Doubt over strategy overshadows Orange's faith in targets

© Reuters. FILE PHOTO: A woman walks past the logo of French telecom operator Orange at the telecommunication company headquarters in Issy-les-Moulineaux near Paris, France, August 6, 2022. REUTERS/Sarah Meyssonnier

By Mathieu Rosemain

PARIS (Reuters) - Investors penalised Orange on Tuesday for a lack of strategic certainty, dismissing the French telecoms operator's claims it is on track to fulfil targets and turn around its stagnating enterprise division.

Shares fell by as much as 3% and were down by about 2.4% at 0951 GMT, making the stock the second-worst performer in the France's blue-chip index CAC 40.

Christel Heydemann, who took over as chief executive of the former monopoly last April, is carrying out a review of the group.

She has until February to address questions related to the potential sale of Orange's loss-making banking activities and the possible arrival of new investors in its mobile infrastructure unit Totem.

Orange's reiteration it will reach its full-year targets on core profits and organic cash flow in 2023 failed to convince the market.

"Commitment to targets beyond 2022 is a little bit masked by the ongoing strategic review that the new CEO is carrying out," said Jerry Dellis, an analyst at Jefferies.

He added much was "up in the air," citing planned investment and the extent to which that will weigh on profits.

Heydemann, who did not attend the analyst call, will lay out Orange's next strategic plan on Feb. 16, when the group reports full-year results, Chief Financial Officer Ramon Fernandez told the call.

The group said all options remained open for Orange Bank, following reports it was considering selling the division that was central to attempts to diversity revenue sources under previous CEO Stephane Richard.

Analysts at ODDO BHF pointed to the slowing sales increase in Orange's Africa and Middle East regions, which have been drivers of growth.

Orange also faces heavy investment in its biggest markets of France and Spain to deploy networks.

Aliette Mousnier-Lompre, the new head of Orange's enterprise division, which offers voice, data and IT consulting services to companies, said she did not expect the division to return to profit growth before 2024.

It has suffered as companies abandon regular fixed phone subscription to make calls via Internet-supported communication platforms.

Orange said third-quarter core operating profit edged up by 0.2% on a comparable basis from a year earlier to 3.58 billion euros ($3.5 billion), in-line with expectations.

It confirmed its full-year targets, including growth in core operating profit of between 2.5% and 3%.

Sales in Spain, Orange's second-biggest market, returned to growth for the first time since the first quarter of 2019, gaining 0.2%.

Group revenues for the three-month period ending on Sept. 30 rose by 1% on comparable basis to 10.8 billion euros, slightly above expectations.

($1 = 1.0129 euros)

(This story has been corrected to fix a spelling error in paragraph 1)