Orange takes €3.7B hit on troubled Spanish unit

Orange’s pain in Spain intensified as it booked a massive impairment charge on the unit due to continued tough competition in the country, a move which led the operator group to a €2.6 billion net loss in the first half of 2021.

In its Q2 and H1 results statement, Orange attributed the need for the €3.7 billion write-down of its Spanish business on a worsening competitive market and the “continuation of (the) sanitary crisis delaying the economic turnaround”.

Orange CEO Stephane Richard added in Spain the “overall context has worsened obliging us to book a significant impairment to the value of our assets,” adding a new management team at the unit “has set in motion its strategy to reposition our offers and the commercial performance is positive”.

News of its woes in the country is nothing new, with Richard citing turnaround in the unit as a major priority [1] earlier this year after statements across several quarters bemoaning stiff competition [2].

In May, the company revealed it was set to make structural changes [3] to the operation including cutting staff numbers.

Financials
Orange’s H1 net loss of €2.6 billion compared with a profit of €1 billion in the same period of 2020. The operator noted the loss also included restructuring costs of €286 million. Revenue for the half year was broadly flat at €20.9 billion.

Despite its issues in Spain, Richard pointed to strong sales performance across many of the group’s divisions in Q2, highlighting “outstanding growth” in its Middle East and Africa (MEA) division and momentum in its enterprise offerings.

The group’s Q2 revenue was up 1.7 per cent year-on-year at €10.6 billion. MEA revenue was up 14.4 per cent at €1.6 billion, while France was flat at €4.5 billion.

Excluding its struggling Spain business, Orange noted its European division would have booked revenue growth of 6.1 per cent. However including the unit it was limited to a 1.8 per cent year-on-year rise to 2.6 billion.

Orange’s Enterprise division contributed €1.9 billion in revenue, up 2.3 per cent. Net profit is not broken down by quarter or by division.

[1] https://www.mobileworldlive.com/featured-content/home-banner/orange-mea-grows-spain-struggles
[2] https://www.mobileworldlive.com/featured-content/top-three/fierce-competition-hampers-orange-q1-progress
[3] https://www.mobileworldlive.com/featured-content/top-three/orange-trims-spain-staff

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