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

Good morning, ladies and gentlemen, and welcome to Orange's Full Year 2024 Results Conference Call. The call 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, and let me hand over the call to Ms. Christel Heydemann. Please go ahead, Ma'am.

Good morning, and thank you for joining our full year results presentation. We are pleased to present today's strong 2024 results with the guidance fully achieved. After 2 years, our Lead the future strategy is delivering results on the 4 pillars of our plan. We have accelerated our transformation and reinforced our leadership. This is clearly reflected in our cash generation. The incremental free cash flow all in after over 2 years amounted to EUR 1.4 billion. In France, our solid commercial strategy has further reinforced our leadership position and we are back to growth in revenues and EBITDAaL. In all our countries, we remain focused on efficiency, and we have implemented new initiatives to accelerate particularly through artificial intelligence. These outstanding results give us great confidence to raise our 2025 guidance for organic cash flow. Let's start with our 2024 results fully achieving our guidance. Over the year, the group delivered EUR 40.3 billion in revenues, reflecting a plus 1.2% increase driven by growth in retail and Middle East and Africa. EBITDAaL performance continued to accelerate across the year, reaching plus 3.2% in Q4 and plus 2.7% for the full year. France is back to growth. Europe growth remained solid. Middle East and Africa recorded outstanding momentum and Orange Business met its targets. We maintained discipline on eCapex with eCapex to sales at around 15%, in line with our target. Organic cash flow reached EUR 3.4 billion, rising by almost 6% and exceeding our annual goal of at least EUR 3.3 billion. Our balance sheet remains robust with a net debt-to-EBITDA ratio of 1.8x and benefiting from the cash upstream related to the creation of MASORANGE. Finally, our carbon reduction efforts continue. We have reduced emissions on all scopes. We are accelerating on Lead the future execution we have achieved an average retail growth of over 3% at group level over the past 2 years, benefiting from the quality of our network, the excellence of our customer service and a leading position in terms of NPS, Net Promoter Score, in 15 countries. We have been actively pursuing in-market consolidation in Europe, particularly in Spain, where MASORANGE is delivering synergies at full speed. We continue to urge Europe to review its regulatory framework as we believe a strong digital and telecom ecosystem is essential for enhancing competitiveness in the region. In terms of infrastructure, we fully benefit from our strong fiber footprint, and we drive the monetization and optimization of our fiber networks. The monetization rate has increased by more than 3 points in France and 5 points in Europe in 2 years. While in Spain, we are creating a FiberCo with Zegona. Orange business pursues its transformation and is delivering a sequential EBITDAaL improvement, leveraging continued double-digit revenue growth from Orange Cyber Defense. Middle East and Africa delivered an outstanding double-digit growth, demonstrating our leading position and operational efficiency. I take this opportunity to highlight the strength of our position, the growth of Middle East and Africa is based on 16 countries benefiting from leadership positions, 160 million mobile customers, solid growth engines and a strong untapped potential. The risk inherent to the continent is mitigated, thanks to a well-diversified country portfolio with no country representing more than 15% of Middle East and Africa revenues and a solid local anchorage. We definitely believe in the strength and the potential of our business. Our Lead the Future plan focuses on value creation, and we delivered on our main indicators in the last 2 years. Firstly, free cash flow all in has significantly grown, almost doubling compared to where it was 2 years ago. Secondly, our return on capital employed increased to 6.9%, achieving a total increase of 100 points over 2 years. EPS increased by 12% to $0.82 per share. The improvement in free cash flow all-in, ROCE and EPS supports our dividend growth, dividend set at EUR 0.75 for 2024 payable in 2025 is fully covered by our free cash flow all-in generation. Lead the future is also innovation at the forefront. The AI Summit in France earlier this week was an opportunity to reaffirm our strong position on artificial intelligence. We have notably communicated on a new strategic partnership with Mistral AI combining research collaboration, AI integration to optimize our networks operations and the distribution of AI-enriched offers for our B2B customers in France and in Europe. AI is also a great enabler for efficiency, a top priority for the group. At year 2 out of 3, we have reached 2/3 of our EUR 600 million savings ambition and we have accelerated key initiatives to deliver cost savings in the midterm. In France, we have signed an unanimous agreement with trade union representatives for a new senior part-time plan for '25, '28. This will enable us to adapt our workforce to the evolving challenges of our business and will contribute positively to EBITDAaL with progressive effects starting from 2025. We are as well accelerating our operational efficiency projects across the group. Procurement will also be a key source of additional savings, thanks to accelerated group synergies. Our purchasing base represents EUR 18 billion every year and we aim to generate around EUR 700 million in procurement savings in the midterm. Needless to say that AI has a huge potential to create value and improve our cost base. We delivered EUR 200 million value, thanks to AI in 2024 to more than 150 use cases in networks and operational efficiencies, and we are targeting about EUR 300 million of value in 2025. Let's move to our ESG comments, which are at the heart of our strategy with remarkable achievements in 2024. Most of our 2025 objectives have already been met a year ahead of schedule, including the reduction of Scope 1 and 2 CO2 emissions, the number of beneficiaries of training to digital and enhanced representation of women in management networks, and we are also making significant progress on Scope 3. Let's now move to France. In 2024, we remained the strong leader in France in a dynamic market. Competition in the fixed only and convergent markets, which represents more than 50% of our domestic revenues, remained healthy. The low end of the mobile market was competitive. Our mobile-only revenues account for 13% of Orange France total revenues. In that context, we can leverage our strong customer base and leading position with best-in-class churn and NPS, well above the market. Indeed, our NPS reached a second level -- record level of more than 30 at the end of 2024 and our mobile churn is 7 points better than market average. We focus on our commercial playbook execution, which is based on 3 axis: first, we are driving increased segmentation to address all market segments, offering solutions that range from 2P offers to bundle offers with content; second, we enhanced customer loyalty by capitalizing on our top positions in churn, NPS, mobile customer services and FTTH network quality; finally, we increased value through upsell and cross-sell initiatives such as value-added services and migrating our base from ADSL to fiber with a premium. This commercial strategy is fueling retail revenue growth in line with our CMD ambition. This commercial strategy has proven successful. We delivered on our commitments in 2024, we master our market. At the beginning of last year, we committed to get back to positive net adds on broadband and we successfully achieved this from Q2. And we also stabilized as targeted the convergent base in Q4. Convergence remains the cornerstone of our strategy, accounting for 30% of total revenues in France and 80% of annual retail growth excluding PSTN. In Q4, the convergent ARPU reached EUR 78, up almost 4% year-on-year. Fiber kept driving fixed broadband commercial performance with the best quarter in 2 years leading to 1.1 million net adds in 2024, and fixed broadband ARPU is up by almost 5%. Mobile remained strong this quarter with close to 120,000 net adds. This efficient commercial performance resulted in a full year growth of 2.6% in retail revenue, excluding PSTN. With that, I hand over to you, Laurent.

Thank you, Christel. Good morning, everyone. So let's start with our group revenues, up 1.2% in 2024 and exceeding EUR 40 billion. The solid growth was driven by retail services, up 2.6% in the quarter and 2.7% for the year, more than offsetting the expected wholesale decline. From a division perspective, France is up 0.4%, and Middle East and Africa contributed the most to revenue growth in the group, achieving a remarkable double-digit growth. Europe revenues declined due to a reduction in low-margin activities despite retail accelerating during the year. Finally, in a challenging IT market, Orange Business decreased slightly. Moving to EBITDAaL, growth accelerated across the year to reach 3.2% in Q4. This strong result was driven by an outstanding double-digit performance for Middle East, Africa, continued solid growth in Europe and we are very pleased to be back to EBITDAaL growth in France. As expected, Orange Business continued the sequential trend improvement of EBITDAaL helping the decrease compared to the previous year as per target. Lastly, ICSS EBITDAaL was impacted by one-off and a base effect related to submarine cable sale last year. Moving to net income. Net income is stable in '24, driven by higher EBITDAaL in '24 and positive base effect related to 2023 French pension reform. Income tax reflected improved earnings in France and Middle East, Africa as well as the base effect of deferred tax assets in 2023. Lastly, the net results related to MASORANGE was impacted by one-off costs related to integration, [ restructuring ] plan and financial expense. Moving to eCapex. We maintained our disciplined policy. We pursued our investment in Middle East and Africa to support our strong revenues, while the limited increase in eCapex in France is related to lease buyback of equipment. Organic cash flow is up by almost EUR 200 million, reaching EUR 3.4 million, well in line with our guidance. The strong cash improvement of 6% is fueled by an uplift of EBITDAaL and lower tax income payment. Free cash flow all in reached around EUR 3 billion, almost up EUR 500 million, driven by organic cash flow growth and a phasing to our 2025 in license payments. On net debt, so our net debt reduced by EUR 4.5 billion, driven by the EUR 4.3 billion net proceed that we received from the creation of MASORANGE in the first half. This led to a leverage ratio of 1.8x, well in line with our guidance and reflecting our very strong balance sheet. Let's move to revenue by segments, starting, of course, with France. In France, revenues and EBITDAaL are back to growth in 2024 with Retail Services revenues up 2.6% during the year. Wholesale decline has been mitigated by unbundling and civil work tariff increase in 2024, as expected. For 2025, we are expecting a slightly better EBITDAaL growth than in 2024. Moving to Europe. Revenues are down 2.3% this quarter due to a decrease in low-margin activities, while retail accelerated by nearly 2%. Retail growth in Q4 is driven by our volume value strategy, strong mobile net adds, notably in Belgium and ARPU growth in Poland with as well churn improvement. This quarter represents the best commercial performance for broadband and FTTH since 2021. Convergent Services maintained a solid momentum with almost 8% year-on-year growth. Altogether, Europe posted a very strong 3.9% EBITDAaL full year growth, supported by price increase, operational efficiencies and synergies related to in-market consolidation leading to an EBITDAaL margin uplift of 1.6 points. Looking ahead, we expect Europe to deliver a low single-digit EBITDAaL growth in 2025. So let's move to Middle East and Africa with an outstanding double-digit growth both in revenues and EBITDA. In Q4, revenue growth accelerated to 12.6%, fueled by double-digit growth in our 4 key drivers: Orange Money, fixed broadband, B2B and 3G, 4G, which is up 22% on a year-on-year basis. This performance is driven by both mobile customer growth and ARPU up 4%. The 4G customer base increased only this year by 16 million customers. We are also very proud of the success of our Max-It super app launched in November of 2023, which has already attracted over 17 million users. Thanks to revenue growth, strict cost control, we delivered double-digit EBITDAaL growth in 2024 for the fifth consecutive year, increasing the EBITDAaL margin to almost 39%. EBITDAaL minus eCapex is up by more than 11% on a historical basis, leading to cash generation, which is our top priority for Middle East and Africa. Moving forward, we target at least high single-digit EBITDAaL growth in 2025. Turning to Orange Business. Revenues for the quarter decreased by 4.1% due to the expected decline in voice services and a challenging IT market. In that context, we are pleased to report a 4-point increase in the NPS, highlighting overall business recognition as a trusted players. Cyber Defense is moving full steam with double-digit growth this year. Our transformation plan, which includes a volatility departure plan in France has allowed us to achieve our goal of reducing the EBITDAaL decline by 50% this year. Our transformation action will continue to unfold in the coming years and support the ongoing EBITDAaL improvement with a decrease halved in 2025. We now target EBITDAaL stabilization in 2026 in the context of a more complex IT market. Let's move to conclude on MASORANGE. MASORANGE retained its leadership on gross adds and on value management with continued growth of convergent ARPU. The market remains competitive, but worth noting that the 3 main operators, including MASORANGE, of course, have increased their tariff in January of this year. Total revenues increased by nearly 5% this quarter, fueled by strong retail performance. Adjusted EBITDA is up 11%, benefiting from strong synergy implementation. We delivered this year, no less than EUR 120 million in synergies over 9 months, exceeding nicely our target of EUR 100 million. We reached an agreement as well to create a FiberCo with Vodafone Spain, and we target to close the transaction by the end of H1 '25 after the selection process of the financial investors. So proceed will be as communicated, fully devoted to debt repayment. For 2025, we target a slight revenue growth, cumulative synergies above EUR 300 million and double-digit growth of adjusted EBITDA minus CapEx. With that, I'll hand over back to you, Christel, for the conclusion.

Thank you, Laurent. In light of our strong achievements in 2024, especially in cash generation, we have decided to upgrade the 2025 guidance initially provided at our Capital Market Day. We now expect an EBITDAaL increase of around 3% in 2025 and an organic cash flow of at least EUR 3.6 billion. eCapex will remain disciplined with circa 15% eCapex to sales ratio while maintaining our leverage guidance of around 2x. Our dividend policy is unchanged with a dividend floor of EUR 0.75 for 2025 paid in 2026. Thank you for your attention. Laurent, the Orange Executive Committee, the MASORANGE management and I are now ready for your questions.

[Operator Instructions] Our first question comes from Mr. Ondrej Cabejšek from UBS.

Congratulations on these results, and thank you for the presentation. I have 2 questions, please. One just zooming in on France. So clearly, you expect trends to actually improve in 2025 on the EBITDAaL line, despite some noise around competition. So I just wanted to focus on the drivers of this improving momentum. So clearly, obviously, the -- like I said, the cost cutting is set to improve, I guess, the profitability. But then what are your current latest thoughts around the competitive dynamics and the pricing, especially in mobile, which we've seen, I guess, improve since the price cuts that we saw in the second quarter, but then more specifically and what's more important for you, the conversions competition that where we saw a lot of noise towards the end of the year. That's one question, please. And then the second question on your dividend. So you are now upgrading the free cash flow guidance for '25. You are at 1.8x net debt-to-EBITDAaL so quite below your leverage target. So I guess, investors will want to hear a commitment that the dividend per share will continue to grow in 2026 and beyond. So is this something that you can already communicate?

Thank you. So on the France dynamic, indeed, we expect a slightly EBITDAaL growth than in 2024 with continuous efforts on cost. So first and foremost, we plan to continue to benefit from retail growth, low single-digit retail growth, driven by, as we've done so far, volume and value. As you know, we've been already doing that in 2024, maintaining our best-in-class churn, leveraging, of course, our solid convergent segment. So we will have tactical price increases. And as we've said, continue to upsell from copper to fiber. On the competitive environment, actually, as we've said, stable environment on broadband and convergence. And of course, the core focus for us, as we said, is a churn reduction and best-in-class churn, and you see convergent customer churn is much better than non-convergent customers. We expect to see a continued good momentum on the convergent ARPU. And as you know, and as we've said, I mean, convergent segment is 30% of our total revenues in France, and it's 80% of our retail growth in 2024, if we exclude the PSTN and of course, this is a mix of tactical price increases. And as we've said, the upsell and cross-sell strategy. On the mobile market, we expect, as we've seen and commented on '24, the mobile-only market, especially in the low end, remains very competitive. Even though we've seen since the beginning of the year, some price increases of a few euros for actually all operators on the mobile the entry price point on B brands have moved on average from EUR 8 for slightly above 100 gig 5G packages to EUR 10 now, and this is true from all players. So increases from EUR 1 to EUR 5 on most tariffs with some differences depending on the data buckets. So from that standpoint, we are confident that -- and we see no change. Actually, it's pretty reassuring. On the EBITDAaL, of course, it's all the efficiencies and the cost drivers as we've highlighted. So we plan to accelerate our net cost reduction. We mentioned procurement. This is, of course, all the operational efficiencies that Jean-Francois is driving with his team. optimizing subcontracting schemes, advertisement and promotion. We will get a bit of a tailwind from -- on the energy side. And on workforce, as we said, we have agreed with our employee representatives on this new early retirement scheme, which we will start to benefit in 2025 towards the end of the year, but we will see progressive effect towards the end of 2025 and of course, increasing until 2028. And we mentioned AI. And of course, as you know, we continue on EBITDAaL to get the wholesale headwind. And as per the Capital Market Day, wholesale headwind in 2025 is expected to be circa EUR 100 million. On the dividend, as you know, we have an attractive dividend yield above 7%. Our capital allocation policy is unchanged. So that's why we communicate on this floor at EUR 0.75. And of course, it's unchanged until our next Capital Market Day, and so we will revise it at the next Capital Market Day. So end of this year, early 2026, with no [ taboos ], as we've been saying several times.

Just on this last point at the dividend. So there's a floor, right, which investors might view as insufficient given what I said in terms of the leverage and the free cash flow. So is there an ambition at least to continue growing this number with the specifics, obviously, as you say, communicated later in the year or early next year? But is there an ambition to actually grow this?

Well, I mean, as I've just said, we know we have a very attractive dividend yield. When we talk to investors, we also know and we want the share price as well to increase. So that will be linked. So at this time, of course, we're not making any announcement on our capital allocation. But of course, we know this is a key expectation from all investors, and this is something we will tackle as part of our next Capital Market Day, which at the latest, I would say, should be when we publish our 2025 results.

Our next question comes from Mr. Nicolas Cote-Colisson from HSBC.

Two short questions, please. The first one is on the labor costs in France, because I think you are planning to recruit 6,000 employees in the next few years. But if you were to take into account the senior plan, in line with what happened in the past years and the natural attrition. How should we see the headcount evolving in the coming years? And also if you can remind us when are the next wage negotiations all in France, again? And my second question is on cross-selling in France. I was wondering how big the business opportunity is at this stage in terms of revenue and EBITDAaL? And if you are intending to sell more products maybe outside telecoms in order to keep the churn very low in the convergent packages.

So on the labor cost in France and on the headcount, as I mentioned, actually, it's not just an early retirement program that we renewed or that we extended with our employee representatives, we signed a new workforce planning agreement, which includes indeed a plan on hiring, especially young talents in some of -- in the areas, and I have in mind, of course, in our stores, in Orange business, in our AI initiatives, but this is part of -- and this is, I would say, consistent with the hiring we have been doing in the past years as Orange. As part of the workforce, of course, we have, as you know, also an aging workforce, and that's why we have this early retirement plan, which we think will have EBITDAaL impact roughly EUR 400 million in -- at the end of the plan, so 2028. Now let me remind you that this plan is, of course, fully based on the voluntary departure. So that's taking into account the assumptions that we've made based on the previous plans. As you know, this is the scheme that we have been using for a long time and that our employees are used to. When it comes to wages negotiation, it's too early to comment because we had just -- we just started actually the negotiation with our employees. We expected the -- we expect it to be lower than last year, knowing that, of course, the inflation has decreased significantly, but it's really too early to comment further given I want to leave the negotiation to go to its end. On the cross-selling opportunity in France, actually, not just in France because this is something that, as you know, as part of our churn-reduction initiatives and also leveraging, I would say, the huge portfolio of customers that we have, indeed, we are selling new offers to customers. You've seen the launch of our cybersecurity offers for customers. We've been selling for quite some time, insurances. We are selling -- so cybersecurity insurances, of course, devices that's been for quite some time in the industry. And we continue -- and content is also a core upsell opportunity for us, especially linked to our broadband packages. So this is definitely -- we also have agreements on music, entertainment. So there's all type -- this is part of us being distributors for players. So this is not new, but we will continue to do so.

But I was just wondering, beyond the benefits at the churn level, all these initiatives, are they -- do they contribute in terms of gross profit margin positively? Or is that really just a churn tool?

No, this is not just a churn tool. This is contributing. And as you know, if we have also tried to upsell new services, I have in mind, of course, the banking activity with Orange Bank in Europe, which we decided to stop because it was neither contributing on the churn either contributing on the margin. So of course, we are very disciplined when we launch and when we upsell and making sure that this contributes positively, of course.

Next question comes from Mr. Akhil Dattani from JPMorgan.

Can you just start with a quick clarification on the French EBITDA? Christel, you mentioned obviously a number of drivers, but one of the things you've highlighted in the results today is that you've spend some CapEx in '24, buying out some of the routers that consumers were leased in France. So if you could just maybe help clarify whether that's a meaningful impact on a lot in EBITDAaL, so just a very quick clarification. And in terms of my main questions, it's really 2. One is on Orange [ Mass ], Laurent mentioned the fiber deal that you're hoping to close through Q1. I just wondered if you could comment in terms of how we think that should high level work? There's obviously a lot of speculation on proceeds which the press is saying could be about EUR 3.5 billion. Could you just talk us through without going to specific numbers, what that means for the deleveraging of that asset? And then what that could mean for the timing of when you consider reconsolidating the business? And then the second one was just on the CMD. Christel, you mentioned a few points around timing and things you're thinking about. But I guess, high level, if you're planning for that event. Can you sort of talk us through what are your main priorities?

Yes, I think you got cut, but your question was on the CMD. And then I heard what would be your main priorities.

Yes, exactly. I just want to understand that what you think the main priorities for that event would be? You talked about a few things around AI, the dividend. But just high level, what are you thinking about as you plan as a management team?

Thank you, Akhil. So on the French EBITDA, indeed, the CapEx lease, which was done in Q4 and slightly impacting our CapEx in France has a beneficial impact, but it's very limited in our trajectory. So it was really more tactical, but it's not something that's driving really the EBITDAaL trajectory is driven by what I was explaining before, cost reduction and strong focus on our commercial performance. On Spain, and the FiberCo, we still expect -- we are still in the process of negotiating. We signed the binding agreements with Zegona in December, and we expect to close it by the end of H1. At this stage, it's -- and the proceeds from this transaction will, of course, mean cash proceeds for MASORANGE, and we expect those proceeds to fully be used for deleveraging the MASORANGE company. There's some echo on the line, but I hope you can hear me. On the Capital Market Day, I would say, as usual, I mean, we will, of course, highlight what will be our strategic priorities for the midterm and providing an update on the trajectory for our different businesses and as well as capital allocation, of course, for the next years. And no doubt that AI will be a driver. I mean, we're just at the beginning of real revolution thanks to AI. So this is not just short term or midterm. This is really long-term drivers. So no doubt that this is something that we will accelerate on. And I would say, innovation in general, that's a strong asset for us. We have teams working and this is the core DNA of the company. So we will have a strong focus on this.

Can I just ask one clarification? What will dictate the timing of the event? You obviously mentioned it will be latest by your full results next year. Is it a function of closing the Spain deal? Or are there any other variables that dictate timing?

No, I won't provide you any guidance on moving, I would say, on MASORANGE, no, it's fully a function of -- we haven't really set a date. So I would say, it's going to be between the end of '25. And I would say, logically, at the latest for the results of '25, which means early '26, if we come to capital allocation, especially focusing on our 2025 results and consequential dividend payment.

Next question comes from Mr. Roshan Ranjit from Deutsche Bank.

I've got 2, please. Going back to France, Christel, you mentioned the scope for tactical price increases. If I look at the, I guess, Q4 trend, we saw a slight slowdown in the convergent ARPU growth. So how should we think about this targeted price increase through '25? And how does that reconcile with your -- I guess, we're now at the end of the 2% to 4% growth CAGR. So what should we expect for '25, please? And second question is just around TOTEM. You are still guiding to a 1.5x tenancy ratio target in '26, up from 1.4%. Could we get a sense of how that is driven? Is that more from the kind of Orange [ rollout ] ? Are you expecting to try and maybe win some other customers? And how are discussions with the MNOs in the Spanish market evolving there?

So on the -- on France, as I was mentioning, we see already some moves on the low end of the mobile market. And when it comes to price increases and ARPU for convergent offers, it's really driven as well from the copper to fiber, so DSL to copper migration. And we've also done some tactical price increases, including back book on copper offers as we've done, but very tactical. I don't know if, Jean-Francois, you want to comment further?

Yes, I can slightly comment. I mean, we will have, as you explained, Christel, a balanced strategy on value and volume. And basically, we are really expecting retail to continue to grow low single digit in 2025. We are very confident with our commercial strategy. As you saw, the market is moving. We [ lead ] the right direction on mobile in the month of Jan. So we are confirming the ambition of plus 2%, plus 4% growth over 2022, 2025 as was guided in the same day, so very confident on 2025's commercial strategy.

And when it comes to TOTEM, so we have successfully, I would say, increased our tenancy ratio already, and we continue to drive it. And this is true in France, and this is true in Spain. And of course, this is not just based on the Orange or MASORANGE footprint, even though, of course, in Spain, MASORANGE is driving its network synergies and this is impacting all the [ power cos ] I would say, supplying to MASORANGE, but we've also extended the footprint and the tenancy ratio of TOTEM with other players in Spain, and we will continue to do so. But as you know, Spain is an interesting market where there are more power cos than there are MNOs.

That's great. And just on that point, I mean, do you see the telco market evolving in Spain in the near term?

That's an interesting -- as you know, we've been very active to drive evolution in this market with MASORANGE. Mainrad, you're on the line. So actually, maybe you're closer than I am to -- you actually based in Madrid now. So do you want to comment on the Spanish dynamic? So maybe Meinrad is not plugged in or -- but no, we know that the market is it's still very competitive. And actually, we see and that's what we have been arguing with Brussels actually during the antitrust process. Of course, we talk about the MNOs and the large ones and MASORANGE is a leader in Spain. But there are still a lot of small players, mostly MVNOs, but also have some fiber footprint. And many of them are very active discussing and tactically trying to consolidate the market. So there's no doubt that Spain will continue to evolve in the near term.

Our next question comes from Mr. Paul Smith from Citi.

Two, please. Firstly, kind of following up slightly on some of the previous questions about labor costs and requirements, but thinking slightly longer term. Some companies in the sector put out fairly aggressive headcount reduction targets, whether in the short term or by kind of end of decade. Just thinking in terms of particularly how much you're talking about AI today and the changes to employee terms and these kind of things. Just can you talk slightly about your headcount requirements in the medium term from your current footprint, I think, of around 70,000 employees in France and around 130,000 employees worldwide? And then secondly, you talked a lot about the consumer competitive environment. I was wondering if you could also talk about the business competitive environment and expand slightly on the challenging IT market conditions that you referenced on Orange business?

So on the -- on labor cost and headcount, I think I've said it before. But as a company and given our history you don't expect me to announce, I would say, a big headcount target reduction because at least it proved in history of the company that it's actually counterproductive. Now if you look at our track record, and I think that's true for any telecom incumbent in Europe. We have been massively reducing headcount over the past 20 years, and this has been driven mostly, of course, through retirement and of course, embracing new technologies. And so that's why the early retirement scheme that we have in place will continue to have impact. If we take the assumptions that, again, we've discussed with our employee representatives, knowing that this is only on a voluntary basis. So this is absolutely not a target, but we can estimate that it's roughly 6,000 employees who could be eligible and voluntary to adopt this scheme. Now this is over the next years, and this means that those employees will remain employees of Orange for actually a longer period of time, but they would be on a temporary basis, which means that we would have immediate cash benefit from this scheme. So really no headline on headcount reduction because we really want to be responsible in the way we manage our employee workforce. When it comes to AI impact, I really -- I'm not sure how companies can announce headlines. We know that all jobs will be impacted by AI. And this is actually why we have massively trained all our employees, and we are actually providing tools so that employees can all benefit from gen AI in a secured environment within the company. So there is no doubt that this is driving efficiency. If we take our presales team, if we take our developers, if we take our, I mean, customer support, so this will have impact. But at this stage, the technology is really far from replacing humans. And I think it will never replace actually human or it should not replace human, but it will really enrich and make our employees more efficient. So at this stage, it's really difficult to anticipate, I would say, short to midterm headcount impact. But as part of our workforce planning negotiation with employee representatives, we've clearly highlighted the type of jobs and positions where we plan to hire and train because it's not just external hiring, it's also training. We have already a few thousand employees working on data and AI, and we will continue to increase that. And so that's very important for us. But no doubt that AI will have impact on all type of jobs and will impact all employees. On the consumer and, I would say, business competitive environment, if we focus on the French market and the small businesses, this is, of course, a market that is always -- that's always been very competitive. And as you know, we have a very solid market share actually qualified as dominant market share by the antitrust authorities, but we fight hard to protect and defend this market share, and we've successfully done it over the past years. With -- if we look at our global businesses and international footprint, it's clear that this is a very competitive market, especially when it comes to IT integration, and so on the IT integration type of business or type of network services, we face competition from large IT integrators as well as, I would say, more traditional competitors. So this is not new, but this has definitely increased, partly driven by the maybe less dynamic IT environment in the past month.

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

I have 2 questions, please. The first one is about France again, but looking at it slightly differently. Clearly, you are doing a very good performance with an acceleration in volumes despite the competitive environment. And I was wondering if besides all the good things you've done if that is also due to a reacceleration of the market growth in Q4? Or you feel you're taking a bit more market share? And I realize we don't have numbers from the other players, but maybe portability numbers that you may have -- could shed some light into that? And then I had a question about OBS. So we've seen that you've delayed a bit the stabilization of EBITDA. And as you flagged, 2025 is going to prove more difficult because there's more competition on the IT side. Is your expectation and your guidance for 2026, based on a better environment in IT or there are other levers that now make you confident you can stabilize that in 2026?

Thank you, Mathieu. On France, I mean, definitely, the performance in 2024 is based on the very solid and strong performance of our teams in France. As we said, 80% of our growth is coming from convergent segment. It's not that Q4 performance is not linked to an acceleration in the market dynamic. So it's really the accumulation of all the work we've done, as we've said, very detailed segmentation, very focused approach and tactical movements as well as this upsell, cross-sell. So it's -- there's no magic, but I mean, Q4 has not been less competitive. And I think we've been commenting quarter-after-quarter. Of course, if you look only at the mobile net adds, the mobile market remains extremely, especially on the low end, very competitive. Now there's always seasonality in -- some seasonality in Q4. So that's driving. But as you said, at this stage, we can only comment for Orange. We don't have the other -- market performance. Jean-Francois, you want to add?

Yes, we can comment because we have portability visibility, and we are very proud to be for the first -- third quarter, consecutive quarter positive in portability [indiscernible] and stable Bouygues. So that's something we are pretty proud of.

I think you share your pride, actually, when you say it, Jean-Francois. No, when it comes to OBS, of course, I mean, our 2025 and '26 performance, I don't think we are -- I mean, we're not planning on a better IT environment. We are really planning on what we control. And Elliott is driving very aggressive, I would say, transformation, focusing, of course, our internal efficiencies, our operational performance as well as repositioning our portfolio, and we've said it. So we're investing on our next-generation platform, evolution platform. We are launching new AI offers we have been pruning our portfolio. And of course, we have Orange Cyberdefense that continues to grow double-digit, very solid performance and a leader now in Europe, of course, benefiting to these results. So no, we are not, I would say, betting on external to drive this.

Our next question comes from Mr. Stéphane Beyazian from ODDO.

Can I ask you regarding the network shutdown because you've started some tests actually more than tests in a couple of locations. So how is that going on? And whether you start to have some thinking about what savings potentially you could get out of that from selling copper, for instance, an indication would be interesting? And I've got the second question regarding free cash flows. Is it possible to have a little bit of guidance or color on what taxes you are expecting for 2025, so cash taxes and also possibly on litigation, there were a couple of issues at the end of 2024?

Thank you, Stéphane. So I will let Laurent comment on the free cash flow and taxes litigation. On network shutdown, I'll let Jean-Francois add further, but it's -- at this stage, we've read in the news some numbers on the savings or the benefit we could get from the copper resale. This is not science fiction because we plan to resell it, but the numbers are completely built at least they're not coming from us. So this is not what -- we are only starting to work on the supply chain for recycling this copper, but there's a cost to extract it. And so yes, we will get savings, energy saving when the copper is dismantled. But this is obviously a very large industrial plan that we passed successfully the first step end of January, and that's going to be a key element actually of our next Capital Market Day because, of course, this is for us a key project in France. Jean-Francois?

Yes. So indeed, we are planning to shut down our copper network. As you know, this is a project that will bring us up to 2030. We have taken the first step because we have phases in this project. Actually, we have 8 phases. They will bring us again to -- until the end of 2030. We had the first, what we call, a lot with 200,000 households that we've shut down. We have done that 31st of Jan. I mean it went extremely well. I mean we had less complaints than the number of fingers of the hand at the end. So we've been really happy about the way it turned down -- has turned out, sorry. And as Christel was saying concerning the copper reselling, this is also going to grow in the next years. But we are, I would say, in the first steps, and we have started to shut down commercially, what we call the second lot, which is concerning 900,000 households, which are going to be shut down in end of June 2026. So this project is starting extremely well.

Laurent, on the free cash flow?

Yes. Stéphane, so drivers in terms of our cash for '25, of course, number 1 will be the EBITDAaL minus eCAPEX uplift in line with our guidance of EBITDAaL up 3%. So that's, of course, the main engine in terms of cash positive evolution. We will have against that some tax headwinds, and we have considered in our guidance of at least EUR 3.6 billion the tax impact in France, which is impacting us by around EUR 100 million. So that's on top of the guidance uplift we have and we'll have as well some limited headwinds on the financial interest due to the interest rate decrease, which is impacting our positive treasury. So that all of that is leading to the EUR 3.6 billion at least of organic cash flow. So moving to the free cash flow all in. We have, as I said, some phasing on the licenses of 5G, mainly in MEA, which in turn will lead to globally this EUR 500 million average license per year over '24 to '25, and this is the kind of run rate we see on the midterm so far. In terms of litigation, as you know, we had a litigation with indeed, which will be paid out in H1, and we are talking about EUR 50 million and we'll make appeal for this [ nil ] fine, and we do not have any litigation, I would say, as we see on 2025 so far, but this is something which is, of course, depending on the various lawsuits that we have.

And just a quick follow-up regarding Orange Bank, which will go away this year. Will that help a little bit in terms of savings this year? Is there anything around any cash also that you may have to [ then disburse ] anything that we should know?

No, absolutely Stephane. So very much in line with our trajectory I remind the net cash impact is EUR 200 million for the Orange Bank closing, and we are in line with that. In '25, a bit less of a headwind in terms of profitability, but nothing significant, all in line with the expected trajectories.

The next question comes from Mr. Joshua Mills from BNP Paribas. Mr. Joshua Mills, your line is open in case you have a question. Okay. In that case, we'll move on to the question from Mr. Ottavio from Bernstein.

Very simple question, but I guess it's something you want to tackle on the CMD later on, but it's on the capital allocation. Previous question has been highlighted about your gearing that is effectively reducing and that gives you options. The optionality, of course, it's on the cash distributions, but also in terms of the assets that you have off balance sheet, I'm talking about Spain and the JVs and the fibers. Now because in Spain also, you're doing the -- you try to monetize at least you -- the plan is to monetize the networks. That will lead to an acceleration of the gearing and that potentially also the timing when the private equity would like to monetize their own stake. So therefore, the question is, going into next year, kind of ranking in terms of the priority between case distributions and bringing some of the assets you got on balance sheet like Spain and also the fibers, JVs, both in France and in Poland, which are on the pecking order. I know that it's very likely that you want to tackle to this later on in the CMD, but if you could give us a bit of a flavor of how you're basically going to manage your balance sheet going forward?

Thank you. So indeed, you're rightly pointing to the various options that we have. As we've said, we are very focused on value creation for the company, and our teams in Spain are very focused on delivering the synergies, which is the first lever to create value for us of share in MASORANGE. We will not disclose any timing or any intention, but we've been very clear on the fact that we want to have the option to reconsolidate and the MASORANGE asset. There is no predefined scheme to do that. So that means all options are open, and that's why we've been very clearly keeping the cash upstream dividend that we received, at the creation of MASORANGE and the low leverage at Orange balance sheet level. And as you know, we also have a lot of valuable assets on our balance sheet. We have a lot of fiber footprint. We mentioned that, that infrastructure is a key pillar of our strategy, and it's -- and we believe it's a core value and we have TOTEM. We have various assets. We have FiberCo. The first priority for us with FiberCo is, of course, to increase the monetization rate of the fiber that it's on our fiber assets. So monetization can go through our retail or through wholesale agreement. That's why we have a wholesale teams dedicated to that. But no -- pretty fine, I would say, path. Of course, the Spanish MASORANGE valuation is a key priority, deleveraging priority one, finalizing the -- executing full steam synergies and finalizing and closing the FiberCo.

If I can be more specific, [ NETCO ] the monetization, when it will be done in Spain, the cash will go towards deleveraging or towards upstreaming dividends to Orange?

Yes. No, sorry, I thought -- because I thought I had already mentioned it, but no, the cash upstream to MASORANGE from the FiberCo will go fully to the deleveraging of MASORANGE.

Perfect. And in terms of the JV for fiber, do you have both on the concession in France and in Poland. Do we expect that at some stage will be brought back into on balance sheet, you will consolidate or you will believe in outside your perimeter for a long time?

So if we talk about our French FiberCo, we have the option to take control back and there's -- that's pre-agreed with our core shareholders, and this is something that will assess based on, of course, as always, value creation for Orange shareholders. And we have similar scheme, by the way, in our FiberCo in Poland as well, where we are also looking at increasing, I would say, the value of our fiber footprint in Poland.

We will try once again the line of Joshua Mills, BNP Paribas. Please go ahead, sir. Joshua, just in case your line is muted. You are now in case you have a question? Okay, perhaps not. In this case, we see no further questions on the line. We'll pass the line back to the management team for the concluding remarks.

Thank you all for joining this morning earnings call. We are confident in our ability to fully deliver our Lead the Future trajectory, while accelerating we have upgraded our organic cash flow target for 2025 to reflect this commitment. AI, all our actions and initiatives are designed to lay a strong foundation for a successful phase beyond 2025. Thank you all.