Cost-cutting stabilises margins at Orange

French telecoms group Orange kept margins stable and slowed the fall in its revenue during the third quarter thanks to a continuing reduction in labour and other costs.

Europe's biggest telecoms provider by subscribers on Thursday said that revenue for the three months to the end of September was €9.8bn, a 2.3 per cent decline on the same period a year earlier on a like-for-like basis - and slightly ahead of consensus forecasts of €9.7bn.

The fall was much less severe than the 4 per cent year-on-year revenue decline reported a year earlier. Orange said that earnings before interest, taxes, depreciation and amortisation (ebitda) margins remained steady at 33.1 per cent for the third consecutive quarter.

Orange shares climbed to €11.15 in early-morning trading up 2.3 per cent.

The group, which has been fighting a price war in its domestic market, defended its margins in large part by cutting labour costs.

Orange said that indirect costs declined 2.8 per cent to €119m. Half of that came from a reduction in labour costs, with the number of employees falling 3.7 per cent on a comparable basis with a year earlier.

Jerry Dellis, telecoms analyst at Jefferies, said that the figures were ahead of expectations. "Strong progress on indirect cost reduction has allowed Orange to temper the pace of commercial cost savings," he said.

Orange's subscriber numbers have benefited from its decision to focus cost-cutting on labour rather than areas that more directly affect its ability to attract customers, such as advertising. Orange said that mobile contracts in France, which account for about half of group revenue, grew 5.5 per cent from a year earlier to 21.6m customers.

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