Orange SA

PAR:ORA

Earnings Call Transcript 2021-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to Orange's First Quarter 2021 Results Conference Call. The call will be hosted by Mr. Ramon Fernandez, Deputy CEO, Finance, Performance and Development with members of Orange's Executive Committee for the Q&A session that will start after the presentation. Thank you. And let me hand over to Mr. Ramon Fernandez.

[Ramon Fernandez]

Good morning. Welcome to our Q1 '21 results presentation. We will start with Slide #4, which presents the key highlights of the quarter. You can see on this page, a number of elements. As a result of our excellent commercial performance this quarter, we now serve more than 11 million convergent customers and close to 10 million fiber customers out of 49 million connectable homes. We posted strong FTTH net adds, especially in France and Poland. In France, thanks to fiber, we reached the highest broadband quarter in Q1 since 2016. In mobile, 5G offers are now available in 5 countries with a strong appetite for 5G smartphones. In France, we now cover 239 cities with 5G. In Africa & Middle East, the top line grew by 7.1%, the highest first quarter in 10 years and fixed broadband, now one of the key engines of growth in Africa & Middle East, posted a customer base growth of 38%. Orange Bank grew its customer base with 1.5 million customers in Europe, including nearly 300,000 newly integrated B2B customers. And Orange Bank Africa has already more than 500,000 customers in Africa. Finally, the group has made critical steps in implementing 3 major infrastructure projects with the creation of Orange Concessions in France, TOTEM, our European TowerCo. And recently, the Polish FibreCo, delivering on the commitments made in our Engage 2025 Strategic Plan. These projects clearly underline the value of our network assets which have been shown to be so crucial during the ongoing pandemic. By creating these independent structures, we are strengthening our leadership and fostering sustainable value creation through an optimized infrastructure management with a dedicated profit center. Regarding our financial achievements. Slide #5. This quarter was fully impacted by COVID compared to only 2 weeks of crisis impact in Q1 2020. Nevertheless, we managed to sustain revenue growth with plus 0.5% and reaching EUR 10.3 billion despite, Spain still negative, thanks to the excellent performance of Africa & Middle East, the solid trend of other European countries. The upturn of Enterprise, while France is resilient. We also managed to stabilize group's EBITDA at minus 0.3% year-on-year. This is minus EUR 8 million, while the roaming impact was minus EUR 42 million this quarter. Regarding eCapex, as initially planned, we will reach between EUR 7.6 billion and EUR 7.7 billion this year, in line with this full year guidance, eCapex were up by 12.4%, reaching EUR 1.8 billion at the end of March. This increase is mainly due to less asset disposals, but also to an acceleration of investments after the COVID slowdown in Q1 2020 notably in France and EMEA. Let's now move to the business segment review, starting with France on Slide #7. France were -- this first quarter continues to be impacted by health restructuring measures, notably with the closure of around 1/3 of our stores, representing 40% of our sales. In spite of this impact and excluding the negative nonrecurring effect of digital content offers, we managed to stabilize our total revenues in Q1. As such, regarding retail services, excluding digital content offers, our strong performance in fiber and convergent services more than offset both the structural decline in PSTN and the conjectural decline on roaming and also our retail service revenues, excluding PSTN, maintained its solid trend by growing by 1.9%. Turning to equipment sales. They were back to growth, boosted by 5G main brands handsets launch. Lastly, wholesale revenues decrease was mainly due to national roaming, whereas on the fixed side revenues growth from FTTH compensated for legacy decline. Turning to our commercial results. We continue to build on the strong momentum of fiber, registering 385,000 net adds, a record for a first quarter, fueling a broadband net adds at plus 94,000. On mobile, we delivered a resilient performance for Q1 with plus 32,000 net adds, excluding M2M, and a slightly decreasing churn in a quite competitive environment. This quarter, we saw new promotions in the very low end. But in our opinion, they do not jeopardize the global improvement dynamics in over recent months on the main low-end playing field, that is mobile plans above 10 giga, for which the entry price point remains stable. Thus, on the value side, our convergent ARPO pursues its growth despite a drop of out-of-bundle revenues related to roaming and content. Last but not least, we have launched 2 more-for-more commercial bank book actions since the beginning of 2021, which will start to translate into our financials from Q2. Let's now turn to Europe where we achieved a solid commercial performance with a clear improvement year-over-year. Despite a quarter being fully impacted by COVID, with fixed broadband net adds of plus 62,000 compared to minus 8,000 in Q1 2020. And mobile net adds of plus 64,000 in Q1 versus minus 99,000 in Q1 2020. However, total Q1 revenues remain under pressure at minus 2.4% due to the situation in Spain. Excluding Spain, other European countries grew by 2.2%, notably in Poland, where retail services grew by 2.7%, driven by strong customer volume and better ARPO trends with a clear monetization of fiber as the ARPO in fiber in Q1 is 18% higher than the fixed base only. In order to build on the strong fiber momentum, as said earlier, Orange has signed a partnership with APG in Poland to expand our fiber footprint by an additional 1.7 million households over the next 5 years. The entity was valued at EUR 605 million. As a result, Orange Polska will receive EUR 303 million from APG. Turning to Spain. This quarter, we maintained our positive performance in net adds in convergence fixed broadband, including FTTH and mobile contracts, thanks to the repositioning of our offers, which helped us improve the convergent churn by more than 4 points and also stabilize the fixed broadband customer base while keeping on increasing fiber penetration. Nevertheless, while allowing us to be more competitive and more active in the low-end segment, repositioning our offers results in pressure on the top line. Total revenue was down at minus 7.4%, but with an improving trend quarter-on-quarter. Retail services decreased by 10.2%, linked notably to the impact of repricing on existing customers of the customer base in H2 2020, while wholesale revenues decreased by 2.3%, mainly due to a drop in visitor roaming and international traffic. More than ever, let me assure you that all our teams are fully mobilized to implement the new strategy and improve the performance in Spain. Let's now turn to Africa & Middle East, the main contributor to the group growth, with revenue increasing by 7.1% in Q1, driven by 4 fast growth engines: data, reaching 36 million 4G customers with revenue up by 22%; fixed broadband, with 1.8 million customers, up 38%, which continues to accelerate with revenue growing also by 38%; Orange Money, with an active customer base up 18%, delivering revenue growth of plus 19%; and finally, B2B, with a significant revenue growth of plus 12%. The mobile customer base increased by 6%, reaching more than 130 million customers. From a geographical perspective, this very strong growth was mainly supported by the clusters Sonatel, Côte d'Ivoire and by Egypt. Half of the footprint delivered a double-digit growth with strong performance in Guinea, Sierra Leone, Burkina Faso and Mali. Let's now look at the Enterprise segment, with revenues coming back to growth at plus 0.4%, pursuing the improvement trend that we had observed after the drop in the first lockdown period in Q2 2020, thanks to an ongoing strong recovery in IT&IS revenue, up by 6.4%, supported by both cybersecurity revenues, up by 16% and cloud, up by 5%. The latter with service growth of plus 9%. Today, IT&IS revenues exceed 40% of total revenues as we continue to increase its weight in our revenue mix, pursuing our strategic plan. This performance was able to compensate mobile, down by 1.3%, still, to a large extent, impacted by roaming; voice, at its usual legacy declining trend at minus 4.9%; and finally, data, at minus 3.2%, dragged down by a broadcast due to event-related business not possible in a lockdown period. During this quarter, we pursued our strategy around the development of SD-WAN in France and globally, where OBS enjoys the leading position. Getting chose Orange flexible SD-WAN to support and build a resilient, secure cloud-based infrastructure with increased agility to transform the health industry. And another example, Orange has been chosen to deploy SD-WAN solution for BNP Paribas, comprising more than 1,800 sites and bank agencies. Let's now recap our 2021 guidance given in February, which we are confirming, despite the ongoing COVID situation. As we said in February, our guidance include the tax refund allocation effects. Therefore, firstly, we are targeting a '21 EBITDAaL around flat minus, following the use of the tax refund for an employee shareholder plan and CSR projects. Second, eCapex level will be between EUR 7.6 billion and EUR 7.6 billion (sic) [ EUR 7.7 billion], completely in line with our prior guidance of between EUR 14.7 million and EUR 14.8 billion for 2020 plus 2021. Third, organic cash flow target for 2021 is above EUR 2.2 billion. The net debt-to-EBITDAal telecom ratio remains unchanged at around 2 in the medium term. And finally, in regards to the 2021 dividend, we will propose to maintain a EUR 0.70 level while being a EUR 0.30 interim dividend in December '21. And we confirm as well what was said previously regarding the 2020 dividend at EUR 0.70, plus the additional EUR 0.20 coming from the tax refund. This concludes my presentation, and with my colleagues, we are now ready to answer your questions.

[Operator]

[Operator Instructions] Our first question today comes from Nicolas Cote-Collison from HSBC.

[Nicolas Cote-Colisson]

Two questions, please. First one is on Spain. I can see the net adds across the products were positive, but still, they were still weaker than in the previous 2 quarters. So is there any specific reasons there? Has competition been tougher? Or should we read this as a kind of a seasonal pattern? And any indication on as when the retail revenue trend should improve would be helpful, too. And my second question will be for cloud and cyber defense. Do you see the vertical integration as a net positive? Or do you think there is a case for more independent structures to gain scale faster eventually?

[Ramon Fernandez]

Okay. Thank you very much, Nicolas, for your 2 questions. So we have Jean-François Fallacher, CEO of Spain, with us today. So Jean-François will take the question on Spain. And Hugues Foulon, who is in charge of cyberdefense will take your question on cyber and Helmut will also be able to comment on the cloud part. So Jean-François?

[Jean-François Fallacher]

Hello, everyone. Jean-François Fallacher speaking. Yes. So on your first question about the commercial results on Q1, yes, indeed, if we compare it to the excellent results -- commercial results in Q3 and Q4, this is a slowdown of the results. Indeed, I mean, mainly linked to the fact that if we look at the market in Q1, I would say if we look at the big brands, the 3 big infrastructure brands, the market has been, I think, quite stable, I would say. But if we look at all the other players and even the second brands of the main operators -- just to give you some statistics, we looked at how the offers have been moving for the 5 main low-cost brands, I would say. There were roughly 50 changes of offers. 1/3 was a simple price decrease and 2/3 was adding more resources for the same price. So you see that this, I would say, a low-end market in Spain has been more aggressive actually in the first quarter. So the slowdown that you see, indeed, is clearly explained by -- I mean the aggressivity of the low-cost player, more aggressivity of the low-cost player. As I had the opportunity to comment in, actually the previous quarter results, we are very cautious on our side. I mean you know that we have changed our portfolio over last summer, which basically explains the very strong results we posted in Q3, Q4. And by the way, which explains also the positive net adds we are posting this quarter. Nonetheless, we are very cautious. We do not take any other measures to be more aggressive because clearly as a strong number 2 of the market, the last thing we want is to fuel further any price war. So this is what I can say. I mean on the -- your other question was on the revenue trends. On the revenue trends, clearly, the minus 10% we are posting this semester is again due to facts. The first is the loss of customers that we had in the first half of 2020, which is still waiting. And the second effect, obviously, is linked to this new portfolio. The new portfolio has clearly allowed us to not only stop the energy of customers that we had in H1 2022. But again, to go back to positive net adds, as you can see. But it has a consequence, is that there is obviously a mix effect in our base because as more of the Orange base -- or Jazztel base is taking the new offers, we have a positive effect on the reduction of churn, as was commented by Ramon. But also, clearly a mixed effect, which is weighting on our service revenues, so that's what is currently happening. And we have to be patient because this effect will last. And as I was commenting in previous meetings, we cannot expect, I would say, a better outlook before 2022.

[Ramon Fernandez]

Thank you. Thank you, Jean-François. Let's start with Helmut on the IT&IS business, which is back to a very nice growth, and then we'll go to Hugues. Helmut?

[Helmut Reisinger]

Thank you, Ramon. Thank you, Nicolas, for the question. I take care of the cloud perspective of your question. As you know, any kind of enterprise digital transformation is comprised of a network transformation, of a cloud transformation and of a security transformation, the 3 go hand-in-hand. Cloud is a business per se, but also an enabler across the different functions. If you just think about the collaboration landscape, most of the collaboration solutions which we are using, you are using, are more and more cloud-based. If you think about solutions in the industry for the zero perspective, cloud extends into the edge, and edge is negatively the meeting point between network, cloud, enablement and security, of course. So therefore, we very strongly are convinced that the driver for our 9% services growth that also Ramon has highlighted -- and by the way, it's driven primarily by Europe and by Asia Pacific, where the growth is even higher, is a good way forward. We noticed that the sensibility in terms of data sovereignty, specifically our European passport and being an trusted player in all of the digital ecosystem is an advantage. And as we have highlighted for the first time, cloud also goes hand-in-hand with the data analytics business that also has seen a double-digit growth, as you could see, I think it was on Page 4 of our presentation. And last but not least, the networks. Ramon has highlighted software-defined networks are more and more also cloud-enabled because networks become the access platforms to cloud services. So we are very confident on this double approach on cloud, which is both an enabler and a business per se.

[Hugues Foulon, Senior Executive Vice]

Hugues Foulon speaking. So maybe to ask a few things about cyber. So we are really working with Helmut to define the best of the 2 worlds for cyber. On one side, to keep and to increase the synergies with the rest of the group, and especially on what just Helmut mentioned. And on the other side, to have the right level of autonomy and agility to develop this company. And why do we need this autonomy? This is to have the room of manageability on the finance side, but also to define the right model to attract and keep the key talents all over Europe for cyber. Thank you.

[Operator]

We now move on to our next question, which is Akhil Dattani from JPMorgan.

[Akhil Dattani, Managing Director and European Telecoms Analyst]

I've got 2 questions as well, please. If I can start maybe on Spain and just a follow-up to the prior question. Just any sort of color on how fast is the back book repricing you are would be helpful? Just to help us understand when that inflection starts to come through. And I guess linked to that also, any comments you have on the recent MasMovil-Euskaltel deal and what you think it means for the market would also be helpful. And then shifting over to Enterprise. We've had Bouygues and Iliad both move into enterprise space recently. So I just thought it would be helpful to get your thoughts around their price points, their strategies and how you think it plays into the market going forward.

[Ramon Fernandez]

Thank you. Thank you very much, Akhil. So Jean-François will go back for the bank book Spanish question, and then I'll ask Fabienne to take the Enterprise French question.

[Jean-François Fallacher]

Okay. Thank you very much for your question. Jean-François Fallacher speaking. So on the question on the back book repricing, I mean, what I can say is that on the Jazztel side, most of it is done, I would say, 1 more quarter, and we will be done. So meaning that most of the customer base has been migrating to the new tariffs. However, on Orange, there was still quite a long way to go, which is both sides good news and bad news. The good news is that obviously, by doing that, we are preserving the value. But this base will migrate to the new pricing, which is also good news because then they will be protected from -- and we aim to obviously reduce churn in a country where churn is excessively high in Spain. So as I was saying, the effects of these moves, we still -- we need to have some patience. The effects of this move will still last a few quarters. But obviously, as we previously said, we should see some remuneration at the end of this year and next year in 2022. Your second part of your question was about the potential acquisition of Euskaltel by MasMovil. I guess your question will be on the impacts of these acquisitions. The way we see that, clearly, first of all, as we said before, this is a consolidation move, whereby #4 of the market is buying the #5, and obviously, it's going to grow stronger. So that we will have -- if this operation is finalized, which we believe is very likely, we will have a stronger #4 in the Spanish market. So as it is a consolidation move, long term, we believe this is a good thing for the Spanish market. That's the first point. Short term, in terms of potential market repair because I get a lot of these questions. Here, we are a bit more cautious because looking at the way MasMovil has been integrated its previous acquisitions, and we know that MasMovil is having also an external growth strategy to fuel its growth. But what we see is that usually, they have acquired companies and they have not specially integrated them nor a reduced number of brands. I think they are probably the operator running the most number of brands. So here, short term, we don't see -- we're a bit more cautious, and we don't see, let's say, any potential, let's say, market repair. Although looking at the last trend we saw from the Virgin brand, we believe that having this brand, let's say, in the MasMovil environment, with a numerous number of other brands, might be a positive news for us and for the market. Now obviously, as you all know, we have 2 major, I would say, operators which are our wholesale partners. The first one is MasMovil, both from fiber and mobile, because they are using our national roaming deal. And Euskaltel is the second one. Obviously, these contracts are contracts with very strong confidentiality clause. So you will understand that I cannot reveal any of the details of this. We will see what will be the reaction of MasMovil. So first of all, we need to see this deal happening. And then I guess they might -- that we see want to renegotiate some of the Euskaltel contracts. So we are preparing ourselves, and we will see in due time what will be the consequences. But we expect there will be consequences on our wholesale business in the short term indeed.

[Ramon Fernandez]

Thank you very much, Jean-François. Just to say, this is Ramon that we are all watching this very closely. And I guess this scenario of market consolidation in Spain is a good news, I would say, looking ahead. Fabienne, on the enterprise market for France?

[Fabienne Dulac, Deputy Chief Executive Officer of Orange France]

Yes. Thank you, Ramon. Good morning. So as expected, we observe more and more competition on the B2B and with the new competitors. And as usual, free SIMs has entered the pro market by price aggressiveness. Maybe the most important is the special price difference, seems very important is really reduced when you compare exactly the same offer. And the gap is not different than we have before in the market between Orange and the other competitors. That explain the soft reaction you can observe in the market by competitors. We have some moves, we launched a new offer yesterday. But at the end, the market is not stable, but with the same kind of competition. Bouygues seems focus the high-end market of pro SME, free SIMs aim to attract price-sensitive growth, maybe more on the low-end market. So we have the same kind of competition, the same kind of gap of pricing. In this context, we expect this arrival. So we prepare it and we keep developing and enriching our offers by investing new services. It's why we launched 2 weeks ago cyberfilter to secure mobile equipment, and we will enrich in the future our offer around cybersecurity. Maybe the most important is to note that the Q1 of the 2020 year was very active on B2B and that sustain all competitors in their growth and specifically Orange because we maintain our market share, and we are really confident we can maintain them in 2021 with a very -- with the market more active, the need to -- for connectivity, for website, for fiber is really there in this B2B market and specifically on the pro SME. So it's a good news for the future, and I think that will help to have a more peaceful market because a lot of activity for our competitors.

[Operator]

We now take our next question from Roshan Ranjit from Deutsche Bank.

[Roshan Vijay Ranjit, Research Analyst]

Two quick ones from me, focused in France, please. Ramon, you mentioned the slight step-up in CapEx this quarter with part of that being focused in France. Is it possible to get a sense of the phasing of the tax refund CapEx allocation? So is that a driver this quarter? Or is that going to be more evenly phased out through the year? So that EUR 300 million CapEx for that front, please? And secondly, you mentioned some slight price competition at the lower end in the market. Have you had to respond with any price adjustments with Sosh? On that, I think you did that at 1 point last year, and then you actually moved pricing higher. Are you seeing any kind of erosion between the high end and the low end? That would just be interesting to know there.

[Ramon Fernandez]

Thank you. Thank you, Roshan. So on the -- I will turn to Fabienne. But on the CapEx part of the question and the phasing of the tax refunds, there is only EUR 10 million in Q1, which is coming from this so-called tax refund CapEx allocation. So far, most of it is in front of us looking at the EUR 300 million we talked about, which will be essentially split between -- most of it for France and most of it for co-financing in fiber and the rest in Africa & Middle East, where we can see that every euro invested is translating into very fast growth cash. I'll turn to Fabienne on the pricing question, just saying that, as I said initially, we are confident that the better environment that we have been witnessing over the past quarters is still with us, which is, of course, an important element. Fabienne, do you want to elaborate on this?

[Fabienne Dulac, Deputy Chief Executive Officer of Orange France]

Yes. Yes, you're right. We observed specifically in the mobile because in the broadband, it's really stable. No more aggressiveness or no more promotion. In mobile, we observed new promotion appear this quarter, specifically in the very low end markets. In our view, these moves are tactical, and they are linked with 2 points. The low levels of sales, this is a characteristic of the Q1, and above all, the shop closure. So competitors need to animate the market and launch this very low end market. But the most important is the low end entry price point remains stable. And this is the more important because for the customer, this is a major activity. So in this context, we decide to pursue our strategy with Sosh to be a smart follower strategy and smart follower. And to not respond, as you can observe, we don't launch new offer. We maintain our strategy to try to pacify the market without being out of the market. But we can do that and we succeed and the growth of Sosh is sustainable in this Q1. You have another question about -- yes, low end market and high end market, yes. So Q1 has been impacted by the closure of the shop and specifically, in this case, this Orange brand. We have been impacted. So in Q1, we don't observe a slowdown in the high-end market, but an impact on Orange brand. But at the end of March, we observed a better increase. So we are confident in the future because we know we can open more closure in the future. Currently, 30% of our shops are closed due to the sanitary restriction and as explained, as mentioned by Ramon that represents 30% of our sales. But we have a good news in the future. So we are confident that in the future, we can go back growth more than in Q1 on Orange brand. I think I have take all your questions.

[Roshan Vijay Ranjit, Research Analyst]

Yes. No, that's great. Just a quick follow-up. You talked about a kind of normalization towards the end of the quarter. So is that the kind of 80 high-end, 20 low-end split, which you previously talked about? Is that fair?

[Fabienne Dulac, Deputy Chief Executive Officer of Orange France]

Yes, exactly. On the -- on March, as you can see, we launched an offer, promotion on the Orange brand attractive that sustain the dynamic of Orange brand. And so that helped us in the period where the shops were closed. So we observe this. And as all year -- every year, Q1 is not favorable for our brand. It's -- because it's a soft activity, and we know that March is the turnaround of the year, and we are very confident for Q2, Q3 and the end of the year that we will be in growth, specifically on Orange brand. We make all we have to do to enrich Orange brand and to have an attractive plan. So we are really confident in this -- in the -- for the future. But March is a turn around, Yes. The turn -- not turnaround, turn. And just maybe to be clear, the Sosh remains 20% of customer base. So there's no change in the equilibrate of customer data for Orange globally.

[Operator]

We now move on to Mathieu Robilliard from Barclays for our next question.

[Mathieu Robilliard, Research Analyst]

I have 2 questions, please. First, with regards to Belgium and Orange Belgium. I think you made it clear that your final offer price is EUR 22. But I was wondering what you would do if you don't get enough shares, for example, to be able to delist the stock because it's in some shareholders of them, although I'm not satisfied with the price offered. So what would happen in that situation? That's the first question. And then if I could come back to France. Ramon, I think you mentioned that you did some back book price increases or more for more initiatives by the end of Q1. And I was wondering if this was a bit more pronounced than in previous quarters. Trying to understand if that could have a visible impact in terms of the retail trajectory in the coming quarters.

[Ramon Fernandez]

Thank you, Mathieu. So on Belgium, the offer is closing tomorrow at 4:00. It was open on the 8th of April. And as you said and clearly understood, the price of EUR 22 is the final price. I just recall that before announcing this operation in December, the price was at EUR 16. So the price premium of 36% is here, and it will not be here forever, right? So if we don't have enough shares to delist, which is most probable because one shareholder, which holds more than 5% of the stock, which is required to -- you need 95% to delist, said he would not bring his own share. So Orange Belgium will remain listed. We didn't set any threshold. But I guess everybody will understand that the EUR 22 will not be there forever. So my personal advice would be to bring these shares to this table. On France, I'll go back to Fabienne. But I will just say that in this environment, to be in the position to have this bank book repricing is, I think, the best testimony of what Fabienne was saying about the resilience and the pricing power that Orange France keeps on the French market. So it's a very encouraging move, I would say. Fabienne?

[Fabienne Dulac, Deputy Chief Executive Officer of Orange France]

Yes. It's exactly what you explained. We maintain our strategy to push more-for-more strategy and to push some revamped offer, as we made in October, if you remember, when we included additional data, 5G compatible to SIM card and to sustain pricing power. And we are able in -- at the beginning of the year to pursue our approach of back book repricing. We did it on the mobile-only, and we did it on the open plan, and we will do, when it's possible, each time we can. We don't observe any impact on the customer base and no refuse because behind this back book repricing, we gave more data. We -- you know our strategy, we are very limited in the data because we want to have the possibility to give more data and to give -- for more pricing. So we pursue this strategy, and we are really confident that we can do in the future and specifically with the 5G arrival. You have a second question about the dynamic, the retail trajectory in coming quarter. We are really confident because our fundamentals are very good in the Q1 and will be very good, too, in Q2. We observed a real and solid acceleration in access revenue growth, driven by 2 points. The same and positive momentum for fiber. The growth of the customer base is really, really strong. And we observed the same in April, and I think we observe a real term in 2020 and in 2021 and a strong appetite for fiber. And the second point, as I explained, we maintain our pricing power strategy and all opportunity we can have to give more for more for customers and back book repricing. And we maybe can rely on the roaming of Q2, too, for the revenue.

[Operator]

We now move on to Jakob Bluestone from Crédit Suisse.

[Jakob Bluestone, Research Analyst]

I have 2 questions, please. Firstly, can you give an update on the potential entry in Ethiopia? What's the latest there that you can share with us on that potential move? And then just to come back to an earlier point on Enterprise and the new offers from Bouygues and Iliad, I think you mentioned you expect it to keep your market share stable. Just to be clear, do you think you need to revamp your portfolio to achieve that? So is there any risk to the ARPO that you see? Or do you think you can achieve a stable market share in Enterprise without -- on the back of your current offers.

[Ramon Fernandez]

Thank you, Jakob. Well, on Ethiopia, the process is ongoing. I think that -- what I said in the full year call, which was if the conditions do not seem good enough, we would not go, is more actual than ever. So let's see. But I guess you have understood that it's an important process. But we would only go if we are convinced that we can create value. So I think it's important to understand. And this is more generally what is driving our M&A policy. On the French Enterprise market, I'm going to turn back to Fabienne, maybe Helmut also would want to add something, but I would only say that we've said for some time that we do not expect to keep the market share on the enterprise market absolutely stable. We've been saying for some while that we were expecting to see more competition ahead, but that other services coming with 5G with all the IT&IS services we talked about with cyber, with cloud, with data, then the other business that we would generate would help to mitigate any impact on the market share through additional revenues and higher ARPOs. So I think this is how we should see this. But just turning back to Fabienne.

[Fabienne Dulac, Deputy Chief Executive Officer of Orange France]

Thank you, Ramon. But it's exactly what you said. We have so high market share on the B2B specifically on the pro and SME market, that we expect we can have some decrease, small decrease but maybe decrease because we have more competition. But at the same time, we are convinced we can generate more value per customer with more services, and this is exactly what we can observe at the end of 2020 at the beginning of 2021. So it's why we keep enriching our offers by investing new services, more services and specifically about around cybersecurity because it's an important concern for the B2B and for our customers. And we will maintain this strategy to give more services and to enrich our gain -- our plan. To answer your question, we offer a wide rent from small to big customers. So we don't need currently to revamp our offers. We have to adapt them and we did it, if necessary. But we have a very wide runs, so we have different solutions for our customers. It's not the case of free we have only one offer, so maybe it will be a point for him and for Iliad in the future. So we will adapt as we did on the B2C market and as we did in the B2B market. More to be consistent with the behavior of the consumer and to adapt to the competition. And maybe there was another question -- you have a third question. I don't remember

[Jakob Bluestone, Research Analyst]

No, no. Just 2.

[Fabienne Dulac, Deputy Chief Executive Officer of Orange France]

Oh, it's okay?

[Jakob Bluestone, Research Analyst]

Yes, you answered everything.

[Operator]

We now move on to Sam McHugh from Exane.

[Samuel McHugh, Analyst of Telecom Operators]

Yes. Just 2 questions as well. First one, I wonder if you could just elaborate a bit more on the back book pricing in France, kind of maybe some color on how big the price changes were? What percentage of the base that they apply to? I don't know if you can help us a little bit. And then secondly, just a question on TOTEM. I understand the number of the TOTEM sites in France don't actually have any mobile equipment on them. And then maybe the empty or only have radio equipment. Can you give us an idea of what percentage of the sites are like that, that don't have MNO equipment? And are they capable of hosting antenna? And are these sites in more rural or urban areas?

[Ramon Fernandez]

Fabienne, do you want to shed more light on the back book? Or do we want to keep some of our little secrets for ourselves? Your choice.

[Fabienne Dulac, Deputy Chief Executive Officer of Orange France]

No. Maybe just 2 points. The back book repricing with some different stake, first of all, generate value. And the second point is for Orange to maintain the difference between Sosh and Orange brand, and to offer to our Orange brand customers more value, more data, more services, a real difference between the Sosh offers. So that's why we, all the time, revamped our offers or organized some strategy more-for-more to be -- as on the B2C, consistent with the customer behavior, consistent with the requirements, and to give more but at the same time, to benefit more pricing. So this is a simple strategy, and that sustains the revenue. And this is a good news because we are convinced that in France, even if we observe a beginning of market repur, we have -- we are able all competitors, to raise and to increase the pricing first. We are very far from what the value we can generate. So we will maintain the strategy and sustain the market to be more pacify and to be more reasonable. And we don't want to lose this strategy, and we don't -- we want to make the job as we did in 2020, and we will do the same in 2021.

[Ramon Fernandez]

Okay. Thank you. Thank you, Fabienne. On the TOTEM question, we do not disclose the information regarding sites with no MNO equipment. But in any case, these sites are not taken into account when we talk about increasing the tenancy ratio. But we will have a chance, Sam, to come back to all these issues. We've designated the CEO of TOTEM Europe, Nicolas Gouhier, a very experienced guy from the group, and he's going to set a team. And we are very well on track with implementing and putting in place, operationalizing TOTEM before the end of the year. And I guess at some point, I don't know if it's in Q3 or before the end of the year, we will be back to you with additional info on this Orange TowerCo, which is going to be an important part of the story for the group in the next quarters and years.

[Samuel McHugh, Analyst of Telecom Operators]

So just to clarify, your tenancy ratio growth targets don't assume you'll have equipment to these sites, is that right? .

[Ramon Fernandez]

We'll come back to this in details, but the answer is yes, but we'll come back to all these issues later. Yes.

[Operator]

We now move on to Jerry Dellis from Jefferies.

[Jeremy A. Dellis, MD & Senior Telecommunications Analyst]

I've got 2 questions, please. First one is back on Enterprise. I suppose, in the consumer market, we did see the development of what we call the no-frills segment. If we think about the Enterprise market, what is there to stop a no-frills segment developing? And if we think about the specific offer that Iliad markets into the Enterprise space today, it may have fewer features than some of the offers that Orange markets. But on a like-for-like basis, how much cheaper than your list price as Iliad's pricing today, please. And then secondly, in Spanish wholesale, you mentioned the prospective merger of MasMovil and Euskaltel may have some implications for your wholesale business? My understanding is that Euskaltel is committed to minimum guarantees until June of 2024. So could you help us understand where the wholesale revenue risk actually lies? Is it a question that Euskaltel is currently spending above those minimum guarantees? Or is there some capacity that they have to exit that deal with you early?

[Ramon Fernandez]

So obviously, you have a lot of interest today on the Enterprise market for France, so we'll go back to this. Fabienne maybe I will ask also Helmut to complement the answer on the -- on this point. So first, Fabienne, then Helmut, and then we'll go back to Madrid.

[Fabienne Dulac, Deputy Chief Executive Officer of Orange France]

Yes. Okay. So you're right, the price is a good question, but not only the only one for the B2B market, and I will come back on this point. If you observe the free offer, the first channel price difference is more than 50%, but it's in really reduced to less than 30% if you compare exactly the same offer between Orange offer, free offer, and the other. So this gap, around 30%, is exactly the same gap we currently have between Orange and the other competitors, Bouygues and SFR. That is why I explained there is no real change in this market, and it's that explain why you can observe a soft reaction from competition. And I don't observe promotion really aggressive in the B2B market. since the launch of this new offer by free. The question is, can we -- if we can have a better price. I think it's not the question because as I explained, we don't have exactly the same offer. We have more services in Orange brand offer than our competitors. We enrich our offers by new services. So it's maybe a little bit more complicated in the B2B market to compare exactly the same offer with another one. And the second point is, the requirement for the B2B is a little bit different for the mass market, what they require, what -- how customers require. First of all, a really, really strong and solid quality of the network, both on fixed and on mobile. Second point is they need sometimes a really strong convergence of telco and IT because they don't have the possibility to have a different supplier. So they want some offer package and adapted at their requirements. They need a quality of a strong and solid customer support, and we have it. They need the proximity, and it's exactly what we did in 2020 during the crisis COVID and maybe one point will not a significant improvement if our B2B NPS in 2020 and at the beginning of 2021. So it's not so easy to be -- to make the same disruption on the B2B market as they made in the B2C. And the assets we have in Orange brand are really solid. And I repeat, we maintain in 2020 despite more competition, and we maintain in Q1, our market share because it's not only price, it's not only offers, it's a lot of assets around, and we have them. And maybe a last point, it's more complicated to address the customer B2B than B2C. So it's another point we have with all the team we have on all territories in France. So yes, I am sure that the market will be dispute, the market will be more competitive, and we have to anticipate and to prepare the future and that is exactly what we do all the day, every day. But we are not worried about tomorrow by this offer and not by the reaction of Bouygues yesterday. We will -- we have the ability to adapt our offers. We have the ability to be competitive in this market with all assets we have. So we are still confident. Maybe, Helmut, you want to complete?

[Helmut Reisinger]

Yes. [Foreign Language] Fabienne, and thank you, Jerry, for this question. Indeed, to complement, Fabienne was highlighted on the topics on the pro and on the SME segment. So I speak more for the medium-sized segment and the higher segment in the French market. In a nutshell, first of all, we have a value strategy, number one. Number two, the price elasticity is, of course, much higher in the consumer side. I think this was also pointed by the question before, then it is on the B2B side. And you have observed that we respect very much our tough competitors that you have mentioned. But you have observed as well, there have been acquisitions made 2 years ago to enter also the SD-WAN market to go into those pertinent IT topics. But there's a learning curve to overcome. And so far, I think in the decision-making of the customers, even though there are now new offers, I think the positioning is very much a telco-only approach versus the customers. And the problems we are solving for the customers are their digital transformation. And this, as I said, comprises network, plus cloud, plus cyberdefense. And therefore, we are more pertinent and COVID has simply accelerated this move that the customers are asking telco plus, in addition, something. And the quality of the network, the relevancy in talking to the customers, I think, is clearly underlined. To give you one example, which we did as well, even on the mobile side, because the churn rate is very, very low on the mobile side, by the way, and it has gone even down in Q1 in France. But even on the mobile side, we introduced last year, mobile applications offer, which means for a medium-sized enterprise in France you have the possibility to completely administer why your mobile application that is in our store, your complete reimbursement of expenses of your employees. We are helping them to get more productive, and therefore, the pure price point of a pure mobile offering is one answer, but it does not solve all the issues that enterprises have on the French market. And therefore, I think this is one of the reasons why for years now, we have been defending our good value strategy.

[Ramon Fernandez]

Thank you, Helmut and Fabienne. Jean-François for the wholesale?

[Jean-François Fallacher]

Yes. So on the wholesale impact of the MasMovil and Euskaltel deal. So I see that you read very well the press release of Euskaltel in 2019 so that you need this information in public. There are 2 contracts actually, we are having with Euskaltel. We have one contract, which is MVNO contract, another contract concerning access to fiber. What I can tell you is that, obviously, we expect that MasMovil, once this operation concluded, will very likely want to see how they can optimize these contracts. So these contracts, obviously, they include minimum guarantees and exit closes. But you will understand very well that for confidentiality reasons, I cannot comment further. So as Ramon was rightly saying, obviously, we are preparing ourselves for this potential upcoming negotiation that should occur once again, this deal will be completed by MasMovil.

[Operator]

We now move on to Frederic Boulan from Bank of America.

[Frederic Emile Alfred Boulan, Senior Analyst]

Two questions on my side. First one on pricing in France, following the previous discussion. I think Fabienne you talked about a turn in the Orange brand in March. I'd be interested in the mix. So on one hand, you've introduced a premium for 5G, about EUR 5. But at the same time, you also have EUR 10 for 70 gig since March. So any comment on the type of customers you're adding? And how you think it will impact the ARPO in the medium term when we compare -- when we take into consideration the back book repricing that you mentioned and the level of the front book? So that's the first question. And secondly, on -- a follow-up on TOTEM, is there any update right now on your thinking, both from the scope perspective, beyond France and Spain and target capital structure considering some of the developments in the broader European landscape.

[Ramon Fernandez]

Thank you, Frederic. I'll -- so turn to Fabienne. Just saying for France that you need -- and Fabienne was saying so, but I'm just repeating that when you have 1/3 of your shops closed, this gives you a specific context which explains the promotion you had on the Orange EUR 10 plan. This is very linked to the closure of shops. You need to understand this. But Fabienne?

[Fabienne Dulac, Deputy Chief Executive Officer of Orange France]

Yes, it's exactly what you said. The context of the Q1 was a little bit specific, with a lot of our shops were closed. It's a soft quarter. So we decide and as I explained, to maintain smart follower strategy research and not respond to the market and specifically to the new offer appeared. But at the same time, we decided to support the Orange brand and specifically because that 40% of the sales were out due to the shop closure, and we need on the digital to support and to support the Orange brand, and we launched an attractive promotion yes at 9 point -- at around EUR 10. But I remember after 1 year, it's EUR 35. This promotion, maybe just to remind you, is not new. This promotion has already existed. It was embedded in plan -- and in open plan. So it's not new. It was not predatory, and as you can observe in March in the market, there's no reaction. We have not been followed. So it was not a predatory offer. It was an offer to sustain Orange brand when 30% of our shops are closed. And we don't participate in the predatory market. You can observe it. It's really clear. I think you have a second question about -- yes, the 5G premium, yes. We decided in our strategy in our value strategy to maintain 5G only on Orange brand and not to align with the other competitors. Sosh is not available in 5G, and we want to maintain this strategy in 2021. I think it's possible. The 5G term will be, I think in 2022, not in 2021, we observe a strong dynamic in handset sales. 40% of our sales of our handset sales are made on 5G handsets. So it's a good. But the real term will be in 2022. So it's too early to change our strategy, and we will maintain the value strategy and to have a real gap of experience and of offers between Sosh and Orange brands, so we maintain this strategy.

[Ramon Fernandez]

Thank you, Fabienne. On the TOTEM question, Regarding the scope, as we said in February, we are going and we are working on the potential arrival over time of other European Orange countries in TOTEM. So this is ongoing work, and we will be back to you in due time, but you have here a clear perspective.Second, on the capital structure. Well, on this front, I think we were clear that TOTEM is going to create value, building on 2 legs. The first one is the organic leg through increasing the tenancy ratio and looking for additional sources of revenues. And here, we have a number of ideas and Nicolas Gouhier is already working on these issues. And the second one is inorganic because we will be watching very closely domestic opportunities and also broader opportunities in the European market, which is on the move with a number of players. And we will be part of this game. This is also why we are setting this independent structure with dedicated management and a clear objective, which is to be a key player on the European landscape. At this stage, I guess there is really nothing more to say, but we said that the capital structure would be a means to an end. If participating to the consolidation of the market requires an evolution in the capital structure of TOTEM, this, of course, will be considered.

[Operator]

From UBS, we have Giovanni Montalti with our next question.

[Giovanni Montalti]

Can I ask if you can share some thoughts with us in terms of how do you think about potential further consolidation in Spain following MasMovil will bid on Euskaltel?

[Ramon Fernandez]

Well, I think, I will -- this is Ramon, just repeat what we have said constantly, which is first that the fragmentation of the Spanish market is an important cause of the difficulties that a number of players are seeing on the Spanish market. And so 6 players, at least 20 brands, at least, is too much. And the first move of MasMovil and Euskaltel is probably a step which would not be the end of the game. If you look at the dynamics of the Spanish market, probably it will not be the end of the story. And so once you've said this, well, then when you are in our shoes, you look at all potential scenarios. We've been doing so. We will continue to do so. But we've always a view which is that Spain is a central market for us. We have a very strong asset. I can say, because Jean-François will not say that we have a top CEO in charge of putting the operation in Spain on a better footing with the full support of the group, of course. And that has started. And we will continue to build on the recovery, not hoping to see consolidation, making the job for ourselves. We need to do the job at home, and this is what Jean-François and his team is working on. There are many initiatives which have been taken. Once again, we are seeing some first, very encouraging signals of a turnaround on the commercial front, of course. This will take some time to turn into financials. We know this. We said it. We said, we did not expect to go back to EBITDA growth before 2022. But the work is ongoing. And if at some point, there is anything else to do looking at the structure of the market, we are a big player, and we will be part of this discussion.

[Operator]

We now move on to Andrew Lee from Goldman Sachs for our next question.

[Andrew J. Lee, Equity Analyst]

I had just 2 quick questions. The first one was on your cost-cutting and how that -- your cost-cutting targets and how they filter into your free cash flow guidance. Apologies, I've probably just got confused on it. But I think originally, you said that not all of your EUR 1 billion cost-cutting target was included in your midterm free cash flow guidance?Like is that the case? Or are you including all of the EUR 1 billion cost-cutting target now in that guidance? And how does the -- do the benefits -- or how are the benefits of the tax rebate restructuring spend incorporated into your free cash flow guidance, if at all? That was question number one. And then the second question was just a broad one, which you may not want to answer now, but on the TOTEM strategy, there was some press speculation a couple of weeks ago about you potentially pooling your towers with another large player. And so as a hypothetical question, what is the aim and the benefit of doing that, given there's limited overlap in existing markets? Why would you seek to do that? And why, specifically, would you necessarily want to be a major European tower player?

[Ramon Fernandez]

Okay. Thank you, Andrew. On the cost-cutting targets, free cash flow guidance and basically what is -- where do we stand with our scale-up cost efficiency program. First to say that we are on track with our objectives. There is already in Q1 some elements of this scale-up program, I would say, both the letter and the spirit, very strong discipline at group level, which has been filtering down in -- which is being discussed on a regular basis, of course, at the executive committee and then more broadly across the group. All the objectives we give are, if I may say so, all included. So when we say that by 2023, we aim at a net indirect cost reduction of EUR 1 billion on the basis of EUR 14 -- close to EUR 14 billion basis of 2019. This is going, obviously, to contribute to the organic cash flow target for 2023, which has been set between EUR 3.5 billion at a minimum level, up to EUR 4 billion. And we said with Stéphane at the full year call that we were optimistic that because of what we were doing with the scale-up program and all the other initiatives at group level and the very strong dynamic we see in some areas -- I mean we are spending a lot of time, and it's fair enough on the difficult situation in Spain, but we tend to forget that Africa & Middle East, which is now far bigger than Spain, is growing EBITDAal at a pace of 10%. And if we were talking about EBITDAal in Q1, you would see that Africa & Middle East is even able to do more than this. So we need to see that we have other engines for growth, which are going to support these free cash flow objectives, also the other European countries. I mean when you look at Poland, when you look at Belgium, I mean, Belgium published its results. Also, you see there is a nice dynamic here. Romania and Slovakia are also -- we never talk about Central Europe, but they have also nice performances and they have been improving significantly. So the cost-cutting program is in place. The discipline is here because we just have no choice if we want to make sure that we will be able to absorb some difficult situations, essentially now Spain, which will be better. I mean this is a tough period, but it's going to get better because of all what we said. And so the guidance is all included. It has a minimum target of EUR 3.5 billion of organic cash in 2023, and we will be there. And when you look at the benefits of a tax rebate, I don't take very much a rebate word, by the way, because it was not a rebate. It was a battle, it was a legal battle that we have been winning. It was not a rebate. It's something we talk with our teeth, this EUR 2.2 billion. And when you look at how this is incorporated, when in fact, the incorporation is in the additional spending we have put and we will be putting in the machine in 2021 to prepare through value-creative initiatives, to prepare for the future. And this is why the organic cash flow, which was continuing to grow with more than EUR 2.6 billion is going to more than EUR 2.2 billion because of some additional CapEx with an investment rate of return between 15% and 20%. So this is going to be very much supportive of the performance of the group. And we have also some, I would call, investment in transformation in the company. We talked about a number of issues in February, which will also help the group to be more, I would say, cost effective, more agile, and this is very rewarding, I would say, spending. On -- I hope it's clear enough. If not, Andrew, we -- please, we will come back to it. And -- but everything is included. Look at the cash line and be confident that the minimum EUR 3.5 billion in 2023 is a very, very strong objective of all the team. Regarding TOTEM, yes, there will be a press speculation time and again. When you create such an ambitious new entities such as this Orange TowerCo, obviously, you will read, and we will all read some comments about what's going to happen with pure tower companies in Europe, and there are some interesting elements regarding some of them currently. I'm not going to be more specific, but a lot of discussions and focus, and you have the tower companies of the telco players. Vantage has been listed. Deutsche Telekom is there, there is TOTEM. And I guess that the telco players that have made the decision to keep control of their towers, and we are in this category, we think it is wrong just to give up these strategic and value creative assets. Well, we will be part of a tower market, which is attracting a lot of attention, which apparently is valued much better than the telco traditional activities. And we are part of this game, and we will look at any opportunity which would help us to secure and accelerate our capacity for growth in the domain. And when you ask what are the benefits in theory of, let's say, cross-border consolidation? It is exactly the same question as the one we have when we look at telco cross-border consolidation. So it's a good question. There are some elements of answer to this question. But today, it's premature to enter into more details. But the fundamental point is that we are absolutely determined to make sure that this infrastructure assets that we own is going to support the future of Orange as a group. Look at the latest deals we've made, we didn't talk so much about the Polish FibreCo and the CEO of Orange Polska is also with us online today, a Julien and Jean-François now in Madrid had been preparing this Polish FibreCo but look at the value of this operation with APG. I mean this is a clear signal that these assets have a very strong value in that we are able to manage them well, if I may say so.

[Operator]

We now take our next question from Abhilash Mohapatra from Berenberg.

[Abhilash Mohapatra, Analyst]

I've got a couple of clarifications, please. Firstly, just on the French wholesale business where you say that on the fixed side, fiber-to-the-home compensated for legacy declines. If you could give us some color on what that includes for maybe sort of cofinancing or in construction revenue trends during the quarter, that would be helpful. And then secondly, just on French Enterprise again, I guess lots of focus on that. Just wanted to check, previously, you suggested that Enterprise EBITDAal could start to grow again from end of 2021. Just wanted to check if that's something that you feel confident with still, please.

[Ramon Fernandez]

Okay. Thank you, Abhilash. So Jérôme Barré is also with us today. So Jérôme, can you take the first wholesale question?

[Jérôme Barré]

Yes. Yes, maybe I could. Good morning, everybody and thanks for the question. So my first comment about wholesale revenue in France is that the forecast that we gave during the December 2019 Capital Market Day for the fixed wholesale of new in France are unchanged, unchanged, which means a peak in 2020. What was news in 2022 at approximately the same level as in '20, 2019. And no change for the cumulated revenues between 2019 and 2023 as well. That's my first comment. The second comment is that we expect in the next decrease compared to 2020 due to a few reasons. The decrease of the mobile agreement with Iliad, even if we have postponed the end of this agreement at the end of 2023 -- '22, sorry. That's the first point. The second point is that on the FX market, wholesale market in France, the fiber to financing proceeds will be rolled-out in 2020. And of course, copper will pursue its structural decline. But there are growth relays. We have growth relays in the infrastructure -- the infrastructure field. We have growth relays in the fiber revenues, other fiber revenues. You mentioned the airplane construction, which is, of course, a big growth relay. And so we're working hard on this growth relays. They should help mitigate the decrease of wholesale fixed, wholesale revenues in France. And my final comment is that we -- and back to your question about the growth of this new activities is that we will give some new -- more color, some insight regarding this growth relays in France, in Q3 in order to show and to demonstrate how we mitigate the decrease of legacy business and legacy revenues through this growth relays, especially on infrastructure and fiber revenues.

[Ramon Fernandez]

Thank you very much, Jérôme. And Abhilash, we also plan to come back to all of you in Q3 with a kind of deep dive on wholesale because we know we always have questions on the wholesale perspective. We've been discussing this in the past year or so. On our work plan with the team, we have a Q3 deadline we set to ourselves to come back to you with additional information on wholesale. On the Enterprise OBS EBITDAal trajectory. Yes, I am happy to confirm what we have said, which is that we continue to expect to have positive turnaround by the end of the year in terms of EBITDAal growth. And I would add that Q1 was encouraging, very encouraging. We don't talk about EBITDAal last Q1. We talked only about revenues. But the turnaround you are seeing in the revenues is also showing much, much, much better trajectory in terms of EBITDAal, following a very difficult 2020, which was heavily impacted by the pandemia. But we are clearly on a much better track. And so what we said before is confirmed, despite the ongoing COVID impacts like roaming. So full confirmation.

[Operator]

Our last question today comes from Thomas Coudry from Bryan Garnier.

[Thomas Coudry, Managing Director of Equity Research]

I have 2 questions, please. One is a follow-up on 5G. Could you give us more color on the cities where you have launched 5G? You have now a few months in experience, do you see a change in competitive dynamics in these countries -- in these cities, sorry? And how is the take-up of 5G there? And also, I just wanted, please to have an update on Orange Bank, on your clients and on the status of your discussion with the potential new partner.

[Ramon Fernandez]

Okay. I guess for 5G, France was the question, even if we have launched 5G in 5 countries. But I guess when you're talking about the cities and the 239 cities. Maybe Fabienne, if you can give a few big names? And then we'll turn to the Orange Bank question before closing.

[Fabienne Dulac, Deputy Chief Executive Officer of Orange France]

Yes. We launched 5G in 240 cities, specifically big cities as Paris, Bordeaux, Lyon, Marseille, Clermont-Ferrand, and Nantes. I think we will be able to launch in Lille because it was the last one of the big city in France, and I think we will be able to launch, I think, in May. So all the discussion we have with local authorities allow us to launch in France in all the big cities, and we can reach more than 24% of the population coverage. So it's a good thing. We don't observe a change in the competitive landscape. I think it's too early. This Q1, and I think it will be the same for 2021. The fiber will be the real element of the battle because all -- a majority of the population in France is confined is in a kind of lockdown. So the priority is given to the home connectivity and fiber is the real turn of this year, and it was the case in 2020. So I think for the 5G, we will -- I think we will have to wait for 2022 to see some real change. We observed quarter-after-quarter more appetite for 5G. And specifically, as I explained a few minutes ago, for new offers we launched in October, and we are very satisfied by this launch. And by the equipment, 43% of the handset sales in Q1 were 5G-compatible. So We observe that the French consumer prepare as operator, the arrival of 5G quarter-after-quarter and that sustained the equipment revenue in the Q1 as you can observe, too.

[Ramon Fernandez]

Thank you. Thank you very much, Fabienne. So I'll maybe answer now to Orange Bank question on what is the evolution of a process looking for potential partners, and then we'll close. Just to say, and Paul de Leusse is with us, that the change towards value compared to volume is very well on track. So I'm not going back to it, but we may take, at some point, with Paul more time to discuss the overall strategy in terms of mobile banking. I think it could be interesting. And as far as discussion with potential new partners, the point is that, as we've said, Groupama who's our partner today with 22% of the equity of Orange Bank, has said that they were willing to change this position in terms of being a shareholder, even if a commercial partner is very much here. And so we have opened a process to find a new partner. This process is ongoing. And I must say that we have seen a very interesting marks of interest, which clearly show that Orange Bank is an interesting partner for these interested parties. So once again, we have a chance to come back to it. Maybe it's time to conclude. I would like, in the name of all of us, to thank you for being with us, for your question. I would just like to stress in closing that we talked a lot of France. And in France, despite this COVID period with the closure of a number of shops, we have very solid net adds, a very good commercial dynamic with a decrease in churn. And so we are extremely confident, as Fabienne was saying, about the improving trend for retail services over the period, thanks to the more-for-more strategy and a number of initiatives, including the bank book price increases we discussed. So this is point one. I think we talked a lot about Spain, which is an area of focus well understood by everybody. Important to note the turnaround, which has been engaged. So we are extremely determined to follow up on the first positive signals here. Wholesale will be part of what we will talk again in Q3. But I think Jérôme did already give you a nice flavor on this. And when you look at the financials, well, we spent a lot of time and it's normal on some issues which raised questions. But don't forget, Africa & Middle East. We have no questions on the Africa & Middle East. But it's EUR 2 billion EBITDAal growing by 10%, so I would say it's worth giving a look. Maybe we should do more to -- we value and add units with that also, I think, and maybe we'll have dedicated session at some point. The other European countries are growing. IT is fast-growing. We talked about cyber at 16% growth. I mean we have also to look at all these issues which put us in a very confident situation when we look at the EBITDAal perspective for the year, the finance minus figure is clearly -- at least what we will be delivering and the organic cash, which is really the cornerstone of our story because the end of the game is cash. Well, the cash target is very strong. And we'll be where we have committed to be. So thank you all. Take care and [Foreign Language].

[Operator]

Thank you. This concludes today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.