Orange Spain 'full speed' on Spanish market despite bruising headwinds

France's biggest telecom firm announced the impairment on the value of its Spanish activities earlier

  
The logo of the Orange telecommunication and internet provider is seen on the facade of a store in Paris July 24, 2013. Orange, Europe's fourth-biggest telecom operator by sales, posted on July 25, 2013 lower second quarter sales and profits in line with analyst forecasts as a price war in France sparked by a low-cost mobile rival began to ebb and cost cutting efforts began to pay off. Sales fell 4.8 percent on a comparable basis to 10.32 billion euros ($13.66 billion) in the quarter, while earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 8.4 percent to 3.29 billion euros. Picture taken July 24, 2013. REUTERS/Christian Hartmann

The logo of the Orange telecommunication and internet provider is seen on the facade of a store in Paris July 24, 2013. Orange, Europe's fourth-biggest telecom operator by sales, posted on July 25, 2013 lower second quarter sales and profits in line with analyst forecasts as a price war in France sparked by a low-cost mobile rival began to ebb and cost cutting efforts began to pay off. Sales fell 4.8 percent on a comparable basis to 10.32 billion euros ($13.66 billion) in the quarter, while earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 8.4 percent to 3.29 billion euros. Picture taken July 24, 2013. REUTERS/Christian Hartmann

REUTERS/Christian Hartmann

MADRID- Orange's Spanish unit will invest nearly 4 billion euros ($4.75 billion) in 2021, its chief executive said on Thursday, almost quadrupling the previous year's commitment despite bruising markets and a 3.7 billion-euro writedown in the second quarter.

France's biggest telecom firm announced the impairment on the value of its Spanish activities earlier on Thursday, saying it reflected competition that has hurt sales and profits in its second-largest market. 

"The Spanish market is hyper-competitive... but amid the three main operators Orange is a strong second," CEO Jean-Francois Fallacher told reporters in a call.

The impairment on the value of its Spanish activities will not impact strategic priorities, ability to invest or cash flow, Fallacher said, highlighting last week's 350 million euro investment in two bands of the 700 megahertz spectrum auction vital to 5G deployment.

"We are full speed with our investments in the Spanish market," Fallacher noted.

Spain doubled the length of spectrum concessions to 40 years this year and removed the tax telecos used to pay national broadcaster RTVE, which Fallacher said had weighed on operators and hindered them from focusing on the 5G rollout. 

Another obstacle has been football's prohibitively priced viewing rights. Fallacher called for the regulator-determined formula to pro-rate the number of football customers rather than the number of paid television customers.

"The formula to calculate prices is so perverse that even if Orange Spain gains football customers, they are totally irrelevant in the cost computing," the teleco's consumer division vice president Diego Martinez told reporters.

Spain has been a headache for Orange over recent quarters, prompting it to oust its local boss and lay off 485 people in the country but restructuring will allow new skills to be recruited for the future, Fallacher said. 

Orange Spain is ready to renegotiate contracts giving Euskaltel third-party access to its network services should an expected merger with Masmovil go through.

However, Fallacher said third-party operators accessing network services through leasing contracts were damaging margins.

"We like competition, but will be able to invest less and less if this trend continues," he warned.

($1 = 0.8423 euros)

(Reporting by Clara-Laeila Laudette; Additional reporting by Mathieu Rosemain; Editing by Inti Landauro and Jan Harvey) ((Clara-Laeila.Laudette@thomsonreuters.com;))


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