Orange S.A. (ORA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Orange's First Half 2024 Results Conference Call. The call today will be hosted by Ms. Christel Heydemann, CEO; and Mr. Laurent Martinez, Chief Financial Officer, with other members of Orange's Executive Committee for the Q&A session that will start after the presentation. Thank you very much and let me pass the floor over to Ms. Christel Heydemann. Please go ahead, ma'am.

Thank you. Good morning, and welcome to our 2024 first half results presentation. Two days before the start of the Olympics games in Paris, we are very proud to be the official partner and to provide all the connectivity for the event. Our teams are very enthusiastic and committed to this flagship project to demonstrate our expertise. So let's now zoom and highlight a few points that I will detail in this presentation. Our Lead the Future plan is now at midterm and is progressing at full speed. H1 results are very strong, with an organic cash flow growth of more than 17% year-on-year, and we are fully confirming our full year guidance. Before diving into our H1 financial results, I will also take the opportunity to comment on the French competitive environment. As the market leader, we pursue a disciplined pricing strategy while monitoring our volume/value equation. This has again fueled our retail growth this quarter. In Spain, after 3 months with MASORANGE, we are happy to announce the agreement with Vodafone Spain to create a FiberCo, a new illustration of our capacity to capitalize on our infrastructure leadership. Now let's move to Slide 6 for midterm update on our Lead the Future plan. It's now almost 1.5 years since our strategic plan was launched, and we are focused on execution, as illustrated by our strong cash generation over 18 months. Firstly, we are fully in line with the priority to monetize our core business. Our continued value strategy is illustrated by growing ARPOs, notably in France and Poland, where we also maintain the best-in-class churn. We have been driving in-market consolidation in Belgium, Romania and, of course, in Spain with the creation of MASORANGE. We are now starting to benefit from the synergy potential of those operations. Secondly, with more than 53 million FTTH connectable homes in Europe, we've continued to capitalize on our infrastructure leadership notably with an increase in fiber monetization rate as an example, in France, of plus 3 points in 18 months. TOTEM is fully on track with its objective to increase its tenancy ratio. Regarding the third pillar of our strategic plan, we streamlined our portfolio with the ongoing closure of banking activities in Europe and the sale of OCS and Orange Studio earlier this year. Orange Business transformation is fully on track with the continued EBITDA trend improvement since 2022 and a strong growth of Orange Cyberdefense. Finally, Africa and Middle East continues to deliver an outstanding double-digit growth both in revenues and EBITDAaL. These 4 pillars have contributed to a sharp cash generation since 2022 with EUR 4.2 billion free cash flow all-in delivered in 18 months. We fully confirm our '24 and 2025 organic cash flow guidance. Now let's zoom in on France on Slide 8. As the market leader, we continue to pursue our disciplined and rational pricing strategy to support our volume/value equation. In France, the competitive pricing environment on fixed broadband has been roughly stable; however, the slowdown of the market has led to sustained price competition on the mobile entry market, particularly in June. Interestingly, in July, we observed more rational moves from our competitors with price increases, both on front book and back book, illustrating the necessity for all players to defend value. In terms of market structure, we are definitely leading on the premium and mid-value segments and maintain a solid position on entry segment with our B brand, Sosh. Overall, we are pleased by our commercial performance in Q2 with this trend continuing in July. So no significant impact related to the competitive environment. On the next slide, our disciplined behavior is consistent with our volume/value strategy, capitalizing on the strength of our brand, customer base, strong NPS, churn and our best-in-class network. In practical terms, our commercial strategy is based on 3 pillars: First, a segmented commercial strategy to address all market segments. This has been illustrated by the launch of new targeted offers on the Orange brand since the beginning of the year, but also some slight adjustments on Sosh. Second, we continue to defend value through cross-sell, leveraging our strong customer base and retail distribution channel with a wide range of offers, including our recent B2C cybersecurity offer at EUR 7 per month. The commercial takeoff of this new offer is very positive. And finally, we continue to upsell, thanks to tactical price increases and the strong remaining potential linked to 5G and fiber migration with more than 1 million new fiber customer per year. All this will continue -- will contribute to grow retail revenue, excluding PSTN, between plus 2% and plus 4% in coming quarters, in line with our Capital Market Day target. If we move to the next slide, this strategy is bearing fruit, as demonstrated by the Q2 commercial performance, both in terms of net adds and best-in-class churn in mobile and fixed. We succeeded in stabilizing fixed broadband net adds with continued a strong FTTH momentum. We also delivered an outstanding mobile performance with more than 100,000 net adds this quarter. Convergence accounting for 30% of total France revenues and 6 million customers is still an efficient way to increase value and increase customers' loyalty as illustrated by a churn, which is 4 points lower than fixed broadband churn and a significant ARPO growth at plus 5% year-on-year. In mobile, which only accounts for 13% of total France revenues, ARPO remained stable quarter-on-quarter and is slightly down year-on-year, reflecting the solid volumes on Sosh. Thanks to our volume value strategy, we delivered in Q2 a retail, excluding PSTN revenue growth at plus 2.5% year-on-year, fully in line with our objective. Looking ahead, we will continue to execute our volume value strategy, and we expect a similar retail excluding PSTN revenue trend in H2 that we had in Q2. Overall, we fully confirm our target of stable EBITDAaL in 2024 for Orange France. Let's now turn to Spain and more specifically, MASORANGE fiber network strategy. MASORANGE announced this morning that we intend to set up a FiberCo with Vodafone Spain to maximize and monetize the use of the mass Orange and Vodafone fiber network in dense areas by creating the FTTH network with the best occupancy rate in Spain. On inception, the FiberCo will have 11.5 million fiber lines with around 4 million connected households. We plan to crystallize the value of this FiberCo by letting a financial investor enter the capital of the JV leading to a targeted capital structure where MASORANGE will have 50% of the shares and receive a significant cash upstream that will accelerate the company's deleveraging. Now let's have a closer look at our main financial KPIs, excluding Spain. In the second quarter, the group delivered EUR 10 billion of revenues, up by 0.9%, thanks to retail and EMEA growth. Our EBITDAaL performance improved and grew by plus 2.6% with Orange business in line with plan. France flat. Europe and Middle East, Africa posting outstanding growth. Our disciplined eCapEx in line with our target of around 15% CapEx to sales, together with the EBITDAaL strong growth allowed organic cash flow to grow 17.4% and reached EUR 1.55 billion, giving us full confidence in delivering at least EUR 3.3 billion this year. Finally, our balance sheet remains very healthy with net debt-to-EBITDAaL ratio at 1.9x, improving, thanks to proceeds received at the MASORANGE closing. The execution of our ESG strategy through the 3 main claims presented in Lead the Future is equally on track. On environment, we are 2 years ahead of schedule in our objective to reduce Scope 1 and 2 greenhouse gas emissions by 30% in '25 compared to 2015. We are now focusing on our trajectories for 2030, a 45% reduction of greenhouse gas emissions for all scopes versus 2020 that has been validated by SBTI in June. On digital inclusion, we have increased the number of people receiving our free training. The cumulative number since 2021 has increased to 2.2 million, in line with our ambition. And as a trusted partner, we launched our B2C cyber secure solutions in France in June with a very positive momentum. The Group's human rights policy was also published in March. Our achievements are acknowledged by strong ESG ratings. I will now hand over the floor to Laurent for a more detailed review of H1 financial results.

Thank you, Christel. Let's start with the Group revenues. In the second quarter, the group delivered EUR 10 billion in revenues, up 0.9% year-on-year in organic and 1.6% in reported numbers. This was driven by, as you see, solid retail services, up 2.4% more than compensating expected Wholesale decline. From a segment perspective, Middle East and Africa contributed most to Group revenue growth with double-digit growth, and France, slightly up again this quarter while Orange Business remained slightly negative. Europe revenue slight decrease was due to low-margin activities, while retail is up by more than 1%. Moving on to EBITDAaL, with a positive 2.5% performance in the first half, consistent with our low single-digit guidance for the year. France has stabilized its EBITDAaL as per target. Europe also delivered a solid performance in line with our expectation. And MEA firmly stays in the double-digit growth targeted trajectories. Orange Business delivered as well on its targeted trajectories. Finally, ICSS EBITDAaL was impacted this semester by some cost phasing one-off and a base effect related to a submarine cable sale last year. Moving to net income, which is flat at EUR 1.1 billion with improvement in EBITDAaL and financial results offset by income tax increase consistent with the taxable profit improvement in France. Moving on to eCapEx, we kept our discipline by staying at close to 15% eCapEx to sales ratio, while we continue to invest in our high-growth business in Africa and Middle East. Moving to cash. We are particularly pleased, as indicated by Christel, on our positive performance of cash generation in this half year with organic cash flow reaching close to EUR 1.6 billion, fully in line with our full year guidance of at least EUR 3.3 billion. Strong cash generation improved by more than 17% year-on-year, driven by our operating cash flow and lower tax income in line with the tax we paid in France last year. Free cash flow all-in, our new indicators reached EUR 1.26 billion, up by more than EUR 200 million versus last year. Moving to debt on the following page. The debt reduced by almost EUR 4 billion in H1, driven by the EUR 4.3 billion net proceeds received from the creation of MASORANGE leading to a leverage ratio at 1.9x at the end of June, very much in line with our guidance and reflecting our very strong balance sheet. Let's review now the review by segment, starting by France on the following page. In France, positive performance in the second quarter with revenue up again and the continued good retail trends sustained by a solid commercial performance as commented by Christel. After a strong Q1, the retail ex PSTN growth is at a robust 2.5%. Our volume value strategy and specifically the measures taken since the beginning of the year, will continue to fuel this growth. Wholesale followed the same trend as in the first quarter, benefiting from the increase of unbundling and civil work tariff. As a result, as you see EBITDAaL improved in H1 and reached plus 0.3% on a year-on-year basis. These good H1 results confirm the upward trend in EBITDA since last year, and we do confirm our target to deliver a stable EBITDAaL in 2024. Turning to Europe, which results now are excluding Spain, are in line with our Q1 numbers. Revenues were down 2% this quarter with solid performance on retail at plus 1% and decrease on low-margin activities, such as equipment sales, IT&IS and Wholesale, as expected, impacted by the new regulatory decrease of termination rate. On the retail side, the growth in the quarter has been driven by our volume/value strategy with record mobile net adds, churn improvement and convergent services with a very solid momentum at plus 7% up year-on-year. Overall, Europe posted a very strong 4% EBITDAaL growth, thanks to price increase efficiency, first effect as well of the in-market consolidation in Belgium with a very positive 14% EBITDAaL growth this half year. Based on this positive momentum, we upgrade our outlook and now expect Europe to deliver the low to mid-single-digit EBITDAaL growth in 2024. Moving to MEA. With, again, a very strong performance this half year, demonstrating once more our very positive momentum on the continent. Second quarter revenues is up double digit for the fifth consecutive quarter, fueled by our 4 strong engines of revenue uplift. Clear illustration is the growth in mobile revenues driven by balanced volume and value. MEA overall is up by an outstanding 15% EBITDA growth this half year. Despite anticipated Egyptian pound devaluation, MEA reported strong growth as well on reported numbers with 8% on revenues, 13% on EBITDAaL and 20% on operating cash. Looking ahead, we are upgrading our ambition to double-digit EBITDA growth for MEA. Turning now to Orange business with top line benefiting from growth in IT&IS, specifically on cyber defense, still at double digit over the last 6 months. In terms of innovation, we are very proud to have launched a few weeks ago our solution Orange Cybersecure, unique B2C cybersecurity in France with great commercial traction as we speak. And we continue to transform Orange Business with an action plan, which continues to pay off. Departures on the voluntary plan have started while the reskilling and the upskilling of our employees from our legacy business is continuing. In terms of profitability, we further reduced the trend in EBITDAaL to minus 11% in the first half, and we are definitively confident to meet our 2024 target and return to EBITDA growth in 2025. Turning to MASORANGE. As a reminder, MASORANGE is recorded in our financial statements under the equity method since the second quarter, while in the first quarter, Orange Spain net result is recorded as discontinued activities. And in this slide, we present you the H1 pro forma MASORANGE KPI. In the challenging market environment, MASORANGE retains its leadership on growth adds and value management with a strong convergent ARPU up year-on-year. Total revenues are stable, while retail growth offset by wholesale decline on low-margin business. Looking at the integration process, remedies are executed as planned, and we are pleased to confirm that the run rate synergies will reach at least EUR 500 million from year 4 post-closing. MASORANGE is targeting only for 2024 to reach around EUR 100 million of synergies in 2024. Looking ahead, the outlook for H2 will be globally consistent with H1. Now back to you, Christel for the conclusion.

Thank you, Laurent. I would like to conclude this presentation simply by reaffirming that the solid first half results reinforce our confidence in achieving our full year guidance, which remains unchanged. Thank you for your attention. Laurent, the Orange Com Ex, including we have with us the CEO of MASORANGE, and I are now ready for your questions.

[Operator Instructions] Our first question comes from Mr. Akhil Dattani from JPMorgan.

I've got 2, please. The first on France and the second on Spain. Christel, I was interested in your comments on the competitive environment and the improvements that you're seeing into July. I guess what I'm trying to understand, when we look at the numbers is there's been a pretty marked improvement in your KPIs, but I guess the one area of softness is still the convergent base. So maybe you can comment on what you're looking to do to try and maybe improve the convergent trends? And I guess the bigger picture is that the retail revenue trends in France have slowed the last few quarters. Is that due to the comments you made on the market as a whole, the market slowing? Or is there anything else? So just a real general update there on France, please? And then the second one on Spain. You commented on the JV that you've created. I'm assuming they're not wanting to give too much color just yet, but there were reports yesterday that this vehicle would be a 50-50 debt equity structure and that Orange could get something close to EUR 4 billion of cash out. I just wondered if there is any color you can give us just to help us understand what the numbers might be or how to think about it. And then how do we think about use of proceeds from anything you get? You did mention it could be quite substantial. If that's used to delever the ORANGEMAS JV, should that bring forward the decision around what you do with that asset?

Thank you, Akhil. So on the competitive environment in July, we've just observed the price move from the competition, and that's what we were commenting and including. I'm sure you've seen their moves both, as we said, on back book and front book. On the convergent trend, indeed, so there's actually a slightly negative net adds. But -- as you know, we've been driving aggressive value strategy in the past year. And we were very clear, and I think we said that quarter after quarter that in the context of purchasing power pressure, we were also removing constraint for customers to make sure that customers would want to arbitrate could move out of their convergent package and do some arbitration. And that explains, to some extent, the trend we've seen in the recent quarters. But at the same time, we are very, very pleased with the commercial performance on mobile and broadband. And as you know, I mean, we have a very solid and very low churn on the convergence and the acquisition on mobile and broadband will fuel the convergent growth in the next quarter. So we are very solid and very confident on our ability to continue to drive convergent growth. Churn level is low. You've seen the ARPO increase year-over-year on this convergent base, and this is massive with a churn that's completely under control and again, very low, 4 points lower than the broadband churn level. So really confident on our trajectory. As you know, we've introduced a number of new offers in France in Q2. We had introduced last year, a new package of offers, including on convergence. So this is obviously a big priority for us. This is true in France. This is true across Europe. On the retail services trend, I mean, we are very confident on our guidance and as you know, we've been very clear that this business, excluding PSTN, should grow between plus 2% and plus 4%. Q1 benefited from the full price increase that we did last year in March, April. So we see a slight slowdown in Q2, but this was fully anticipated. And overall, we're very pleased with the Q2 performance, and we confirm that we expect in H2 a similar trend for retail services, excluding PSTN, than the one that we had in Q2. So really no slowdown on the retail services trajectory. On Spain, we don't comment on the links -- first of all, it's just a term sheet. So we still need to go to the final binding agreement. But this is part of our strategy. As you know, maximizing the use of our infrastructure is key. The target ownership would be for MASORANGE to own 50% of this FiberCo but we don't comment on the financial structure and the debt to equity ratio. But this will, of course, provide you more comments as we move forward in the negotiation. But again, the main objective for us is to bring on our infrastructure to combine with, obviously, Vodafone Spain infrastructure, but also to bring and to increase and to have the best, I would say, penetration ratio on our fiber infrastructure in Spain.

Our next question comes from Mr. Mathieu Robilliard from Barclays.

I had a follow-up question on the Spanish JV. You indicated in your MASORANGE slides that you had around 6.8 million customers on fiber. I think you've added around 1.6 million at the end of Q1. So that suggests that there's a big chunk of customers that are on the third-party network. And my question is, do you think that this off-network customers can be migrated over time to your own platform? Is there some complementarity on the platform? If you could size that, that would be great. The second question was around AI. Christel, you mentioned in a recent press interview that the company was working on optimizing the network for the use of AI and notably Generative AI. And I was wondering with that intel, do you think that can generate more revenue opportunities? Could it also mean more CapEx? Any color would be very helpful. And then lastly, on OBS, the revenue in IT services is a bit lower [Technical Difficulty] and I was wondering if that was the result of the restructuring process and we should continue to see slightly lower growth on IPS or it was just phasing and it could recover?

Thank you, Mathieu. On Spain, I mean, the line was not good, but your question was on the intention and whether we would be able to move to the network the cable customers from Vodafone Spain. Is that correct?

Well, I was reacting to the fact that I think MASORANGE, 6.8 million FTTH customers, and you mentioned in your press release that the JV initially would only have 4 million FTTH customers. I was wondering if some of the missing customers want third-party networks or other operators and whether you could migrate them over time into that JV to increase the penetration.

Meini, CEO of MASORANGE. It's perimeter difference, but...

Thank you, Christel. Just to clarify, the 4 million that were announced as clients of the potential future NetCo with Vodafone and the clients from both parties. So it includes also current Vodafone clients. The 6.8 million fiber lines in total of MASORANGE refer to the total footprint in the Spanish market. Own fiber networks above 17 million homes and the remaining networks that we share with other parties like Telefónica. So these are different scopes. 6.8 million is the total number of clients and 4 million is the number of clients expected to be part of the NetCo.

I guess my question is, do you think you can migrate some of the clients got at Telefónica into the new JV of some of the clients with Vodafone that are also somewhere else, not in their own footprint in the JV?

Yes, I mean that's not the main focus. The main -- the rationale of the NetCo is different. We are not planning a significant greenfield deployment, additional deployment of fiber in Spain currently. Our strategy is based on network sharing in this respect. Maybe to give you a bit more hints on the rationale of NetCo, Spain is a very competitive market, not only in retail, but also in networks. So we have a lot of FiberCos and MASORANGE and wants to be in the forefront of a possible consolidation in this market, so playing an active role. We reduced with the NetCo the risk of overlaps, or said in other words, the devaluation of assets that are strategic for MASORANGE. We secured at the same time, a long-term usage of these assets and assure also a crystallization of value, maintaining the control on the strategic assets. And as Christel mentioned before, it may allow to accelerate deleveraging. So this is, all in all, a very positive project for us.

Thank you, Meini. On your next question regarding the IT&IS services within Orange business. So indeed, there is a slight slowdown at plus 5% in Q2 compared to Q1 after 8% in Q1. But this slowdown is mostly due to portfolio pruning. We stopped a number of very low-margin solutions. And the performance, the growth performance is fueled by the growth of cyber defense and our digital services as well, growing at 7.2% after 5.1% in Q1. So no significant I would say, trend even though if in Poland, for instance, we see slowdown of the IT services, which is due to market uncertainty and B2B decisions, but really no -- really portfolio pruning and this is as per plan. On the AI question, so this is a long term and something we started many years ago when -- to implement AI in our marketing and network processes. Now obviously, on Gen AI, we've launched many, many initiatives, and we have actually, a lot of use cases internally. Our focus is, of course, on prioritizing and scaling the one that brings most benefit. Now on your question whether it's going to drive CapEx or revenues, of course, we are very focused on the revenue opportunity when it comes to our B2B business. And we are also -- but this is more mid- to long term, trying to understand what would be the impact for us, not just us, but the telco industry, if some of the use cases we see from handset suppliers or big tech on Gen AI would scale massively but it's too early to say. So the short term, in terms of revenue opportunity, it's really Orange business and some of the offers we've launched in Q1, including we've made these announcements with LightOn in France to deliver AI services mostly for midsize enterprise, who want a package solution to get started. And on the CapEx, we don't see -- at this stage, we are very cautious, and we are not making irrational decision to invest massively, I would say, on compute in a market that's still highly uncertain. So at this stage, really too early to say, but this is more a mid- to long-term discussion on whether or not some of the use cases you can think about like real-time translation or things like that. Whether there would be a need for computing the handsets in the core of the networks or, I mean, in the hyperscalers network or eventually at the edge of our networks, but this is a broader debate. This is also linked to the fair share debate. So really too early to make concrete comments on this.

Our next question comes from Mr. Ondrej Cabejšek from UBS.

I have 2 questions as well, both may be more of a follow-up. So Christel, you mentioned and to H2, you expect trends in France retail excluding PSTN, similar to 1H. And I guess with so many pricing changes, I think this will be reassuring. But then could you maybe talk about what goes into that assumption? I guess, on the one hand, you guys clearly improved materially the net add trends in both mobile and fixed. So this is something that you perhaps expect to continue. And on the other hand, there's probably some dilution on the single-play ARPOs from some of the pricing aggression that we've seen over 2Qs so that would be one question. And then maybe conceptually speaking, just on the Spanish JV again, why is it maybe just 11.5 million homes when the combined entity of Orange in MASMOVIL alone has got something like 19 million. So is this restricted to some certain geographies? Why is it not, I guess, a bigger combined entity would be a general question.

On the France plan for H2, and I will let Jean-François as well make some comment, but we will continue to drive the mix of value and volume. We will benefit from some of the tactical price increases that we've done. We will benefit, of course, from the net adds. We will continue to focus on convergent, I mean, migrating customers for convergence. So it's really -- these 3 pillars have -- as we've highlighted in the presentation, it's really customer loyalty and churn under control, cross-sell, volume and then tactical price increase as well as a very segmented and targeted marketing strategy with some focus on the young population, for instance, or on the communities. But I don't know if Jean-François, you want to -- Jean-François, I said, it also. On the JV, you're right that the 11.5 million lines means we will not move all the fiber infrastructure for MASORANGE in this fiber code. So we've been agreeing on the geographic perimeter, which is the one where we think we bring more values because this is where we have strict overlap between the Vodafone Spain and the Orange Vodafone Spain cable and fiber infrastructure as well as MASORANGE infrastructure.

Our next question comes from Mr. Jakob Bluestone from Exane BNP.

I've got 2 questions as well, one on France, one on Spain. On France, I was just hoping you could help us understand a little bit more around the weakness within the mobile ARPO. So if I look at the mobile-only ARPO went from growing slightly to falling slightly. I think you mentioned in your comments that Sosh was a big part of driving your net adds. So can you maybe just help us understood out of the strong mobile net adds, how much of that growth came from Sosh and how much was kind of -- how much of the ARPO pressure came from broader pricing pressure in the market? And then just secondly, on Spain, if I look at the net adds, it looks like they slowed a bit. So your postpaid adds went from about 120,000 last quarter to 85,000 this quarter. Your broadband adds went from 91 to 44. So it looks like there was a bit of a slowdown in the quarter versus what we sort of saw pro forma last quarter. Was that because of being sort of more internally focused during the integration phase or anything to do with the market. So if you can just maybe help us understand the slowdown in your Spanish net adds?

Thank you, Jakob. So on the French mobile ARPO, so there's a slight deterioration year-on-year, but it's stable quarter-on-quarter. And the slight evolution is due to the Sosh very good momentum on mobile, but we are really stable on the positive momentum on Sosh. So that's what explains the slight decrease again year-on-year, but it's flat quarter-on-quarter. And as you know, our strategy with mobile customers. Of course, mobile revenues, it's only 13% of the total France revenues because our intent as well is to make sure that we migrate customers from our mobile base to our convergent base. So mechanically, we have a mobile customer base that remains at a level under control and under pressure by the net adds because the higher value customers, we tend to migrate them in our convergent ARPO. So mechanically, that's also driving some of the dynamic. On the Spanish market, I will let Meini comment.

Thank you, Christel. Well, the important news is that we are growing. And that's not so obvious for a market leader with 41% or 42% market share. So I think it's -- that's very important and a very good signal that we started very well in this joint venture. Then of course, the priorities are different in our growth strategy. We're having 40% versus 20% of market share more or less before. That means that we have to focus on value creation with our current client base, especially via cross-selling and up-selling and the aggressive growth in new clients has less priority now because we are, let's say, prioritizing a stable market and a balanced value/volume strategy.

Next question comes from Mr. Carl Murdock-Smith from Berenberg.

And firstly, I'd just like to say good luck with the Olympics. And Christel, it was fantastic to see you carrying the flame, what a great moment for you and for Orange overall. Two questions, please. Firstly, just any exposure to French politics? I suppose I'm mostly thinking about public sector projects and whether there could be any resulting delays in customer decision-making in terms of proceeding with projects there? And then secondly, I wanted to ask on minority interest and the outlook there. We've seen minority interest costs step up again significantly in H1. And that's understandable given that it's Africa that's driving most of the growth. But looking forward, consensus only seems to have fairly flat minority interest costs going forward. So I was wondering if you could comment on your expectations both for this year but for future years in terms of the growth in that line.

Thank you for your comment on the Olympics. So as you know, I'm not going to -- I'm not attending the event as a competitor, but indeed, we have teams who are really dedicated to preparing and that's a real pride for all of them. On French politics, we don't see any impact. I would say, I mean, no impact in June and July because in any case, public sector entities and the administration, they still need to benefit from digital. They still move their applications to cloud. They still need actually more than ever support on cybersecurity. So really no impact from the French politics and no slowdown in the market. We've had though impact in Poland and that's part of the slowdown in the market, but that's more related to the fact that there was a number of CEOs of administration who had not been appointed and so lack of ability to execute. But really in the French environment, no impact at all. On the minority interest, Laurent, do you want to comment?

Yes. Thanks, Carl. So indeed, in H1, our minority interest is moving up from EUR 211 million to EUR 268 million. So the drivers are definitively Sonatel in Senegal and a bit of Polska as well. So this is very much driven by the success we have in Middle East and Africa. And to your point, in the second half, we see a trend, which will be consistent with our H1 numbers on these subjects.

Next question comes from Mr. Rohit Modi from Citi.

I have two. Firstly, in terms of your guidance, you have raised guidance for AME and Europe, but I understand group guidance remains same. But in terms of your own expectations, do you see -- I know that it's group guidance is still the same. But do you see any uptick in your own expectations in terms of -- I know it's a small digit growth, but it should be 2% to 3%, that's kind of your own expectations given and if not, then where the weakness is coming from, what is offsetting the growth in AME and Europe, overall. Secondly, just a follow-up in France. Given you have seen a higher uptick in Sosh, if you can give any ballpark number how much -- what is the base of Sosh subscribers? And what is the Orange subscriber base? And are you seeing any kind of cannibalization between Orange and Sosh in this year, particularly?

Thank you. So on the guidance, indeed, you noticed upgrade on the guidance for Europe and Middle East and Africa. And we reconfirm our guidance at group level, but -- so there is no weakness. It's just that the upgrade on the Middle East and Africa and Europe at this stage, have no impact on the full year guidance at group level, but it's a way to reaffirm our full confidence on reaching our group objectives. On the Sosh performance, we don't communicate on the detailed split in our customer acquisition by different brands. But what I can tell you and I know that's the question that you ask regularly is that we see no spin down effect from the Orange brand to the Sosh brand. So we see no acceleration and no customers migrating from Orange brand to Sosh brand. .

Next question comes from Mr. Stéphane Beyazian from ODDO.

I've got 2. The first one is, do you expect a little more pressure on EBITDA trends in the second half or in the third quarter from factors such as salary increases, the Olympics? Any factor that comes to your mind that could have a little bit of impact on the EBITDA trends or you think that all of that will be totally absorbed by growth? And the second question is a follow-up on the question about AI. The one thing you didn't mention is the ability to use chatbots for the customer service, and you know Deutsche Telekom is working on that with its own joint venture. So I was just wondering whether you could -- what you've tested so far, is it promising to you on that aspect? What is today the percentage of calls that you're handling internally and externally to have an idea of potentially what you could be looking to save in the future, if you think that is promising.

Thank you, Stéphane. On H2, I mean, really no pressure, but I don't know if Laurent, you want to give more color.

Yes, indeed, Stéphane. No, I would say, fundamental change since H1. The salary increase are implemented in January 1, Olympics is small numbers. So we do not see any evolution in terms of cost trend between H1 and H2. Besides the fact that we continue our efforts on efficiency, of course, which is continuing of course, as per our target of delivering EUR 600 million of efficiencies by 2025.

And on AI, you're absolutely right that we have many new faces with our customer service, so it's not just chatbots. It's also to augment, I would say, our customer agents customer service agents. So it's difficult to point to one use case, but we don't see a fundamental change. Customers were using, I would say, self-service digital solutions, are still using it, but we improve their experience by Gen AI and customers who want to call and talk to someone. They would still benefit from Gen AI solution because, for instance, we've been measuring that we can save time for the calls of customers, which is efficiency, but it's also quality and well-being, I would say, for our customer agents because they save time in taking notes and gathering data from the file, thanks to Gen AI use cases. So difficult to point, but you're absolutely right that the 2 big areas or I would say there are 3 areas, but customer service is absolutely one of the main application of Gen AI, together with customization and targeted marketing as well, but difficult to point to one specific and difficult at this stage to share some financial impact, but still, it's not just fully digital Gen AI or fully physical human being because there will be Gen AI embedded solution everywhere, including in our human and customer service centers.