A few months ago, Orange MEA started a project to learn more about their passive infrastructure footprint, understanding the constraints of their towers across their African and Middle Eastern markets. Towercos have seen great success in expanding their presence across the Africa with almost 50% of towers now in the hands of towerocs. Major operators such as Airtel, MTN, stc and Ooredoo are either selling or carving-out their tower assets, with more MNOs followng suit.
Orange have always seen the strategic value in their tower infrastructure and have only on occasion sold their towers; of the 38,000 towers covering 17 MEA countries, only 4,000 have been sold. Orange had expressed interest in retaining their passive infrastructure but want to create a more profitable business out of these assets. Orange has seen success in carving out their European assets into their towerco entity TOTEM back in 2021. TOTEM exists independently from it's parent with no shared functions and owns 26,884 sites across France and Spain, with plans to acquire more of orange’s passive infrastructure across Europe.
Orange announces ‘Lead the Future’
Last week Orange announced the results of this project with their new strategic plan ‘Lead the Future’ to “generate value from and recognise the excellence of its core business to grow sustainably in Europe, Africa and the Middle East” according to a press release. Orange recognises that the future the telecom sector is in digital uses and network resilience, and MEA was highlighted as a core part of this strategy as a region of high growth.
On the new strategic plan, Orange’s group CEO Christel Hydemann commented “This plan aims to enhance and develop these strengths to position Orange as the group that builds the future of telecoms and digital solutions. Our aim is to achieve sustainable growth, particularly in cybersecurity, in Africa and in the Middle East. We have already taken the first steps with the sale of OCS, the consolidation projects in Spain and Belgium and targeted acquisitions in cybersecurity. To succeed, three principles will guide the company over the coming years: performance, excellence and trust.”
The strategic plan is broken into 4 pillars:
1: capitalising on its core business to reinforce excellence and service quality.
Orange is a leading European fibre player with 46mn Fibre-to-the-Home connections, making up a third of all fibre connections on the continent. The MNO will develop improved data and AI platforms to enhance the experience across digital and physical channels, and in places where fibre has not been rolled out due to remoteness, Orange is enhancing its next-generation commercial satellite offer with Eutelsat to bring high-speed broadband for the price of fibre.
2: Capitalise on its infrastructure
Orange pledges to continue to invest in fixed and mobile networks, engaging in strategic partnerships in RAN sharing and joint entities to share the financial network costs and secure further investments. In Europe, TOTEM will see a boost to tower count with a commitment to increase tenancy ratios from 1.37 in 2022 to 1.5 by 2026, generating increased value from passive infrastructure.
In Africa, Orange will continue to modernise fixed and mobile networks, deploying 4G and 5G to support economic and social development. Finally, Orange intends to capitalise on new technological innovations in data and AI to better manage its infrastructure network. These so-called ‘Network Integration Factories’ will accelerate automation and virtualisation of network management to reduce costs and streamline operations.
3: Transform business services to accelerate enterprise growth and strengthen cybersecurity
Orange Business Services is seeing a revamp as ‘Orange Business’ to position itself as a leader in next-generation connectivity solutions, supporting enterprise digital transformation which will be critical for companies as the economic digitises. As connectivity plays an increasingly important role in economic and social development, the threat of cyber-security also becomes more prominent. Orange’s European cybersecurity branch ‘Orange Cyberdefense’ aims to hit EUR1.2bn in revenues by 2025.
4: Growing in MEA
The Middle East and Africa are huge growth-driving regions for Orange, which now serve 1 in every 10 Africans on the continent. The MNO will continue to invest in fibre deployments, aiming to become the digital partner of reference, targeting 7% annual revenue growth by 2025. A key factor to the operator's success in the region is the mobile money platform Orange Money which already services 22 million people and facilitated EUR100bn in transactions.
Digital inclusion is top of the agenda for Orange in Africa and will continue to invest in the network to promote digital inclusion through the deployment of Orange ‘Digital Centres’, a support programe of resources for local start-ups and projects using digital technology across 16 Middle East and African countries.
Orange affirms their commitment to carbon reduction
Orange has also announced a new company wide ESG model with a carbon reduction target of 30% in scopes 1 and 2 by 2025, with an additional goal of reducing 45% emissions across scopes 1,2 and 3 by 2030. Orange has always been a leading MNO when it comes to sustainability. Their Green ITN program cut CO2 emissions by 3 million metric tons between 2010 and 2019 by improving network energy efficiency. Orange then set a target of net-zero carbon emissions by 2040 and aims to increase the percentage of energy from renewable sources from 31% in 2020 to 50% in 2025. As part of their Engage 2025 plan.
In addition to cutting emissions, Orange’s ‘scale up’ cost management efficiency plans aims to save an additional EUR600mn by 2025, having already reduced operating costs by upwards of EUR700mn between 2019 – 2022.
Creating value over the long-term
Orange also set out it’s financial ambitions for 2025 based on return on investment and long-term value creation, with a view to see ROCE (return on capital employed) growth of 100-150 bases points. Other financial goals include a low single-digit growth in EBITDAaL, an increased discipline in capex, continued growth of organic cash flow from telecom activities and an unchanged 2X ratio of net debt to EBITDAaL in the medium term.
This implements the results of Orange’s FY 2022 report which identified 2023 as a year's significant expected capex reduction and maintaining the status quo on net debt ratio. Capex spend is expected to be cut by US$650mn by 2025 with investments peaking in 2022 and will fall from 18% to 15% of revenue starting this year. This is mostly in Europe and France due to the maturity of fibre investments as rollout reaches completion.
What this means for the MEA tower industry
While hopes of a new pan-African towerco did not come to light, Lead the Future affirms Orange’s commitment to continue growing their presence across Africa. Orange’s FY 2022 report shows MEA revenues grew +6.4% and EBITDAaL increased +11.3%, significantly higher than in the group average. The two areas of focus for Orange will be driving digital connectivity and connecting the unconnected.
Orange is a 5G pioneer in MEA having set up its first Middle Eastern 5G lab in Jordan after securing a 5G license and recently running a pilot in January. Orange is also piloting 5G in Algeria and received 30MHz of 5G spectrum in Egypt for $440mn last year with Nokia modernising the network in preparation for Orange Egypt’s planned commercial launch.
Sonatel, Orange’s Senegalese subsidiary, open their first 5G facility in Africa for testing 5G products and services, enabling local companies to explore 5G use-cases. Following this, Orange launched 5G in Botswana in November last year, it’s first 5G network in Africa, and plans to gain experience in the Botswanan market to prepare further 5G rollouts in other markets. The launch of 5G technology is aimed at promoting digital inclusion, but the fact that 5G remains largely unaffordable for many limits early use-cases to the public sector and private enterprise.
The deployment of 5G requires significant network densification, encouraging MNOs to colocate on existing sites as well as building new sites. Although Orange has no plans to sell their towers to a towerco, they do offer their own colocations with other MNOs sharing around 15% of their sites in Tunisia. Urban 5G coverage will also require the deployment of small cells networks and DAS for in-door 5G, and the large urban centres of North Africa and Jordan where the majority of sites are rooftops are ideal for 4G and 5G small cell networks.
With next-generation urban coverage ramping up on one hand, Orange is also a key player in Africa’s rural connectivity expansion to bring mobile coverage to an estimated 210mn people (according to the GSMA). Orange recently contracted US-based rural specialist Vanu to deploy 1,070 sites in the Ivory Coast, Burkina Faso and Liberia on a Network-as-a-Service (NaaS) model. In Madagascar, other rural specialists NuRAN and AMN have both signed NaaS contracts to build 500 rural base stations each to extend Orange’s 2G and 3G mobile coverage.
Not only does rural coverage provide much-needed connectivity to underserved areas, supporting Government ambitions of digital inclusivity, but also extends the services of Orange Money which plays a critical role in the provision of local banking and transaction services. AMN has been using Orange’s mobile money platform as a payment system for their mini-grid solution, bringing not only connectivity but also energy to rural communities.
