Wholesale Headwinds Hit Orange; French Mobile Market Back to Growth; Trimming FVE to EUR 13.40

Orange closed an acceptable third quarter with the main headwind being lower wholesale revenue reported in France. Orange has historically been the main builder of fiber lines in less urban areas in France. Competitors have the right to co-invest in these lines based on market share, making upfront and recurring payments to Orange. Notwithstanding, wholesale revenue can have lumpy changes as it depends on competitors’ investment decisions. Wholesale revenue declined organically by 15.4%, also affected by strong growth performance during third-quarter 2020, and we anticipate a mid- to high-single-digit decline for the full year. Although we are trimming our fair value estimate to EUR 13.40 per share from EUR 13.90 after updating our 2021 wholesale forecasts as well as those for Spain, we believe Orange is showing an acceptable fundamental performance, with a stable position in France, a dividend covered by cash flow, leverage under control and a significant amount of fiber investments already accomplished.