Orange's Strategic Turnaround: Can Its 2024 Performance Justify a Re-rating?

In 2024, Orange emerged from a period of strategic recalibration with a compelling case for long-term investors. The French telecom giant's 2.7% year-on-year EBITDAaL growth, coupled with a 3.2% acceleration in Q4, signals a return to operational discipline and regional diversification. But does this performance justify a re-rating of its stock? Let's dissect the sustainability of its EBITDAaL momentum, cost efficiency, and regional initiatives in Africa & the Middle East (AME) and Spain.

EBITDAaL Growth: A Foundation of Efficiency and Execution

Orange's 2024 EBITDAaL of €12,109 million was driven by a mix of operational rigor and strategic focus. The company achieved two-thirds of its 2024 efficiency targets, securing €400 million in savings (out of a €600 million goal), while AI integration in 150+ use cases added €200 million in value. This operational discipline is critical: telecoms are notoriously capital-intensive, and Orange's ability to reduce costs while expanding high-margin services like fiber and cybersecurity strengthens its margins.

The regional breakdown is equally telling. While France saw a modest 0.5% EBITDAaL rebound, AME delivered a robust 13.1% growth, driven by mobile data, fixed broadband, and B2B services. Europe's 3.9% growth, though modest, reflects a shift toward converged services and digital transformation. Meanwhile, Orange Business Services (OBS) faced a -8.4% EBITDAaL decline, underscoring the challenges in its traditional enterprise segment.

Africa & the Middle East: The Engine of Growth

The AME region remains Orange's crown jewel. With a compound annual growth rate (CAGR) of 5% in revenues from 2020–2023, AME's EBITDAaL expansion is underpinned by three pillars:
1. Digital Services: Orange Money, the company's mobile payments platform, continues to scale, capturing market share in financial inclusion.
2. Network Expansion: 4G/5G rollouts and fiber deployments are driving fixed broadband adoption, with 13.5 million FTTH customers globally (14.3% YoY growth).
3. B2B Diversification: Cybersecurity and cloud services are now key revenue streams, with cybersecurity projected to exceed €1 billion in revenue by 2023.

The region's ability to sustain double-digit EBITDAaL growth for a decade is a testament to Orange's agility in adapting to local markets. For income investors, this resilience is a green light, as AME's cash flow stability supports the company's dividend policy (€0.75/share floor for 2025).

Spain: A Strategic Shift and Synergy Play

Orange's exit from Spain's core KPIs in Q1 2025, following the creation of MASORANGE (a 50-50 joint venture with Vodafone España), marks a pivotal moment. While the region contributed -€48 million to the group's net income in 2024, the restructuring generated €4.4 billion in cash and unlocked €200 million in synergies by Q1 2025.

The deconsolidation of Spain's EBITDAaL from group metrics allows Orange to focus on its core markets. However, the joint venture's success hinges on its ability to reduce operational costs and expand 5G coverage. For growth investors, the potential IPO of MASORANGE could create a new avenue for value realization, though execution risks remain.

Cost Discipline and Cash Flow: A Double-Edged Sword

Orange's cost-cutting initiatives are a double-edged sword. While the company's Efficiency Program has delivered tangible savings, over-reliance on cost discipline could stifle innovation in the long run. The 2025 target of €3.6 billion in organic cash flow from telecom activities is ambitious but achievable, given the 7.7% YoY growth in H1 2025.

The company's liquidity position (€16.16 billion in telecom liquidity as of June 30, 2025) and a net debt/EBITDAaL ratio of 1.88x (well below its 2x target) provide a buffer against volatility. This financial flexibility is critical for funding future investments in AI, 5G, and cybersecurity—sectors where Orange is positioning itself as a leader.

The Case for a Re-rating

For income investors, Orange's 3.5% yield and dividend floor offer stability, while its EBITDAaL growth trajectory (now upgraded to >3% for 2025) supports a re-rating. The company's leadership in cybersecurity (a €200 billion global market by 2030) and its ESG credentials (MSCI A rating) further enhance its appeal.

However, risks persist:
- Spain's Synergy Risks: Delays in MASORANGE's integration could impact cash flow.
- Competition: European telecoms face pressure from tech giants and low-cost MVNOs.
- Regulatory Pressures: Stricter data privacy laws and spectrum licensing costs could erode margins.

Investment Thesis

Orange's 2024 performance validates its strategic shift toward high-margin services and operational efficiency. For long-term investors, the company's focus on AME growth, cybersecurity, and AI-driven operations positions it as a compelling buy. The key question is whether the market will reward these efforts with a re-rating. Given its strong cash flow generation, ESG alignment, and sector leadership, the answer appears to be yes—provided the company maintains its cost discipline and executes its AME and Spain strategies effectively.

In conclusion, Orange's strategic turnaround is not just about short-term gains. It's a blueprint for sustainable growth in a rapidly evolving telecom landscape. For those seeking a balance of income and growth, Orange's stock offers a rare combination of defensive resilience and offensive potential.