Fierce competition dents telecoms group Orange's French revenues

By Mathieu Rosemain and Gwénaëlle Barzic

PARIS (Reuters) - Telecoms group Orange's quarterly revenues in France fell for the first time in two years, highlighting the tough competitive environment in the country where rivals are engaged in a race to win market share.

First-quarter sales in France, which represents more than 40 percent of its activity, dropped by 1.8 percent on a comparable basis to 4.41 billion euros (£3.8 billion).

The French telecoms market remains one of the toughest in Europe, with Orange's rivals Altice Europe, Bouygues Telecom and Iliad all controlled by billionaires who have failed to consolidate their position in the market through mergers over the past few years.

"You have no country in Europe with recurring lifelong promotions like this," said Orange Chief Financial Officer Ramon Fernandez.

"And it's a specificity in which some operators have locked themselves, favouring volume over value," he added.

The Paris-based company managed to add 19,000 mobile customers and 49,000 broadband customers in the first quarter, a sign that its strategy of heavy investments on networks and combined mobile-fixed offers is bearing some fruit.

Investments on the deployment of high-speed broadband technology and the extension of fourth-generation mobile network intensified over the first quarter, with capital expenditure growing by 8.4 percent groupwise and weighing on operating cash flow, which fell by about 10 percent.

NETWORK SHARING

The group offered more details on the mobile network-sharing deal signed with Vodafone last week in Spain.

The agreement, which aims to enable faster deployment of 5G technology and cover small cities, will generate 800 million euros in gross savings in 10 years, it said.

The deal will also involve a 300 million-euro investment over four years, including 100 million in 2019.

Orange's overall group revenues over the period were stable, slipping 0.1 percent to about 10.2 billion euros, roughly in line with the market consensus.

Its core operating profit grew by 0.7 percent to 2.58 billion euros and Orange also confirmed its full-year targets, including a higher operating cash flow in 2019 than in 2018, and announced a 0.70 euros dividend for the current fiscal year.

(Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Sudip Kar-Gupta)