Orange to raise €1bn-plus from sale of new rural fibre unit

Orange has created a new business unit to house its fibre operations in rural France and has agreed to sell half of that entity to investors in a deal that should raise well over €1 billion.

The French telco announced the establishment of Orange Concessions, which it describes as the leading fibre network in rural France with over 4.5 billion fibre-to-the-home (FTTH) plugs, although it admits that not all of those sockets have been built out yet. Orange Concessions currently comprises 23 public initiative networks that the telco operates on behalf of local authorities.

The operator has already carried out a competitive tender process to sell off half of the unit and said it received the best offer from a group made up of La Banque des Territoires (Caisse des Dépôts), CNP Assurances and EDF Invest. The investors will take a 50% co-controlling equity interest in Orange Concessions via a deal that values the unit as a whole at €2.675 billion. That suggests a sizeable financial injection for Orange.

“The achieved valuation reveals the value of Orange’s investments in fibre as well as the relevance of such strategic move,” said Orange group chief executive Stéphane Richard.

Infrastructure provides the reliable, solid returns investors are looking for, while such deals enable telcos to generate additional returns from their initial investments in infrastructure, while still maintaining a presence in the market, and sharing investments going forward. Win-win.

“Through this partnership, Orange holds the means to pursue the development of fibre in

rural areas, by winning new public initiative networks or by participating in market

consolidation,” Richard said. The networks Orange Concessions operates on behalf of the local authorities are open to all operators. Orange will continue to take responsibility for the rollout of fibre and maintenance of the infrastructure.

France is making great strides in the rollout of fibre infrastructure. According to the FTTH Council’s latest figures, produced by IDATE, the country ranks second in Europe – behind Russia – when it comes to FTTH/B homes passed, with 21.5 million, an increase of 27% on 2019, and it comes in third in terms of take-up at 10% million, an increase of 39% year-on-year.

The big telcos are battling hard to increase coverage; earlier this month, Bouygues Telecom shared its ambition to become “a major player in fibre” over the course of new five-year plan to 2026, aiming to gain 3 million new FTTH customers and double network coverage to 35 million premises from 17 million at present.

Meanwhile the French government recently pledged additional funding for fibre projects in difficult areas of the country. Last week it provided details of close to a dozen public initiative networks in regional France, with a further €150 million to follow.

Little wonder then, that while Orange is looking to monetise its presence in the fibre market, it is also keeping its options open. It holds a call option on Orange Concessions that would enable it to take control of and consolidate the unit in future.

Orange expects the Orange Concessions stake sale to close by the end of this year.