Orange faces its merger with MásMóvil with a drop in revenue of 4.6% in the first quarter | Economy

Orange Spain faces its merger with MásMóvil in a scenario of continuous drop in revenue, which in the first quarter of this year fell by 4.6%, to 1,132 million euros. The subsidiary of the French operator saw its billing decrease in all business segments, from retail services (-4%) to wholesale services (-8.2%) and mobile sales (-3%).

The operator justifies this new setback in the strong competition in the market, especially in the low cost, the drop in international traffic and lower margins from equipment sales activities. His consolation is that the pace of decline has slowed, as retail services revenue fell 10.2% in the first quarter of 2021 and 5.4% in the fourth quarter of that year, compared to 4% in decrease from the first quarter of 2022.

This bad evolution can complicate the balance of powers and the valuation in the merger with MásMóvil, whose negotiations are scheduled to close in the first half of 2022. There are many details yet to be decided in that union, from who will effectively govern the company that comes out from the merger the first year (it is assumed that it will be the current CEO of MásMóvil, Meinrad Spenger, but it has not been made official), until the exchange equation according to the valuation of both companies.

However, the new CEO of the Orange group, Christel Heydemann, has highlighted that “this operation would mean the creation of a sustainable actor with the investment capacity, infrastructure and competitive advantage necessary for its future development and for the benefit of consumers and of companies in Spain”, as stated in a statement.

Orange Spain’s total customer base grew by 2.8% compared to March 2021, to 20.5 million, of which 16.48 million are mobile service users (+3.6%) and 4 million band fixed width (-0.3%). Fiber optics added 21,100 net registrations in the last quarter (123,000 more than last year), and the network already covers 16.3 million homes and businesses, after expanding its fiber footprint by more than 800,000 real estate units since last year .

Regarding television, the Orange platform has 695,000 subscribers (1% less than in the previous year). The penetration of this service is 17% of the company’s total broadband customer base. Revenue per customer (ARPU) decreased by 0.3% in the first quarter, compared to a decrease of 1.8% in the fourth quarter of 2021. For its part, Orange Bank increased its customer base in Spain by 15,000 people in the first quarter of the year, to exceed 155,000 customers, and raised deposits to 235 million euros, 25 million more than at the end of 2021,

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Football for the next season

The CEO of Orange Spain, Jean François Fallacher, said this Tuesday at the company’s results press conference that the agreement with Telefónica to continue giving the LaLiga matches will continue next season, and that they are also negotiating with Dazn to offer the other five games per day that the platform of streaming in the last auction of rights for the next five seasons 2022-2027.

“Our intention is to acquire the rights from Telefónica, but if there is no agreement with Dazn, it is not a drama, because Dazn will be accessible to any Orange subscriber through an application,” explained the director of Orange Spain’s residential business, Diego Martínez. That would mean that Orange subscribers should have two contracts to watch all football from next season, one with the operator’s package and the other with Dazn, a competitive disadvantage with Telefónica, which has already reached an agreement with the platform to offer all matches to its subscribers in exchange for 1,400 million euros.

Agreements to be decided

Regarding the agreement with MásMóvil, Fallacher has assured that the leadership of the future joint venture with MásMóvil has not yet been decided in the negotiations they are holding with the owner funds of the operator, and that only when the merger is completed and approved, will it be discussed. the firm’s management team.

Sources close to the operation assume that the CEO would be Meinrad Spenger, the current CEO of MásMóvil, while Orange would provide the financial director and the chairman of the board. Fallacher has reiterated the company’s vocation for permanence in Spain, as well as the French group’s intention to exercise the right to repurchase the 50% that it will not control in order to reincorporate the company, before a possible IPO.

Likewise, he has been optimistic about the future approval of the agreement, since he considers that it will not harm the competitiveness of the Spanish market, “where there are hundreds of brands” and a solid wholesale market. Fallacher did not want to comment either on the more than possible reduction of its own trademarks that the group must undertake if the merger is confirmed, since Currently MásMóvil and Orange operate with more than a dozen

The director has also highlighted the impact of inflation, and although both he and the director of Residential have indicated that there are no short-term plans to raise rates, they have opened the door to do so later if inflation does not moderate in the second semester. In this area, the directors have also highlighted that the company has PPA’s (bilateral term electricity contracts) signed for most of its electricity consumption.