Orange's Q1 EBITDAaL Performance: Navigating Restructuring in Spain

Orange’s first-quarter 2025 results revealed a €2.48 billion EBITDAaL (Earnings Before Interest, Taxes, Depreciation, Amortization, and Leases)—a figure that excludes its Spanish operations for the first time. This decision underscores the telecom giant’s strategic focus on stabilizing its core markets amid a major restructuring of its Spanish venture. Let’s dissect the implications of this move and its broader investment significance.

The Exclusion of Spain: A Strategic Necessity

The removal of Spain from EBITDAaL calculations stems from MASORANGE, the 50-50 joint venture between Orange and Vodafone España, which is undergoing a profound transformation. In January 2025, the partners agreed to form a FiberCo—a subsidiary dedicated to managing fiber infrastructure in Spain. This restructuring, expected to conclude by summer 2025, involves transferring assets and operations to the new entity, introducing complexities that could distort financial metrics.

By excluding Spain, Orange isolates the impact of one-time costs, asset transfers, and operational adjustments tied to the FiberCo deal. This allows investors to assess the core business performance in France, Africa/Middle East, and other European markets without noise from Spain’s transitional phase. The Q1 EBITDAaL figure of €2.48 billion represents a 1.3% decline from the prior year, but this metric now reflects a clearer picture of ongoing operations.

The FiberCo Transaction: Costs, Synergies, and Strategic Focus

The FiberCo deal is a pivotal move for MASORANGE, aiming to unlock value by separating infrastructure from service operations. Key details include:
- eCAPEX (economic capital expenditures): Spain’s contribution dropped to €0 in Q1 2025 versus €166 million in Q1 2024, as investments are now tied to the FiberCo’s formation.
- Synergy Realization: MASORANGE delivered €80 million in synergies in Q1, pushing the year-to-date total to nearly €200 million, with a target of over €300 million by year-end. These savings stem from cost-sharing and operational efficiencies between Orange and Vodafone España.

The exclusion of Spain also aligns with segment reporting, where MASORANGE is treated as a distinct entity. This ensures transparency, as Spain’s financials are now presented separately in tables like Appendix 3, which tracks eCAPEX and investments.

Why Investors Should Care: Core Markets and Long-Term Gains

Excluding Spain highlights Orange’s commitment to sustainable growth in its core regions. France, its largest market, remains stable, while Africa/Middle East continues to outperform, driven by mobile and broadband expansion. The exclusion also shields these regions’ results from potential volatility in Spain, such as restructuring costs or delays in the FiberCo transaction.

Critically, the move avoids comparability issues. Had Spain remained included, the drop in eCAPEX and the one-time costs of restructuring could have skewed trends. For instance, the group’s EBITDAaL - eCAPEX excluding Spain fell by just 0.5% year-on-year, a far less alarming figure than the headline 1.3% decline.

Risks and Considerations

• Execution Risk: The FiberCo deal’s completion by summer 2025 hinges on regulatory and operational hurdles. Delays could prolong uncertainty.
• Profitability Pressures: While synergies are on track, Spain’s exclusion masks potential headwinds, such as reduced revenue contributions during the transition.
• Geopolitical Factors: Orange’s African operations face risks from currency fluctuations and political instability, though these are partially offset by high growth rates.

Conclusion: A Prudent Move with Long-Term Benefits

Orange’s decision to exclude Spain from its Q1 EBITDAaL calculation is a strategic masterstroke. By isolating the impact of the FiberCo restructuring, the company provides a clearer view of its core operations, which remain resilient despite macroeconomic headwinds. Key takeaways:

1. Core Markets Hold Up: France and Africa/Middle East contribute 80% of total EBITDAaL, demonstrating the strength of Orange’s existing footprint.
2. Synergies Deliver: MASORANGE’s €200 million in synergies year-to-date signal progress toward the €300 million target, justifying the exclusion’s rationale.
3. Investor Clarity: The exclusion avoids masking trends in stable regions, as seen in the 0.5% decline in EBITDAaL - eCAPEX excluding Spain—far milder than the headline figure.

While risks remain, the exclusion underscores management’s focus on transparency and long-term value creation. Investors should view this as a signal that Orange is prioritizing its strongest assets while navigating Spain’s structural shift—a move that could position the company for stronger growth once the FiberCo deal is finalized. For now, the focus remains on executing the restructuring flawlessly, ensuring Spain’s eventual contribution aligns with, rather than distracts from, the core narrative.

In sum, Orange’s Q1 results, when stripped of Spain’s transitional noise, reveal a company in control. The path forward is clear, and the payoff—when Spain’s restructuring is complete—could be substantial.