On Mar 27, we issued an updated research report on Orange (ORAN). Despite the plunge in the company’s top-line, Orange managed to improve its bottom-line year over year in 2013.
Orange is ramping up infrastructural developments in France and other European countries. The company has accelerated 4G rollout and captured over 40% of the French population in 2013 with 4,200 sites. In Spain, the company remains one of the leading telecom carriers in 4G deployment and covers over 0.5 million customers and 30% of its network coverage. In UK, the company boasts over 2 million 4G customers and foresees further growth in this market given the country’s highest ranking in 4G migration.
Apart from Europe, the company is also focusing on Africa and the Middle Eastern markets. The company has already launched 4G in two countries in this market and expects to launch 4G in two more regions, namely, Senegal and Botswana.
In order to drive growth in the domestic segment, Orange is shedding underperforming assets. Due to weak economic conditions and unfavorable regulatory measures, these assets continue to hamper its top-line growth. The company divested its stakes in the Orange Austria unit to Hong Kong-based Hutchison Whampoa Ltd for cash proceedings of €70 million. Orange also reached an agreement with Altice to sell 100% of its subsidiary in the Dominican Republic-Orange Dominicana S.A for $1.435 billion (€1.1 billion).
Orangecontinues to strengthen its balance sheet and achieved its target of net debt-to-EBITDA ratio of 2.2 in 2013 and expects net debt/EBITDA ratio of approximately 2x in 2014. The company generated operating cash flow of €7.02 billion, more than its targeted €7 billion in 2013.
Orange currently has a Zacks Rank #2 (Buy).
Other stocks in the telecom sector worth considering include Shenandoah Telecommunications Co. (SHEN), Nippon Telegraph and Telephone Corporation (NTT) and Level 3 Communications, Inc. (LVLT). While Shenandoah and Nippon sport a Zacks Rank #1 (Strong Buy), Level 3 Communications carries a Zacks Rank #2 (Buy).