVNO), and (ii) fixed services to other carriers, which include in particular national interconnection, services to international carriers, high-speed and very high-speed broadband access services (fiber access, unbundling of telephone lines, xDSL access sales), and sales of telephone lines on the wholesale market;
− Equipment sales: fixed and mobile equipment sales, excluding (i) equipment sales associated to the supply of IT & integration services, and (ii) equipment sales to dealers and brokers;
− and Other revenues: other revenues includes equipment sales to dealers and brokers, revenue from portals, on-line advertising revenue and corporate transversal business line activities of the Group, and other miscellaneous revenue.
Service fees and inter-operator costs: see External purchases.
Statutory data: data before elimination of internal flows between the consolidation scopes taken into consideration.
Wages and employee benefit expenses: see Labor expenses.
Wholesale: see Revenue.