UPDATE 1-Orange's 2014 profit hopes in limbo

Wed Oct 23, 2013 2:45am EDT

* Q3 sales 10.16 bln eur vs Reuters poll avg 10.28 bln

* Q3 adj EBITDA 3.37 bln eur vs Reuters poll avg 3.35 bln

* 2014 France mobile ARPU to fall by less than 10 pct-CFO (Recasts, adds share data, France details)

By Leila Abboud and Gwénaëlle Barzic

PARIS, Oct 23 (Reuters) - France's largest telecom operator, Orange, still hopes to stabilise operating profit next year although looming changes to European regulations on mobile roaming fees and continued pressure in its home market could knock it off course.

As the group posted in-line third-quarter results and confirmed its 2013 targets, Chief Financial Officer Gervais Pellissier said it was hard to say whether Orange would achieve the 2014 goal given in February in an interview with Reuters.

"The pressure on revenue is still strong," Pellissier said.

"We are working now to try to achieve the objective [of stabilising operating profit] sometime next year, but I cannot tell you that we will be able to."

Investors are closely watching the issue especially since a rally has sent Orange shares 35 percent higher in the past two months, compared with an 18 percent rise for the European telecom sector index in the same period.

Much will depend on how rival Iliad moves into high-end mobile offers where customers get help buying smartphones, which it is expected to do by Christmas, as well as whether European regulators further cut roaming fees.

The fallout from Iliad's Free Mobile service continues, said Pellissier, because only one-third of Orange's customers are on 2013 mobile prices while others are on higher ones from 2012.

Iliad has taken about 10 percent mobile market share in six quarters by attracting many customers who were on pre-paid plans at other operators.

Orange and the other established operators - Vivendi's SFR and Bouygues - have tried to hold onto higher-spending customers on one- or two-year contracts.

Average revenue per mobile subscriber in France will fall again next year by "less than 10 percent", Pellissier added, after a decline of roughly 10 percent in 2012 and a further 12 percent since January.

Europe's fourth-largest telecom carrier by sales saw revenue fall 4 percent on a comparable basis to 10.16 billion euros ($13.99 billion) in the third quarter.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) slid 7 percent to 3.37 billion euros, while operating free cash flow fell 13.5 percent to 2.07 billion.

The hit to revenue from regulations on mobile call fees was softer than a year earlier, helping slow the quarter's revenue decline. Commercial performance in France also improved with the signing of 298,000 net additions of mobile customers.

Analysts had been expecting third-quarter revenue of 10.28 billion euros and adjusted EBITDA of 3.35 billion, according to a Reuters poll of eight analysts. They had also predicted operating free cash flow of 2.05 billion. ($1 = 0.7260 euros) (Editing by James Regan)

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