Orange's Strategic Momentum in Core Markets and Defense Expansion: A Path to Long-Term Value Creation

In a telecom sector marked by margin compression and fragmented growth, Orange (ORPI.PA) has emerged as a rare standout, leveraging disciplined cost control, strategic regional focus, and sovereign-driven innovation to outperform peers. The company's 2024 EBITDAaL growth of 2.7%—a return to growth in France after years of decline and a 13.1% surge in Africa & Middle East—positions it as a compelling long-term buy. Paired with aggressive fiber expansion and a newly launched defense division, Orange is redefining its role in a digital economy where connectivity and cybersecurity are critical to global stability.

EBITDAaL Outperformance: A Foundation for Resilience

Orange's 2024 EBITDAaL of €12,109 million reflects a disciplined approach to operational efficiency. While the telecom industry grapples with declining margins due to price wars and 5G rollout costs, Orange's 2.7% growth outperformed the sector's five-year EBITDA growth rate of -0.50% (GuruFocus). Key drivers include:
- Africa & Middle East: A 13.1% EBITDAaL surge driven by mobile data, fixed broadband, and Orange Money.
- France: A 0.5% EBITDAaL rebound, supported by fiber adoption and cost savings from AI-driven operations.
- Efficiency Gains: Two-thirds of its 2025 efficiency targets (€600 million in savings) achieved by 2024, including AI integration across 150 use cases.

This resilience is critical in a sector where rivals like Vodafone and Deutsche Telekom report low single-digit EBITDA growth. Orange's ability to balance capital expenditure (eCAPEX at 15.5% of revenue in 2024) with margin expansion underscores its strategic agility.

Fiber Expansion: The Next Frontier of Connectivity

Orange's 2025–2027 fiber rollout plan is a masterclass in public-private partnership. By 2025, the company aims to connect 1.12 million homes in France's AMII zones (rural and underserved areas) and 300,000 in urban centers. This aligns with France's Très Haut Débit initiative, which seeks to bridge the digital divide while creating 6,000 permanent jobs and 2,600 apprenticeships.

The “on-demand” fiber model, allowing customers to request connections within six months, is a game-changer. This flexibility reduces deployment delays and ensures Orange captures demand in areas where competitors lag. The Coup de Pouce program—subsidized fiber for low-income households—further cements Orange's market share while aligning with ESG goals.

Globally, Orange's FTTH connectable households grew 9.3% year-on-year to 60.1 million in 2024, with 13.5 million customers. This expansion is not just about volume: fiber drives higher ARPU (average revenue per user) and customer retention, critical for sustaining margins in a commoditized mobile market.

Sovereign-Driven Defense Division: A High-Growth Vertical

Orange's new Defense & Security Division, launched in 2025, taps into a $200 billion global defense tech market. With geopolitical tensions and cyber threats escalating, governments are prioritizing digital sovereignty—a space where Orange's infrastructure and cybersecurity expertise (via Orange Cyberdefense) shine.

The division leverages Orange's 45,000 km of terrestrial fiber, 5G networks, and satellite infrastructure to deliver secure, hybrid civilian-military networks. Its focus on hosting sensitive data, emergency communications, and AI-driven threat detection positions it to win contracts in France and NATO countries. For context, France's defense budget is set to rise to 3.5% of GDP by 2027, while NATO members aim for 5% by 2035.

While the division's revenue contribution is not yet material, its strategic alignment with global defense spending trends and Orange's 8% growth in cybersecurity services in 2024 (driven by Orange Cyberdefense) suggest strong upside potential.

Investment Case: A Triple-Play for Long-Term Value

Orange's strategic pillars—EBITDAaL resilience, fiber-led growth, and defense expansion—create a compelling investment thesis:
1. Margin Stability: EBITDAaL growth of 2.7% in 2024, with a 2025 target of 3%, outpaces peers and supports dividend sustainability.
2. Network Leadership: Fiber expansion in France and Africa positions Orange to capture 50% of the European FTTH market by 2027, a sector growing at 10% CAGR.
3. Diversification: The defense division opens a new revenue stream in a sector less sensitive to telecom cycles, with potential for cross-border expansion.

Valuation metrics also favor entry. At a forward P/E of 12x (vs. sector average of 14x) and a dividend yield of 4.5%, Orange offers a balance of growth and income. The company's upgraded 2025 Organic Cash Flow target of €3.6 billion further signals confidence in its strategy.

Conclusion: A Strategic Buy for a Digital Future

Orange is not just surviving in the telecom sector—it's redefining its role. By combining operational discipline with bold investments in fiber and defense, the company is building a moat around its core markets while tapping into high-growth verticals. For investors seeking long-term value in a fragmented sector, Orange offers a rare trifecta: resilient cash flows, strategic innovation, and alignment with global megatrends.

Investment Recommendation: Buy with a 12- to 18-month time horizon, targeting a 15% total return (including dividends) as fiber deployment and defense contracts scale. Monitor eCAPEX efficiency and defense division revenue traction for confirmation.