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

Good morning, ladies and gentlemen, and welcome to Orange's Q1 2025 Results Conference. For your information, this conference is being recorded. [Operator Instructions] Our call today will be hosted by Christel Heydemann, CEO; and Laurent Martinez, CFO, 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 floor to Christel Heydemann.

Thank you. Good morning, and thank you for joining our Q1 results presentation. We are pleased to report robust results with an EBITDAaL growth of 3.2%, in line with our full year guidance at circa 3% growth. In France, we remain disciplined and delivered a retail, excluding PSTN growth of 1.5%, supported by strong fiber performance and a convergent ARPU up 4% year-on-year. Africa and the Middle East once again demonstrated outstanding double-digit revenue growth this quarter. Those robust results are paving the way to our full year guidance that we fully confirm. Let's move to Slide 5. In the first quarter, revenues increased by 0.6% to EUR 9.9 billion, driven by strong retail performance at 2.4%, which largely offset the expected decline in wholesale and low-margin equipment sales. The decrease in other revenues this quarter was notably due to some one-off items in Q1 2024. From a segment perspective, revenue growth was fueled by Middle East and Africa, with a remarkable plus 12.8% retail growth. Retail growth in France and Europe was offset by wholesale and low-margin activities. Orange Business revenues declined due to last year's portfolio pruning and a competitive market. EBITDAaL grew more than 3%, reaching EUR 2.5 billion, fully in line with our full year guidance. This growth reflects our solid retail performance and our continuous efforts on efficiency. We confirm our strong ambitions on procurement, AI and operational efficiency, notably with our new senior part time for which we booked a EUR 1.6 billion provision in Q1 below EBITDAaL as expected. eCAPEX accounted for slightly less than 15% of sales this quarter. I will now hand over to Laurent for the business review, starting with France on Slide 7.

Thank you, Christel. In France, pricing environment remains dynamic in the mobile entry market, which accounts for much less than 13% of our total revenues in France. Fixed market is stable overall with some fluctuation on the entry market, while the high end remains quite rational. We continue to execute our disciplined and segmented commercial strategy by enhancing our offering to address all market segments. Our focus is on increasing customer loyalty and defining value through differentiating and enriched offering. In the first quarter, France retail ex PSTN is up 1.5%, driven by convergence, with an ARPU increasing by 4% and continued outstanding FTTH net add. This is very much in line with our expectation of low single-digit retail ex-PSTN growth for the full year. We achieved stable mobile net adds and delivered very strong FTTH net add with a best-in-class and improving mobile and convergent churn shielding our market share. Retail growth was offset by expected decline of wholesale and the 2024 base effect on other revenues. Overall, performance within the quarter is in line with our expectations, which allows us to confirm EBITDAaL growth slight improvement this year versus 2024. Moving to Middle East and Africa, which is representing 20% of our group revenues. This region delivered an outstanding 13% revenue growth, marking our 8th consecutive quarters of double-digit growth driven by our 4 growth engines. We definitively confirm our 2025 EBITDAaL outlook with growth of at least high single digit. Moving to Europe. Retail services is up 1.2%, driven by convergence, up by more than 5%, thanks to a balanced volume, value, commercial strategy. IT and IS revenues recovered this quarter with plus 17% growth, while low-margin wholesale businesses and equipment sales declined. We are pleased with the outcome of the 5G auction in Poland awarded at reserve price. This spectrum will strengthen our leadership in connectivity. Looking ahead, we do confirm the outlook for low single-digit EBITDAaL growth for 2025. So let's move to Orange business with revenues for the quarter decreasing by 4.9%, similar to the previous quarters. Excluding the portfolio pruning implemented last year, IT and IS revenues are flat on a year-on-year basis in a competitive market. Growth at Orange Cyberdefense remains solid at plus 8%, mainly driven by a robust performance in France. In Q1, Orange Business order intake for new customers and upsell was at plus 13% on a year-on-year basis. In the quarter, Orange Business launched as well a new 5G+ offer in France and as well a trusted B2B Gen AI offer in Europe. We are reinforcing our transformation plan, developing new business streams, including sovereign and defense, and we pursue actively our cost base optimization and our product and IT transformation. For the full year, we confirm our objective to have EBITDAaL decrease in 2025. So completing with MASORANGE, our revenue is up 2.6%, fueled by solid retail growth and increasing momentum on the B2B side with strong commercial performance, 51,000 net adds in FTTH and 80,000 in postpaid mobile with continued growth of convergent ARPU and stable churn. B2B commercial performance was marked by the award of the largest public contract with the Spanish central government, CORA, on connectivity and cyber, definitely a flagship win on our B2B segment in Spain. We delivered, in terms of synergies, EUR 80 million this quarter, which brings the total of synergies over a year to already EUR 200 million. The process to create our FiberCo with Vodafone Spain is ongoing, with closing expected around this summer. For 2025, we confirm all our targets, site revenue growth, cumulative synergies above EUR 300 million and double-digit growth of adjusted EBITDA minus net CapEx. Back to you, Christel, for the conclusion.

Thank you, Laurent. I would like to conclude this presentation simply by emphasizing that this first quarter's results underpin our confidence in achieving our full year guidance that we fully reconfirm. In the current macro environment, we are confident in the resilience of our business model with very limited exposure to tariffs and the U.S. economy. Thank you for your attention. The floor is now open for questions.

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

I have got 2, if I can, please. The first one is on France. You commented on the competitive behavior at the low end of the market. But I guess I wanted to understand 2 things. One is SFRs pre-reported their Q1 KPIs, which were quite improved. So I guess I'd love to understand how you're thinking about exactly what's going on there? And then within that, when I look at your Q1 revenue number, presumably, there's a bit of a drag this year from a tough comp from the Olympics. So maybe if you could just quantify that just to help us understand how we should think about the outlook? And then the second question is on Orange MAS(sic) [ MASORANGE ]. You mentioned the FiberCo deal expected around summer. Can you just remind us how we should think about the steps thereafter that will help us understand what you do in terms of ownership? So just so we know, is this something that happens to H2? Or will this be a longer process? And I guess part of the reason for asking is you've probably seen there have been some headlines around the potential IPO process that Orange MAS(sic)[ MASORANGE ]. So just trying to understand how we should put that into context?

Thank you, Akhil. So on the France commercial environment, things in Q1 have been pretty much in line with what we saw already in Q4. And commenting on the SFR performance, we knew and we have seen them improving, being more aggressive, especially at the low end of the market already starting in Q4. And again, you've seen their numbers in Q1. So no surprise from that standpoint. And now what we know based on our numbers is that when we look at our mobile portability, we gained customers in Q1 on SFR. So -- and in the end, you see the -- we are positive in terms of commercial performance on all our different segments. As we said, very competitive price point at the entry level and especially on mobile, but no surprise from that standpoint. I don't know if Jean-François, you want to comment on the market environment.

No, you've said it. I mean, I remind that SFR has lost 1 million mobile customer last year in 2024. So we were expecting that it would obviously make some moves to lower these huge losses, and that's what started to happen in Q3, Q4. So we are exactly on the same trend in Q1 nothing to comment about that. As Christel was saying, if you look at our numbers, our base is slightly growing on pure mobile, which is, I remind a small part of our business and is growing on broadband and also on convergence. So that's all I can say.

Thank you. Coming to the MASORANGE performance and FiberCo, and I would say, shareholding structure question. So first and foremost, as we restated, the focus is really on executing our operational plan and delivering on the synergies and Q1 from that standpoint is fully in line. We are aiming EUR 300 million synergies for the full year 2025 after the EUR 200 million last year. FiberCo, as we said, we expect closing around summer. When it comes to the path to control, we know what's in the shareholders' agreement. And indeed, there's an IPO that can be triggered starting 2 years after closing, which means April 2026, provided a number of conditions are met, which obviously we don't disclose. That being said, of course, shareholders are free to discuss any other scenarios. So we don't make further comments. Of course, we are all very focused on delivering on the synergy plan and delivering a strong commercial performance in Spain, which MASORANGE did in Q1.

Great. And just a clarification on the question around the Olympics effect on the comp. I don't know whether you can comment on how material that is as we try and think about how much that might have mattered for the Q1 numbers?

Laurent, you...

Akhil, so you see that the other revenues in France is down EUR 14 million, and that's broadly the impact of the Olympic Bay game that we had in 2024, just to give you a sense.

Our next question today comes from Roshan Ranjit from Deutsche Bank.

I've got 2, please. Just following up on the previous question around the domestic environment, but switching to the pricing dynamics. We do see a slowdown in the retail trends, which you had well flagged given the lack of a subscriber-wide price increase. But something which you have talked about is this targeted price increase. So is it fair to assume that, in Q1, there was no or very limited targeted price increase? I think last week, we did see some back book price increases on the live box tariff. So anything you could say around the development of this targeted approach would be very helpful through the rest of the year, please? And secondly, just quickly on the enterprise trends, again, a tough environment. Something you flagged last year was the pricing pressure from some of the international peers. Has that moderated? Has that increased? Or is that the same? I know you reiterated your guidance, but is the pruning effect offsetting this incremental pricing pressure, if any?

Thank you. so on the French pricing dynamic, there's been some tactical price increase in Q1 from our side. And we've seen a number of moves ups and down, I would say, across the board depending on the segments. Of course, the low-end part of the market remains low, but there's been a number of increase actually, including from some competitors. I don't know if Jean-François, you want to give more details.

Yes. Thank you, Christel. Yes, indeed, I mean, we are -- as we always explained, we are having a very segmented approach, value-driven approach. that continues. So you probably have seen it, and this is to answer your questions about the coming quarters. I mean you have seen we've launched 2 new light boxes alongside some, obviously, broadband packages, 2 light boxes, which are Wi-Fi 7. That is part of our strategy to generate value and volumes as well in the coming quarter. The first weeks because it's been launched 10 days ago is rather positive. So we are very confident that this value strategy is sustainable for the next quarters. And as Christel was saying, on the more low-end pure mobile market, we are making moves with such that you have seen. It's much more dynamic. And here as well, we are quite confident on the fact that we will hold our net adds for the rest of the quarters to come.

On the enterprise performance, so indeed, international remains competitive. I would say what we see on the market dynamic is that, of course, the macroeconomic environment is impacting all geographies and including France. So some delay, I would say, on some customer decisions. But we are working hard on our transformation, of course, driving efficiency and to improve our competitivity. As we said, if we have a strong order intake performance, so we are confident that the transformation is going in the right direction. And if we exclude the one-off impact and especially the portfolio pruning, which was not just impacting -- I mean, which impacted France as well as international, excluding those one-offs, our IT&IS revenues are flat year-on-year.

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

I've got 2 short questions. I'll start with France, unsurprisingly. Obviously, I understand your business is more focused on convergence, but still, we're seeing new segmentation of the broadband market with fiber or new products being now well advertised and below [ EUR 25 ]. So how much demand do you think there is for these fiber-only offers? And how your market survey measures the risk on your own customer base? And whether you are already seeing impacts from this new type of competition in this segment in April? And my second question is on the Middle East and Africa. Obviously, it's a very strong performance this quarter. How do you assess the impact from trade disruption and FX volatility on your business in this region? I'm thinking both in terms of macro and demand, but also from a cost standpoint. Can you just remind us how is your CapEx spend structured? I mean, is it dollar or euro denominated? Any color on that would be very helpful.

Thank you. So on France, indeed, we see a further segmentation, and that's why, I mean, we drive innovation on the high-end part of the market. We've introduced new routers, new boxes early April. And we are positioned as well on the entry part of the market with actually our Livebox 5, which is the oldest one. I don't think we have any data point, but I will let Jean-François comment given he has the latest...

No, I can answer your question directly. I mean you're making reference to the big offer that, by the way, the pure broadband offer has been launched in October last year. So it's not new. We've seen actually Illiad, Free responding to that a month ago with an offer at [ 25 ], a pure broadband. We had this type of offer. So it's not on the market. It's true that competitors have been more aggressive. Just what I want to tell you is that we see no material effect. Our mobile churn is very good, as you can see. Our broadband churn is also very solid. So we don't see any material impact on our -- basically our customer base from these offers, clearly.

On Middle East and Africa and the impact of macro environment and exchange rate, I would say, dollar, euro, Laurent, do you want to take it?

Yes. So overall, in terms of the tariff impact, we do not see any material impact at this stage at all. Of course, we are not exposed to the U.S. market, as you know. Still to your point on Africa and the CapEx ratios, we are buying largely in dollars. So this is more, I would say, a tailwind in terms of the dollar versus euro and versus our local currencies as we speak for Middle East and Africa.

Our next question today comes from Joshua Mills from BNPP Exane.

Mine was just on the cost-cutting side. So at the Q4 results, you talked about the opportunities here following the new deal you've reached with the unions. And I think at the time, you mentioned that some of those benefits will start to come through in the second half of the year. Now that we're further into 2025, could you perhaps give us a bit more color about how you expect those savings to come through in terms of EBITDAaL growth phasing? And also whether you are exploring or have found more cost-cutting opportunities beyond the union agreement and potential headcount impacts, that would be very helpful?

Thank you. So on cost cutting, and as we've said, we are just, I mean, implementing the agreement that we signed in February Q1, and that we indeed had announced during our full year results. So as nothing has changed. We will see some impact starting in H2 this year, but most of the impact should be next year because you know that the scheme that we have in place, people who volunteer to take this early retirement part of the scheme. And I remind that the agreement we had with unions is not just about the early retirement part, but I assume your question refers to this. So we know that people who volunteer. You know that they work part time the first year, and it's only after the first year that they are free and outside the company. So in terms of impact, there's a limited impact at the beginning. But we see the plan is open. Our employees are reaching out and looking at their options. So we are confident that the plan will execute as forecasted. So limited impact, but starting in H2 this year and most of the impact starting next year. When it comes to other cost-cutting options or initiatives, we have many starting, as we said on this call and before, I mean, obviously, procurement. We have many, many -- we have a full company program on this. Of course, AI and all type of operational efficiency program, but nothing more when it comes to headcount in France, if that's your question. The scheme that we have in place, we believe addresses all our concerns. And you remember that our previous plan, which with early retirement, this is something we've been doing for more than 10 years. We had more than 7,000 employees volunteering in the previous plan. So we are very confident that this early retirement scheme is exactly what we need. And I remind that we signed it unanimously with all our workers' union, which is very important for us, having a peaceful, I would say, social and union environment.

Our next question comes from Carl Murdock-Smith from Citi.

I was looking at the universal registration document, and I was looking at the annual bonus pay framework. And there were 2 metrics where you missed target last year. Those were B2B service quality and employee engagement rate. So I was just wondering if you could provide a bit more color on what caused those 2 metrics for you to miss the target, but also what you're doing to improve on those 2 metrics going forward?

Thank you. Great question. And we've been diving, of course, on those metrics, given this is impacting our bonus payout for 2024. To be fair, the B2B service quality, we know was very stretched because the scale between the 0% and 150% achievement rate was very limited. So we missed it, but not by far, given we had planned to improve the B2B service quality. Part of the miss on B2B service quality or customer satisfaction is also the consequence of all the portfolio pruning we've been driving. And so we knew we had a very ambitious target. That's a discussion we had extensively with our Board of Directors, but we accepted the challenge. And unfortunately, we missed it on B2B service quality. We got it right on B2C. On the employee engagement rate, our focus, and this is the first time that we had introduced the level of engagement rate in our, I would say, leadership team bonus scheme. We achieved the objective to increase participation rate of employees. But we missed it on the improvement of the engagement rate at company level. We had set an ambitious target, again, to improve compared to last year. So we did improve slightly, but not at the level that we expected. So again, this is something that we follow carefully. We have those, what we call, internally voice up survey once a year, and we are working now on the one for next year given this is, again, an objective that we have for all the management team.

Our next question comes from Andrew Lee, Goldman Sachs.

I had a question on French consolidation. It's obviously a key topic at the moment across the sector. Have you seen any incremental moves, maneuvers from any of the players in the market that suggest to you that anyone is trying to drive towards consolidation in the near to medium term? We had a press article a few weeks ago that suggested bankers have been engaged, but whether they've been engaged recently or that's just an ongoing engagement wasn't clear. So any comments you could give around any potential moves towards an improvement in the competitive market structure of France would be really helpful. And then just the second question, partly related to that. Would you ever consider -- would it be possible for Orange to buy XpFibre?

Thank you. So on market consolidation, let me be very straightforward. I do believe we need market consolidation in Europe. And this is true in every country where we operate. And as you know, Orange has been actively engaged in market consolidation in Romania, in Belgium and lately in Spain. So we also welcome the U.K. CMA decision on the [ 4.23 ] consolidation earlier this year. Now as you know, in France, we are a strong #1, and our key priority is, of course, to remain a strong #1. So we are carefully monitoring the situation. We know that -- I mean, I think SFR has been very open to, I would say, changing their shareholder structure. But there's not much more I can comment on, except that I think all CEOs in the telecom industry are very vocal when it comes to engaging with Brussels and national regulators to try to change the very consumer-driven regulatory environment that we had for the past 20 years. On the XpFibre, as you know, we've been massively investing in fiber in France. So we don't plan and we don't need to invest in XpFibre. We own 50% plus 10% of the fiber infrastructure already in France, but we carefully review the valuation that investors will put in XpFibre given we own a lot more fiber than XpFibre.

Our next question is from Mathieu Robilliard from Barclays.

I had 2 questions, please. First, in terms of the wholesale trajectory in France, so it was a decline of 4%, which, as you said, was as you expected. Now I refer back to your guidance from a few years ago, I think you were expecting a loss of EUR 1 billion of revenues on wholesale France. And it seems that based on what you did over the past few years and also on this quarter, you are probably -- or you could beat and lose less than EUR 1 billion, unless there are some big elements for the rest of the year that will bring down the decline further. So I was wondering if you are still on track, not that you have to lose EUR 1 billion wholesale revenues or you think you can do better? And then the second question was on cost cutting that was just discussed. At your Q4, you had talked about a potential annual saving by the end of the program of EUR 400 million in terms of the EBITDA. And I wanted to understand what was the impact on free cash flow? Because as I see it, I think a lot of the restructuring costs go below the EBITDA. I was curious to understand what was the net-net in terms of free cash flow savings from that plan?

Thank you. So on wholesale trajectory, absolutely right that the guidance for Lead the Future '23, '25 window was minus EUR 1 billion revenues and impact of EUR 400 million EBITDAaL. We -- indeed, Q1 and if you look at the trend, the Q1 impact is lower than if you just do the math. But we expect H2 to have a stronger decline given we had some base effect in H1 last year. So all in all, no upside, I would say, on the wholesale revenue. We are completely in line with what we had forecasted. On the early retirement scheme impact, I don't know, Laurent, if you want to take it, EBITDAaL impact and cash flow impact?

So Mathieu, so indeed, in terms of EBITDAaL impact, we are talking about EUR 400 million on the midterm. And in terms of OCF, we will have a slight positive cash impact as of '26 and across the implementation of the program.

If I can follow up. So basically, the savings are partly offset by payments on SCF, but eventually, those payments on SCF disappear. So I guess if we look in the very mid or almost long term, then the free cash flow saving actually increased. Am I getting this right?

Yes, it will be absolutely, as you say. There will be a slight positive OCF impact in '26, '27, '28 on this plan.

Our next question comes from Ondrej Cabejšek from UBS.

I've got 2 questions as well. The first one is on, I guess, single-play retention, specifically in mobile, what we're seeing is I guess you're not participating as you flag, and we're seeing in the pricing data too much on the competition in the low; end. At the same time, you flag your churn decreasing continuously despite this, I guess, more difficult pricing environment. But of course, we're seeing, I guess, more and more impact on your mobile-only ARPU. So I was wondering what's going on, I guess, on the retention side, if there's a lot of activity there to basically drive this churn down maybe at the cost of ARPUs despite there being not much going on, on the front book pricing relative to obviously all of your competition? So that's my first question, please.

So on the mobile-only part of the market, indeed, we do play on the low-end part of the market. What we don't do is to be the most aggressive, and lately SFR has been the most aggressive, but Bouygues as well. The ARPU impact that you see on mobile is actually the consequence of the lower average revenue or the low end of the market. So it's not because of aggressive commercial retention programs. And we've seen also some ups and down on churn from one quarter to another. So our focus on churn remains our top priority. Our focus on convergence, and we bring customers, of course, from mobile-only or broadband-only to convergent customers. That's also our priority. But it's not because of, I would say, hidden commercial retention that would be positive for churn that you see the ARPU impact.

That's helpful, Christel. And my second question is referring back to the launch of the new boxes. Obviously, this is, I believe, your first Wi-Fi 7 standard box. So I was wondering, are we maybe moving into a period where this is more important where there is more competition on the CPE side? And I was wondering if you could give us perhaps an idea of the breakdown of boxes by Wi-Fi standard among your customer base, how that compares to your competitors? And just an idea of how much CapEx it would take for you to kind of upgrade your entire stock of boxes and the customer base to kind of Wi-Fi 6 or 7 standards? And if this is something that is maybe capping the quantum of CapEx to sales decline for Orange for the next couple of years?

So on the -- I mean, the boxes have always been in France very important as part of the market, and this started more than 20 years ago, of course. But -- so indeed, for us, it's very important to invest and to innovate on those boxes. So we announced the latest one early April. We had the previous ones. We introduced the Livebox Max, I think, 2 years ago, and we had another one refresh last year. So now as you know, on the boxes, we have a very clear policy as well of circular economy. And so when -- and we recycle them, which is very important for us because that's part also of our environment commitment. When it comes to CapEx, we are very committed to being disciplined and to improving and you've seen that in our past performance. So no change. And of course, we have CapEx on boxes as part of our forecast, but nothing new or nothing -- no increase specifically linked to those new boxes. But you're absolutely right that being innovative, competitive and playing on all the segments is very important. We don't disclose the spread or the segmentation of our customers by different segment type. But as you know, we are #1 on the higher end of the market. So you can expect us to be -- to have the best market share, of course, on the premium part, which means also the premium boxes and the premium broadband packages. And that's also part of our convergence strategy. You've seen also us investing, not just on the box, but on the content and on a number of value-driven upsell strategy, including cybersecurity, for instance. So it's not just the box, it's the full package of services that we can upsell to customers.

Can you maybe just hint in terms of like the French CapEx to sales, like how much of that is, on a recurring basis, related to the upgrades of the boxes? That would be very interesting.

I don't think we share that.

Okay.

And again, if you compare the boxes to the amount of money we spend on fiber rollout on the radio access network, it's very limited.

I'm just wondering if it's like 1 or 2 percentage points, just like any indication would be just very interesting.

So yes, no, as I said, it's very limited.

[Operator Instructions] Our next question comes from Emmet Kelly, Morgan Stanley.

I've got 2 questions, please. First question just relates to AI. France hosted an AI summit back in February, which gained a huge amount of publicity. There were some very big investments announced, I think, over EUR 100 billion of investments, some very, very large AI projects. I'm just wondering, was there anything in that summit that you would flag that would be particularly interesting from a telco perspective, whether it was new consumer AI apps, whether it was data center build or maybe scope for fiber connectivity for all these AI projects? And then my second question, it's kind of in a similar vein. There's been a lot of geopolitical change over the past few months, especially as it relates to security specifically here in Europe, and that obviously captures data security as well. I've seen a lot of comments recently about data sovereignty getting a lot of attention in Europe, and your competitor, Iliad has made waves on this front with Scaleway. And obviously, you've got OVH, so it seems to be particularly topical in France. I'm just wondering, is data sovereignty something that your consumers are talking a lot more about? Have you seen any changes in consumer behavior looking for, let's say, French-based data centers that might be French-owned? And what products Orange are providing to potentially meet this demand?

Thank you. Great questions. On the -- I mean, follow-up of the AI summit and the amount of investment, I don't -- I mean, I don't think there's been any communication on the detail of the -- of how the EUR 100 billion of investment that was announced was planned. Most of it was in large data center projects. And so of course, that means those data centers would generate opportunities for us in our infrastructure business and wholesale business. But this is something we were already working on before, including with -- I mean, from large hyperscalers to smaller and more regional players. So this is something that, of course, we've been driving before and we continue to drive. When it comes to the AI environment and new consumer app, I think more than the AI summit, there was the Mobile World Congress in Barcelona where there's been a lot of announcement from especially device manufacturers on new devices and a number of, I would say, showcase around what AI could do. That being said, you've seen -- I mean we -- all players invest on AI. We are launching, we are testing what customers want. We know consumers, and there's a lot of data points where younger people are clearly using Gen AI on a daily basis, but nothing particular at this stage to comment on. Of course, our Orange Business teams are very engaged. And as you've noticed, we've made some announcement on some Gen AI solution that we are proposing to customers in a secured environment. So that's very important. And we are working with some French players to do that Mistral AI as well as LightOn, but it's still very early. And as you know, the AI technology is moving very fast, innovation is moving very fast. so that's something we drive activity. Our focus is of course on AI adoption internally as an enabler for a number of operational efficiency program and we have many of those. When it comes to security, we have indeed a lot of questions from customers from Orange Business as well as Orange Cyberdefense, a lot of questions on security that's true in France, but that is more true in Poland or Eastern Europe footprint for us. And now whether that will translate into more investment, it's probably too early to say. But clearly, all companies are working on their, I would say, risk scenarios and assessing options. We are providing cloud solutions -- private cloud solution to customers. We have also -- we are investing together with Capgemini in a French trust cloud solution, Bleu, which passed -- which needs to be certified by the National Security Agency in France, and we've passed an important milestone for that. So this is, of course, a market that we are carefully monitoring and in which we are investing. Again, Bleu, we do it with Capgemini 50/50.

Our next question comes from Ottavio Adorisio from Bernstein.

A couple of questions on my side. The first is back to France. From memory, you do have a target from the CMD of growing retail service ex PSTN between 2% and 4%. You told -- you basically mentioned that you fall below that range because of the impact from the Olympics. So the question is, do you believe that you will go back in the range for the full year, or we should expect to be below the range for this year? And the second one is on MASORANGE. At the beginning of the call, you mentioned that the IPO could be triggered 2 years from closing, so from April next year. You said that's subject to some condition you don't want to discuss. But from the lender presentation, clearly it was stated that the idea would be to IPO the business when the gearing will be below 3.5. Considering that you exit last year with 5x, of course, you have a gearing event with the FiberCo potential monetization. But if it that doesn't bring the gearing below 3.5, is Orange willing to consolidate that business or basically taking a controlling stake even if the gearing is well above 3.5? And do you have any sort of threshold whereby you don't want your gearing at Orange level to go beyond to avoid any sort of credit pressure?

So on the France retail services performance, our guidance was a 2% to 4% CAGR on the 3 years, and we confirm that we are in that range. Indeed, Q1 was at 1.5%, so in line with our expectation, which we had said to be low single digit for full year '25. So no change. But -- and it's true that for Q2 and H2, we expect the retail, excluding PSTN to -- as I said, to grow low single digit, so not so different than Q1. Maybe it could be slightly lower, but again, in the range that we had set of a CAGR, 2% to 4% on the '23, '25. On MASORANGE, indeed, to trigger an IPO, we know that we should reach a number of -- to lower, I would say, the current leverage of MASORANGE. Today, MASORANGE is targeting a reduction, which would go below the 3.5 that you mentioned, that was mentioned. So we are actively -- the team -- the management team of MASORANGE is actively working on that. When it comes to our Orange balance sheet and concern, of course, we -- as you know, we got EUR 4 billion dividend upstream when we concluded the deal. We kept that liquidity to keep all options open. And we follow carefully what would be the impact, of course, of reconsolidating Spain on our balance sheet and our leverage, but too early to provide more comments, but we are very committed to sticking to our guidance and to having -- to keeping, I would say, our low leverage. But no, I don't know if, Laurent, you want to add more comment? But as I said, all options are on the table. And again, the shareholder agreement stating a number of scenarios. The teams are focused on delivering the synergies. We plan to close the FiberCo around summer, and we are free to discuss any time, I would say, between shareholders.

Our next question is from Nick Lyall, [indiscernible]. We will come back. In the meantime, let's head to our next and perhaps final question if we don't hear from Nick. The last question comes from Fernando Cordero Barreira from Santander.

The first one is related with the potential regulatory changes on the European landscape is obviously a big topic. But I would like to understand or to get your views on -- at which extent should we include into the discussion, let's say, potential CapEx increase or potential CapEx effort in order to get this consolidation allowance in the European telco sector? So in that sense, at which extent should we think on CapEx if consolidation is going to be allowed in Europe? And my second question is also related with CapEx, but more in the short term. We have seen some, let's say, higher CapEx results in this first quarter versus last year. Just to understand at which extent should we expect the phasing of CapEx in 2025 to be more stable in quarterly terms?

Thank you, Fernando. So you're rightfully pointed to -- indeed, as you know, every consolidation project is different, and it happens that in -- at least in the U.K., the CMA decision was taken based on some commitments on CapEx investment. Now as you know very well, in the MASORANGE transaction, we were very clear on the synergies that we could generate, but we did not -- we didn't have to commit on CapEx increase. But the synergies that we generate on the network by bringing more customers on one network is generating opportunities for us to optimize, I would say, our CapEx, but also to increase in some areas. So at this stage, I don't think we should assume that any consolidation would generate more CapEx investment. But again, it's to be taken case by case. I think the U.K. and Spain demonstrate very different environment. On our CapEx commitment, we see it to be more linear this year after Q1. So there's always some seasonality -- not seasonality, but the impact of more spending sometime in Q1, sometime in Q4. But again, don't drive any conclusion from the Q1, and we are committed to being in this 15% CapEx to sales ratio.

We have one more question from Nicolas Cote-Colisson from HSBC.

Two short questions, please. You mentioned 5G+ offers being launched at OBS. How large the business opportunity is? And how much competition is there in that segment? And a very short question on EBITDAaL losses still booked at Orange Bank, EUR 17 million in Q1. What should we expect for the rest of the year?

So as you know, 5G technology was actually created for B2B customers. And so we made some launch in Q1 in Orange Business as well, I would say, as for consumers actually. But so it's still, I mean, early. We have seen -- we have won a number of contracts, especially with large infrastructure or some industrial customers, but still too early to comment on the pickup of those 5G+ offer. I don't think that's specific to Orange, this is something we're discussing across the industry. On the Orange Bank, Laurent?

Yes. So we are -- Nicolas, we are expecting a meaningful improvement compared to last year. Last year, we were at around minus [ EUR 120 ]. So that will be a material improvement for the full year '25.

But when do you think actually you can -- we can go to new [indiscernible], when Orange Bank will be completely out of scope? Is it H2 thing? Or can it take...

Yes. No, we are expecting to close the bank by the end of '25 as expected. So basically, '25 will be the last year where there will be still some negative impact in terms of EBITDAaL. And in '26, the amount will be very marginal.

That was our last question. So please let me hand it back over to Christel Heydemann for any concluding remarks.

Thank you all for joining. So we are pleased with our solid Q1 results, which, once again, demonstrate the soundness of our Lead the Future strategy. We will continue to be focused on offering the best quality services to our customers while improving our operational efficiency. I take this opportunity as well to announce that our next Capital Market Day will be held in February 2026 alongside the publication of our 2025 full year results. Thank you all.