Modest Orange dividend overshadows European mobile mast plans

PARIS (Reuters) - Orange ORAN.PA said it planned to carve out its mobile towers in most European countries to shore up the group's value, but the move was overshadowed by the French telecom firm's modest dividend outlook, sending its shares lower.

FILE PHOTO: Orange logo is seen during the Mobile World Congress in Barcelona, Spain February 28, 2018. REUTERS/Yves Herman

The company is following similar moves by other European firms that are looking to sell mobile networks as infrastructure valuations surge on interest from investors such as U.S. private equity firm KKR KKR.N and Spain's Cellnex CLNX.MC.

The infrastructure sale aims to beef up its valuation as tough regional competition hampers Orange’s growth and margins.

Bigger rivals Deutsche Telekom DTEGn.DE and Britain's Vodafone VOD.L have separated their mobile tower assets and are seeking to sell part of them via a listing or private sale. Vodafone's shares jumped when it announced spin-off plans.

“Today, we believe that the value of all of our networks isn’t reflected in our stock prices,” Orange Chief Executive Stephane Richard said.

But Orange shares still fell by about 4% in early trade, with traders citing disappointment about the dividend outlook after Orange said it would pay out a minimum annual dividend of 70 cents per share over the period.

The company also said that, as part of its news strategic plan, it would not start cutting back capital spending until 2022, after initially aiming for spending to peak in 2018.

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The CEO said the dividend could rise later depending on cash flow, but analysts and investors remained cautious.

“Investors will need to wait until 2021 and beyond to see more tangible positive results,” Bryan Garnier analyst Thomas Coudry wrote in a note after the mobile mast move was announced.

Although the new tower firm aimed to show the value of infrastructure, there was a “very limited” opportunity to turn this into cash, investment bank Jefferies wrote in a note, adding that the “dividend floor is not raised”.


Orange’s mobile towers could be worth around 10 billion euros ($11 billion), analysts have estimated. Citi said their value may reach 13 billion euros, or 20 times the operating results generated by towers.

France’s former telecoms monopoly said it owned about 40,000 towers for its network on the continent. The first “TowerCos” will be created in 2020 in France and Spain, Orange’s two biggest markets.

The Paris-based company will retain control over the new entities with the aim of merging them into a European company in future that would also be majority-owned by Orange.

The group also said it was selling 1,500 mobile masts to Spain’s Cellnex for 260 million euros.

The divestments were part of Orange’s five-year strategic plan, which it said included sharing the deployment of high-speed fiber broadband technology with other operators via dedicated firms that could be opened up to outside investors.

Reporting by Mathieu Rosemain; Additional reporting by Sudip Kar-Gupta; Editing by Louise Heavens