Operating strategies pay off in Q2 results

Operating strategies pay off in Q2 results

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Orange, Telefónica and Nokia are among those who have reported their Q2 and H1 financial results in recent days.

Nokia revised its full-year outlook as its new strategy drove progress, while Telefónica confirmed it is to focus on the opportunity presented by UK fibre. At Orange – which is two years into its Engage 2025 strategy – new services, enterprise transformation and fibre underpinned the highlights.

Nokia – full year outlook revised

After bracing for a "challenging" 2021, Nokia's new operating model is paying off with CEO Pekka Lundmark revising the full year outlook in the firm's Q2 results. Net sales for the full year are now expected to be €21.7bn to €22.7bn, compared to €20.6bn to €21.8bn in the earlier outlook. Nokia now expects a comparable operating margin in the range of 10-12%, rather than the 7-10% previously stated.

Over the quarter, Nokia posted a 9% increase in net sales on a constant currency basis. Although growth was recorded across all business groups, there was particular strength in the network infrastructure division, which covers IP, optical and fixed networks, as well as submarine.

Lundmark said: "The highlight of the second quarter was the Mobile Networks launch of our new AirScale baseband and radio products with up to 75% better power efficiency helping to reduce our environmental footprint and the lightest 32TRX massive MIMO active antenna in the market.

"In Network Infrastructure we sustained double-digit growth and have a series of product launches ahead in the second half to further strengthen our differentiation. Cloud and Network Services is making good progress on its portfolio rebalancing and Nokia Technologies continues to scale with two licensing agreements with automotive manufacturers including Daimler," he added.

Capacity will have more on these developments in the August September issue, which features an interview with network infrastructure division president, Federico Guillén

Telefónica – net debt down and a focus on UK fibre

After an eventful quarter Telefónica reported a 30% reduction in its net debt. This followed the close of the Virgin Media and O2 merger, ATC's purchase of Telxius Towers and the part sale of Chilean subsidiary InfraCo SpA, to KKR.

Second quarter net profit was €7.74 billion euros – a record posting – while the decline in reported revenue narrowed to 3.6% year on year. In organic terms, revenue returned to growth, up 3.4% year on year compared -1.3% in Q1 21.

In terms of operational efficiency, 79% of Telefónica's processes have been digitalisaed and an OpenRAN pilot is due to launch in Spain, soon.

Revising the full year outlook for "stable revenue", Telefónica is now expecting "stable to slight growth in revenue".

The firm said: "First half performance is already meeting or slightly surpassing financial targets for 2021 and, due to the positive outlook for H2 '21 in all our core geographies, allows us to upgrade the financial targets of 2021 of revenues and OIBDA. Also, guidance basis takes into account the updated perimeter of consolidation following the sale of Telxius Towers     and completion of the   VMED/O2UK JV (consolidated using   the equity method) both as of 1  June 2021, and the sale of Costa Rica as of 1  August."

In the UK Telefónica's focus will be on fibre. CEO Lutz Schuler said in the conference call that given the UK's low fibre penetration," the time to act is now".

He said: "Upgrading the network would very moderately increase network costs, no additional funding would be needed. It would cost around 100 pounds per premise to upgrade and is an opportunity to utilise our fibre expertise."

 Orange – revenue up, wholesale down

Two years into its Engage 2025 strategy, total revenues for Orange Group increased 2.6% over the quarter, following a "sharp rebound in equipment sales and sustained performance in services".

Globally, the MEA market was the standout performer, noting a 14.4% gain in revenue, while Europe's results were impacted by Spain. There, a new management team has begun to reposition the company. Discounting this market, Europe saw revenue increase 6.1%.

Organic cash flow from telecom activities was €840 million over the first half, a significant gain on the €255 million on H1 last year and noted despite strong increase in eCAPEX.

Revenue from wholesale services was down, however, mainly due to lower volumes of co-financing received from third-party operators.

On fibre, Orange's €13 billion investments over the last 10 years have paid off with the group now close to reaching the milestone of 50 million connectable households in Europe.

The group is maintaining its financial objectives for 2021 as announced in February.

Chairman and CEO Stéphane Richard said: "In line with our Engage 2025 strategic plan, the Group’s vision remains firmly focused on creating long-term value for all of our stakeholders.  Our growth engines – Africa and the Middle East, Europe, the B2B market, cyberdefence, banking and our infrastructure – all have good momentum and we’re beginning to gather the fruits of our investments. This allows us to reiterate with confidence our objectives for 2023."

Enterprise transformation was behind the growth seen by Orange Business Services and Orange Cyberdefense

OBS is expected to see a compound annual growth rate of around 2% in 2022 and 2023, as well as a return to growth in EBITDAaL in 2022 and an acceleration in 2023. For Orange Cyberdefense, the group is aiming for "market-beating double-digit revenue growth, and a medium-term operating margin in line with that of the market and approximately twice the current margin".

Orange Bank already counts "more than two million B2B and B2C customers in Europe and Africa".


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