July 26, 2018 / 7:24 AM / 3 months ago

UPDATE 1-Orange's quarterly profits rise on higher sales, lower costs

* Customer gains in France, Spain, Africa

* Combined offers, cost cuts drive up profits

* No update on new banking service

* Confirms full-year targets (Adds background, details, quote, shares)

By Mathieu Rosemain and Gwénaëlle Barzic

PARIS, July 26 (Reuters) - Orange, France’s biggest telecoms group, met market expectations with quarterly results that attested the relevance of its strategic focus on combined fixed-mobile offers, it said on Thursday.

Instead of pouring money into sports rights like European peers BT Group and Telefonica, Orange has spent billions of euros to upgrade its broadband network in its main markets, France and Spain, and made customers sign contracts for both fixed and mobile services.

The so-called “convergent” offers in the two countries helped drive up core operating profit by 3 percent in the second-quarter from a year ago to 3.38 billion euros ($3.97 billion), Orange said in a statement.

Shares were up by 1.39 percent at 0702 GMT, valuing the group at 37 billion euros.

Cost savings made under Orange’s plan also further strengthened group profitability, it said. The Paris-based company cut costs by about 486 million euros over the first half, exceeding a 3 billion-euro savings target over the 2015-2018 period.

“In France, despite heightened competition over the second quarter, we’re posting a fifth consecutive quarter of growth in revenue,” Chief Financial Officer Ramon Fernandez told reporters in a call.

Quarterly sales in the France gained 0.6 percent, a much slower pace than over the first three months of the year, reflecting the continued price war between the country’s four telecoms operators. Leaders of Orange, Bouygues Telecom, Iliad and Altice France are all calling for renewed tie-up talks to improve the pricing environment and shore up investments, but no formal discussion has started yet.

The group did not offer any update on its new banking service, Orange Bank, a key component of the group’s strategy of diversification.

The group said back in February that the service had a total of 100,000 customers. It said last year it aimed to have 2 million customers within 10 years.

Orange’s second-quarter revenues rose by 1.4 percent to 10.2 billion euros. The group confirmed its full-year targets, including a yearly growth in its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA).

$1 = 0.8522 euros Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Sudip Kar-Gupta and Leigh Thomas

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