The future is dark

24 June 2003

The mobile operator’s new chief executive has announced little strategy, if a lot of tactics. He aims to build an E11bn cash pile that he has no plans for and knows he does not need. Majority shareholder France Telecom does, though.

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Orange has revealed plans to pile up E14bn in accumulated operating free cash flow by 2005. At a strategy presentation, the mobile group clarified that it expects its revenues to grow by 5% in 2003, accelerating in 2004 and 2005, and that it sees it ebitda growing 15%17% a year up to 2005. That forecast performance, together with capital spending cuts predicated on a dramatic rationalisation of the IT platforms that support its mobile services, should allow Orange to deliver considerably more cahs than had previously been expected.

Sol Trujillo, Orange's new chief executive, refused to consider paying a dividend from that extra cash flow. He said that he wanted to see " a couple of quarters" of performance before raising the dividend issue, and argued that a dividend could not be agreed without a board discussion and a vote at a future AGM.

Orange also set out a new matrix for evaluating its geographical footprint. All its subsidiaries must make an ebitda profit in 2003 and be free cash flow positive in 2004 although Orange believes all of its arms will pass those tests. It will also not keep subsidiaries that are not either the first or secondplaced player in their market, or can reach a 20% share of the market by value after two years. If a subsidiary fails that test, though, Orange may either sell it, or make a bolton acquisition to bring it up to scale. Orange also said it aims to concentrate on the euro zone, including EU applicant countries.

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