Orange SA

PAR:ORA

Earnings Call Transcript 2022-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to Orange's First Quarter 2022 Results Conference Call. The call will be hosted by Ms. Christel Heydemann, CEO; and Mr. Ramon Fernandez, Delegate CEO, Executive Vice President, Finance, Performance and Development, with other 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 Ms. Christel Heydemann.

[Christel Heydemann, executive]

Thank you. Good morning, everyone. I am honored to be with you today as Orange's new CEO and I would like to say a few words about my initial impressions after a little more than 3 weeks into the role.

In a world where connectivity, digital inclusion and environment have become crucial issues Orange, has a key role to play. I am more than proud and happy to now lead a group that has built a unique expertise and position of excellence with its state-of-the-art fixed and mobile networks.

Since I joined the company, I have been visiting the teams across the different regions and markets. I am impressed by the depth of talent and commitment and by the incredible energy in this organization that's dedicated to providing our retail and B2B customers with outstanding products and services.

There is still much still to do, and as we tackle a number of headwinds, some temporary and some structural, we intend to see several opportunities that will strengthen our leadership position in our core markets and that will allow us to take the lead in orders. As we move forward, we intend to position Orange as the industry leader in all aspects and on all levels.

As you know, I'm not entirely new to Orange. As a Board member and member of the Audit Committee since 2017, I have personally contributed to the major strategic decisions of our group. Therefore, I am well aware of the major challenges as well as the many opportunities that lay ahead and as I take up my new role as CEO, I am filled in equal measure with excitement and confidence. Now let's look at the highlights of the first quarter of the year.

In a challenging context, we are pursuing our more for more strategy with price hikes in Belgium and Slovakia during Q1 and the launch in April of the Livebox 6 in France. This value strategy is being enhanced by our continued progress in customer satisfaction. In the quarter, we have strengthened our Net Promoter Score leadership in France, improved customer experience in Middle East and Africa and decreased the churn in Europe compared to last year. Combined with our convergent strategy and European fiber leadership, these actions have fueled solid retail services at plus 2% year-on-year, delivering continued strong momentum in Middle East and Africa, an acceleration in France and a stabilization in Europe.

These powerful assets and major achievements have allowed us to seize strategic opportunities, such as the creation of our new segment, TOTEM, our TowerCo, which is now fully operational and ready to exploit potential partnerships in Europe. Also, we announced the project of our joint venture with Masmovil in Spain. By combining our operations, we will generate significant efficiency gains for the benefit of all our Spanish customers, consumers and businesses.

Now let's have a look at our main financial KPIs for Q1. In the quarter, the group delivered EUR 10.6 billion of revenues, up 0.7% year-on-year, driven by growth in retail services that much more than offset the decline in wholesale. Please note that the decrease of the call termination rate, which affected the wholesale revenues of all our European geographies, had no impact on margin.

Taking a look at the segments, Middle East and Africa remained the key driver of our top line growth with plus 8.7%. TOTEM and Enterprise also grew respectively by 12.2% and 0.8%.

Revenues in France were down slightly by minus 0.7% despite a solid acceleration in retail, which was not yet able to fully compensate the decline in wholesale. Spain's top line remain negative at minus 4.6%, but with retail revenues continuing to improve.

And overall, our European countries, the other ones, were stable, plus 0.1%.

Our second financial KPI, EBITDA, grew faster than revenues at plus 1% year-on-year, reaching EUR 2.6 billion. we confirm our full year EBITDA growth guidance between 2.5% and 3%, bearing in mind firstly that Q2 will suffer from a high comparable basis due to the cofinancing received in Q2 '21. And secondly, that the EBITDA growth dynamic will be boosted in H2 due to the employee shareholding plan which heavily weighted on the group's EBITDA in Q4 '21.

Our third financial KPI, eCapEx, was reduced by minus 5.8% year-on-year, in line with our guidance. Please bear in mind that the decrease is expected to be more pronounced in H1 than in H2 due to the catch-up effect in our baseline in the first half of '21.

With that, I will now hand over to Ramon for the detailed results overview. I will come back afterwards with our outlook for the rest of the year.

[Ramon Fernandez, executive]

Thank you, Christel, and welcome on board. Let's start with France, looking at our segments.

In France, revenues were slightly down by 0.7%. This was due to the forecasted decline in wholesale revenues mainly coming from copper, but also as a result of the new coal termination rate, with no effect on EBITDA.

The amount of FTTH cofinancing received was more or less stable this quarter, and we are fully in line with the wholesale trajectory communicated last July. It is important to highlight that our retail activities continued to accelerate at plus 1.7%, thanks to a solid commercial performance and an increase of all ARPUs.

Indeed, excluding PSTN, growth in retail services reached 3.8%, driven by both the penetration of fiber, which now represents the majority of our fixed broadband customer base and the success of our 5G offers.

Turning to mobile. We achieved higher net adds than last year while improving our value mix and keeping reducing churn.

On the fixed side, our 327,000 fiber net adds allowed us to reach 46,000 broadband net adds, with still more than half of new fiber customers being new customers for Orange.

In a relatively smooth promotional context, we continued to improve our customer satisfaction and to grow all our ARPUs. As such, convergent ARPU was up by EUR 1.7 to reach EUR 70.5 driven by the premium pricing of our new 5G offers. Fixed-only ARPU was also up by EUR 0.35, thanks to fiber offers' price premium. And finally, mobile-only ARPU was supported by last year's bank book repricing and the progressive recovery of roaming.

Building on this momentum in early April, we launched our new Livebox 6, which has been unanimously recognized as the best box currently available. Livebox 6 offers our customers enhanced indoor connectivity in terms of speed and latency, thanks to the Wi-Fi 6E, while enabling energy savings of up to 95% when the device is in deep sleep mode. Livebox 6 associated with personalized services is available at a minimum price premium of EUR 5 per month.

Let's now turn to Europe, where we managed to stabilize retail services. The decline in Spain was compensated by the good performance in Belgium and Poland, which was driven by ICT and convergence. This achievement is the result of our constant search for the best financial balance between value and volume and of our convergence strategy. Through our continued efforts to improve customer experience, we reduced the overall churn year-on-year for both mobile and fixed. Therefore, the decrease in revenues of 2% mainly reflects the decline of low-margin wholesale activities, which is mainly related to the regulatory reduction of call termination rates and international traffic. Excluding Spain, revenues were stable at plus 0.1%.

Finally, in Romania, the TKR integration process is well underway, with the rebranding of TKR to Orange Romania Communications in March and the recent launch of convergent offers under the Orange brand in April.

Let's move to Spain, where in a still intense competitive market, especially at the low end, we continued to improve the trend of our convergent ARPU at the cost of slightly negative net adds. We achieved this, thanks to the service upgrade implemented in H2 2021 for the Orange brand. And our disciplined promotional policy, combined with our continued focus on customer satisfaction, allowed us to reduce convergent churn by 4 points to improve the convergent Net Promoter Score by 10 points and to stabilize our customer base compared to last year. This strategy is reflected in our financial performance with a continued improvement in retail service revenues. This was offset by the decline of low-margin activities such as equipment sales and international traffic.

The continuously improving trend in retail revenues makes us confident that we will achieve our objective of returning to organic cash flow growth this year.

Let me now turn to the remarkable performance of Africa and Middle East, which again delivered revenue growth of close to 9%, with most of our African countries posting a double-digit revenue growth in the quarter. This performance reflects the continued development of our retail business, growing at 9.2%, driven by the double-digit growth of 3 of our growth engines, namely mobile data, fixed broadband and B2B. The key drivers of this achievement were a 27.7% increase of our 4G customer base and a 23.5% growth of our fixed broadband customer base coming on top of the improvement of both mobile and fixed ARPU.

These powerful growth engines allowed us to far exceed the decrease at Orange Money, where the complete rethinking of our Orange Money business model in response to the arrival of a new competitor in 4 countries of our footprint, led to a decrease of average revenue by customer, which is partly offset by the ongoing increase of our active customer base and a historically high level in value transactions.

Moving on to the Enterprise segment. Revenue was up by 0.8% in Q1, thanks to IT and IS and mobile more than offsetting the ongoing decline of fixed services. IT and IS grew by 5% and mobile by 14%. While our top line is growing, profitability remains under strong pressure in a difficult environment with a decline in EBITDA expected in 2022. We have already implemented a number of corrective measures to initiate recovery and more will be taken over the coming months.

Last, but not least, we come to TOTEM, which is now a reporting segment of its own. Revenues from our TowerCo reached EUR 161 million this quarter. Of this total, EUR 136 million came from hosting activities, which exclude work and studies as well as basic pass-through activities without impact on [ EBITDA ]. With our proactive commercial approach and thanks to the unique quality of our assets, we plan to drive an increase of the tenancy ratio from 1.35 in Q1 to 1.5 by 2026.

With that, I will now hand over the floor back to Christel to conclude today's presentation with our guidance for the rest of the year.

[Christel Heydemann, executive]

Thank you, Ramon. Before ending this presentation, I would like to confirm that despite a particularly uncertain environment, all the group's efforts are focused on achieving our guidance for '22 as well as for '23 and especially our organic cash flow targets, the pillar of our commitments.

A few last words before turning to Q&A. Naturally, many of you on the call today will be keen to ask questions about our future strategic priorities, and I promise I will share my views before the end of 2022.

Thank you for your attention. We are now, with Ramon and the entire team, ready for your questions.

[Operator]

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

[Nicolas Cote-Colisson, analyst]

I have two questions. I may start with some questions on headwinds from inflation because it feels like you have already well-hedged your energy costs on this side of things, but maybe less so on the labor cost. So how do you see price elasticity playing out? Are you ready to consider more back book repricing as you did in France in 2021? And what kind of other measures you could take to avoid the negative effect on EBITDA from inflation? So that's for my first question.

My second question is on the EBITDA guidance and the contribution of Africa and Middle East. Because if I look at the consensus, growth in the region will represent most of the group EBITDA growth guidance. So given the geopolitics and macro risks in your footprint, but also referring to more competition in payment, can you tell us what the perception of that risk and possibly the mitigating factors?

[Ramon Fernandez, executive]

Okay. Thank you, Nicolas, for your two questions. And on the second one, maybe Alioune will complement on Africa.

So on inflation, you are first absolutely correct to say that we are well-hedged on energy. We are 85% covered in Europe for '22, close to 50% for '23. And I recall everybody [ event ] energy is around 2% of our OpEx. So this is one point.

On wages, we are well aware that there is a need to find a balance between a fair reward of our employees everywhere and the capacity to preserve our competitiveness.

And as far as price elasticity is concerned, I think we will be able to build on the very strong assets of our group, the quality of the network, with NPS increasing everywhere and we are really very well in advance. I'm looking at Fabienne sitting in front of me, France has been building very significant gap with those following behind, but it's also true in Europe. So all the efforts made here are paying off.

And you also know that we are extremely well advanced in terms of rolling out networks, especially the fiber network, where we are between 85% and more than 90% in France, in Poland and Spain in terms of rolling out fiber compared to our commitments. So all this is going to provide a nice hedge against the inflationary pressures and will allow us to continue to adapt our prices to this situation. We had the 4 bank book price increases last year in France which are going to contribute more than EUR 60 million EBITDA in 2022. Christel was talking about Q1 price increases in Slovakia in June also, coming ahead in Belgium. And so in all our geographies, we will continue to build on the strength of the assets to adapt prices to this inflationary context.

So yes, inflation is going to be a headwind for everybody. But I really believe that in Orange, we have a number of assets. I didn't mention BuyIn, our procurement joint venture with Deutsche Telekom which also puts us in a strong position to negotiate procurement.

Second, on the EBITDA guidance, you are right to say that Africa, Middle East will be -- it's not the only one, but one of the main contributors to reaching the target of at least 2.5% growth in 2022. You all know that the Africa Middle East EBITDA in '21 was EUR 2.3 billion. So you have at least a double-digit growth in mind for 2022 which is at least EUR 230 million. What are the risks? Well, Alioune will be able also to talk about the risks but in the past 10 years, we have seen recurrent crisis in Africa of different natures. What is happening now is not structurally different from what we have been witnessing in the past, at least as we speak. Of course, depending on where the war in Ukraine goes, this could evolve over time, but for the time being, this is where we are.

And the very interesting point to see in Africa is that we have a number of growth engines. And when you look at the robustness of the model with data, with B2B, with broadband offsetting the current pressure on Orange Money, you have really a very resilient model and we are extremely confident that we can deliver what we said last July which is growth higher in revenues than 6%, EBITDA double-digit and organic cash over time growing faster than EBITDA.

I don't know if Alioune wants to add some color to this.

[Alioune Ndiaye, executive]

Thank you, Ramon. It's -- I think you have said everything that was necessary. Just to add a couple of words, first of all, our business is actually very resilient in Africa. As Ramon said, if you look at the 10 previous years, we had a 4.2 CAGR in our revenue, even though you had many crisis in many, many countries, the Arab Spring, devaluation in Egypt, you have economic crisis in West Africa. And even though you had all these crises, we had a strong growth in Africa and the Middle East. So the model is -- the business model is really resilient.

In West Africa, you have some coup in Mali, like in Guinea, in Burkina Faso. And even though you have this crisis, you have a double-digit growth of our revenue because the people continue to use the services we are providing. So this is very important for us.

And with regard to the Mobile Financial Services, I just would like to remind you that it's -- it represents 6.5% of the revenues in the EMEA region. And as you have seen in the presentation of Ramon earlier, the order, 93.5%, is increasing at a sustained pace of more than 12% based on mobile data, fixed broadband and also B2B.

So to sum up, I would say that the model is really resilient. It has been resilient also during the COVID-19 crisis because we had a double-digit growth in 2021 after a 5.2% growth in 2020 when we had the COVID-19 crisis. So I'm really -- even though we think we will have some, let's say, maybe unrest in the region because of the -- also Ukraine crisis, we think the continent will remain resilient. And the potential is always there because you have 520 million people in Africa who are covered by 3G or 4G network and who don't use the Internet, so that means -- because of the price of the devices, because of the digital skills. So we have a huge potential to -- and we need to catch up with.

[Operator]

We now come to our next question from Andrew Lee of Goldman Sachs.

[Andrew Lee, analyst]

Apologies because it was a very detailed answer to your -- to Nicolas' question on the African cost inflation issue. And you said that -- you also highlighted that you've got a resilient business and you pointed to other crisis over the years. But just could you just give us some kind of context on [ grain ] inflation and the impact of that on disposable income as a different type of crisis that may be emerging in some of your African countries versus previous examples. So it seems like you're fairly unconcerned about the risk of your business to that. But maybe just help us bridge that gap.

And then just secondly on the towers, obviously, you remain open to opportunity. Do you have an understanding of the time line over which that will be -- that, that opportunity will arise? I.e., should we expect some kind of decision on your tower assets by the end of the year?

Same goes actually for the Masmovil negotiations. Any kind of update on time line would be really helpful there.

[Ramon Fernandez, executive]

So maybe I will start, and Alioune, if you can come back on -- is there anything different impacting disposable income in Africa, Middle East countries. So I will start with the 2 others.

So on Masmovil, the discussions are ongoing according to the plan. We expect to go to signing at summer. Then we will have the competition authorities' procedures and the objective is to reach closing by mid-2023. So we are exactly, I would say, according to the plan. And Jean-Francois Fallacher, can add any color to this if needed, but things are on a very normal track, I would say.

On towers. I would just repeat what we said in full year and in the meeting some of us had a chance to have in between, Andrew, which is that it would be surprising if the European scenery would be the same at the end of 2022. So all the players are thinking, working and looking at potential opportunities. And we are part of these players. We have a very strong asset. And we have also said since the start that TOTEM had a double objective, one was to maximize organic growth and to create value within the existing assets. We have also a potential to welcome other Orange European assets over time, and we are working on this, it will come.

And second, there is the inorganic track and we know that there are opportunities in, I would say, domestic markets. There will be some consolidation in some domestic markets. But also at the pan-European level, we all know that the big players are considering their options and we are here part of these big players. So this is for towers. It would be surprising if, once again, nothing would change before the end of the year.

On Africa and the income question, Alioune, do you want to come back?

[Alioune Ndiaye, executive]

Well, I -- as I said earlier, I think Africa is actually a region where the huge potential, as you know. I think the business -- the telco business is really resilient to many of the crisis we have had before because it has become really a necessity for the populations. And the level of penetration of our services is actually very, very low. So as we have been able, even in 2020 with the pandemic crisis, to have -- to have a sustained growth of 4% -- more than 4% and a double-digit growth in 2021, I think what it has revealed to us is that the need for connection to Internet has really exploded from the population. So I think there's a huge demand compared to the pre-crisis period. And we're experiencing actually a huge increase in the usage of our services. And it turns out that more and more inhabitants and businesses are using our services in the region.

So with regard to the inflation, I think what -- from the figures we have, from the outlook we have from the International Monetary Fund, it -- we will have a 3.5% increase of the GDP in our footprint. This is the last figures as of end of March 2022 coming from the IMF. And 3.4% is less -- a bit less lower than the 3.8% that was previously forecasted for the GDP growth in the region. So 3.4% GDP growth will enable us to keep on growing very sustainably.

[Operator]

We now move on to Akhil Dattani of JPMorgan for the next question. ahead.

[Akhil Dattani, analyst]

Can I ask two as well, please? Maybe I can start with TOTEM. If I look at your slide, you reported 12% organic revenue growth in the quarter. But if I've understood it properly, quite a bit of that's being driven by pass-through activity, which I assume is the energy price impact. So I guess I was just looking for a bit of color on the drivers of growth going forward between the organic contracted revenue streams and then pass-through volatility, which is impacting the business, just so we can understand how growth will pass from here.

And I guess, linked to that, you mentioned, Ramon, that you'd be surprised if things did not change in terms of your tower position through the course of this year. But I see on the slide you're talking about additional carve-outs with some of the additional markets being injected into TOTEM. I just wondered, if those are prerequisites to a tower deal or not, so just we understand timing of whether those things have to happen first?

And then the second question was, again, just going back to the topic of inflation and just how you might look to pass it on to consumers. I guess it's a much more conceptual question, which is that there's a lot of debate amongst investors around revenue growth in this sector given we've struggled to grow for quite a long time. And I guess what people are trying to understand and I'd be keen to get your thoughts around would be, I guess, on the one hand, if inflation is high, oil product prices are rising, some people hope and believe that makes it easier for you to pass on prices because you're in a world where product prices are naturally trending upwards. But conversely, there's also the argument that the disposable income will be under pressure, and that makes it hard for customers and maybe even governments or regulators to tolerate price hikes. So I guess, I'm just keen to understand how you think about those 2 opposing issues and how your confidence sits at the moment in terms of what you've discussed, i.e., raising prices for the course of this year.

[Ramon Fernandez, executive]

So thank you, Akhil, for your questions. So on TOTEM, the figures that you can see on the slides are that the hosting activities are growing by a bit more than 3%. And these are those who are the most interesting, I would say, because the rest, which is work, studies, just basic pass-through activities, have no impact on EBITDA. So the focus will be on the former, the hosting activities.

And the job of [ Nicolas ] [indiscernible] , the CEO of TOTEM, is to maximize this. And when we said that we have a proactive commercial approach, it means that Nicolas and his team, they are chasing additional businesses in order to build upon what is the existing activities of TOTEM in order to maximize value. And the tenancy ratio is, of course, one of the most obvious KPIs to follow, but we will have also some other opportunities to explore here.

And when I said that I would be surprised if nothing changes in 2022, it's just you spotted right that, as I said, we have other European Orange countries which will be joining TOTEM. So this is going to be done, and the work has started with, first, closing, I would say, expected in '23 because it always takes some time to go through all the process, but we will have some critical steps fulfilled in already 2022, and we sported here to start with 3 countries. And Mari-Noelle Jego-Laveissiere with her team is working on this.

And on a more general basis, well, it's not a prerequisite. TOTEM today is strong enough and has a good enough perspective to be a player, which is able to play, if I may say so, on domestic or pan-European fields. So there is no prerequisite of any kind. If we think the time is right, we are able to move and this is our state of mind.

Your question on inflation, of course, is a very good question, Akhil, so we will have 2 conflicting views here. But if you take it on the simplest way, it would be surprising if the telecom sector would be the only sector on basically of the industry of service which would be totally unable to pass through some of the increases in prices. I mean there is no reason why this would be the case in a context, especially where connectivity has become so important, including when people are working more from home, where different habits have been evolving, the way to consume content, et cetera, et cetera. So telecom has become a kind of a vital need. Some other needs will come before. But this one is very high on the list.

And we have demonstrated in the past that we were able, especially through what we call, Christel was talking about the more-for-more policy, I think it's typical of the Orange way of increasing prices, you have more services, more data. Look at the Livebox 6 that has been launched with a EUR 5 price premium. It's also a EUR 5 price premium with fiber, with 5G. So you have new services. This deserves a better price and we will continue to do so.

And then if we have to also take into account the inflationary context, which has necessarily an impact on wages, for instance, or different costs, well, we will need to do so when the regulators will have also to understand this. So we will continue to work on this perspective, which is a progressive adaptation of our price policy to the environment and the quality of our services. And I will -- and we will never emphasize enough the importance of the growing NPS that we see in all our countries, which is also supporting better prices, because people are ready to pay more to have reliable network, reliable connectivity, quality services, customer experience, et cetera.

[Christel Heydemann, executive]

Maybe I can give you just an example, linked to the last Livebox 6 we launched. [indiscernible] you know now the Wi-Fi is now at the heart of the customer expectation. And in the survey we made before we launch this Livebox 6, 39% of retail customers state that they were ready to pay more for Internet to have a better WiFi quality. So as Ramon explained, customers are ready to pay, if we adapt our offers to the new customer behavior with a better quality of customer experience, better quality of network. And the launch we made a few weeks ago is really successful. 10% of our transaction -- broadband transaction are related on this new offer. So we are able to raise our price at all competitors and we are able to launch new offers with premium pricing, embedded new experience.

So we are -- it's a little bit complicated, but we have some place in France to embedded and to offset -- to embed more services, more for more strategy and to offset a part of the inflation.

[Operator]

We now have a question from Roshan Ranjit of Deutsche Bank.

[Roshan Ranjit, analyst]

Two questions from me, please. Just changing tack and just looking at OBS. I guess, the strategy in recent quarters have been some of these smaller bolt-on deals, which you have done, I guess, more 18, 24 months ago. I think I read recently that there was scope to potentially look at strategic options around OBS, I don't know whether that was involved in maybe larger deals or maybe a kind of spinout. So any details which you can give around that, please.

And secondly, just I guess tied to the previous questions around price increases. We saw an acceleration of retail service revenue growth in France this quarter although it wasn't necessarily as fast as the increase we've seen previously. You still got the back book price increases which you put toward the latter part of last year. So the question is, should we still expect retail service revenue growth to accelerate through 2022 as you come up and lap the prior year's price increase? Is there scope to put through more price increase this year? I know you've given previously this 2% to 4% ex PSTN CAGR. Could we reach above that? Any details there would be great.

[Ramon Fernandez, executive]

Thank you, Roshan, for your two questions. On the OBS point and acquisitions, you are right to recall that in the past years we've made some acquisitions for cybersecurity which has put us in a very strong European position, very successful, and it will be one of the keys for the future of Orange undoubtedly, but also in cloud and data, and we've been doing so in the past years. And clearly, this will be part of the story of OBS looking ahead.

As far as larger strategic options [indiscernible] been making any comment on this. It's more press comments, so I have nothing to say on this. If at some point there is something to say, we will be back to you.

On the price increases, I will give back the floor to Fabienne. But I would just say that -- and Fabienne was giving this illustration with -- for Livebox 6. But that 3.8% increase in retail services, excluding PSTN, is on the top of the bracket we gave that you just recalled of 2% to 4% growth rate, which was one of the important metrics and objectives we had in our [ strat plan ] Engage 2025, and we are here, which is already, I would say, extremely good in the context of the evolution of the retail market in France. So can we do more? I will let Fabienne say but as far as I'm concerned, if we can be within this range, I think we can all be already extremely happy and we will continue to build on this more for more, bank book price increases, new services, et cetera, which puts us in this situation. I don't know, Fabienne. Fabienne?

[Fabienne Dulac, executive]

Yes. Thank you, Ramon. Yes, despite some punctual aggressive promotion, the market repair is still ongoing in France, and this is maybe the most important because we can improve the price for Orange, but for all competitors, and it's exactly what we observed in Q1 as in 2021. So yes, all the price increase and it's good news.

In this context, Orange continued to add value and we have different levers to have this value, back book repricing when the opportunity is there, and we did it in 2021, if you remember, at fourth period and we will do in 2022 regarding the opportunity we have.

We are able to launch new offers, as I explained, with premium pricing and price -- so it's a good news.

And the third point, we observed a limited recourse to promotion. So all these points, make -- we are really confident that we can maintain in 2022 a solid performance on the broadband and mobile volume and value results and we confirm a solid growth in 2022.

[Operator]

Our next question now comes from Mathieu Robilliard of Barclays.

[Mathieu Robilliard, analyst]

Yes. I had a question about Spain. You announced the proposed merger with Masmovil after the Q4 results. So maybe if I could ask a few questions around the transaction. I guess one key question is whether the ECS changed its stance in terms of the remedies, it wants to impose when there is such market consolidation and I was just wondering if -- how confident you felt that maybe the [ EC ] was going to be more constructive than in the past or whether even if there are tough remedies you think that there's enough synergies in this deal to go through from your point of view.

And then again, in Spain, as we understand it, this could free a bit of cash for Orange. And maybe it's early days, but if you could share or give any color in terms of what kind of views you could do with the cash coming from Spain, that would be very helpful.

[Ramon Fernandez, executive]

Okay. Mathieu, so first thing, just repeating that the discussions are ongoing according to the plan -- what about the EC competition policy? Well, first, we have secured last year 2 green lights from the EC competition authorities in Romania and for Orange concession. So these things happen and I guess everybody everywhere sees that if you want to have a digital single market, you don't need only to have nice regulations and very important regulations like DMA and DSA [ both by the European authorities ] Saturday following the one on the DMA. So the European framework for guarding telecom and digital services is making progress. And it is clear that, at least in our view, and we've said this over time, if the competition authority is not also evolving in order to support stronger telcos in Europe always will be partly much less.

So yes, we think that there is an evolution. And now we need to look at it on a case-by-case basis. We have already a file on the table of the EU competition authorities, which is the Belgium acquisition of the VOO and then we will have another discussion on Spain. And let's wait and see how these things go. But I think everybody is aware that there is an evolution here which is needed and that political authorities are talking about so optimistic about this.

And as far as Spain is concerned, we always recall that today it's a 5-player market. It's not a 4-player market. So it's not even going from 4 to 3, it's going from 5 to 4. And the specific nature of our relations with Masmovil, which is essentially working on our network, is not triggering the disappearance of a network player because Masmovil is on Orange network for a vast majority of its own business. So we will handle this, of course, with care, as always, but with optimism. And then the deal is sufficiently good, that even if you have remedies, we will see what happens. It's -- honestly, it doesn't make sense to discuss [indiscernible].

The free cash, yes, I think you have all understood that around EUR 4 billion should -- in cash should go to the group following closing to the double process of value equalization and the so-called dividend recap. And as usual, depending on the situation of the group when this happens somewhere in the second part of 2023, we will be extremely attentive to the solidity of the balance sheet, to the capacity to support growth of the company, including if some issues we discussed previously, for instance, in infrastructure bigger use of cash, which is value creative and supporting our ROCE, which is an issue that we are looking at very closely.

And of course, we will keep in mind our shareholders as usual. So here also, you are anticipating, Mathieu, which is great questions which will be on our table completely in more than a year but of course, we are already reflecting on all these things.

[Operator]

Our next question now comes from Georgios Ierodiaconou from Citi.

[Georgios Ierodiaconou, analyst]

Yes. The first one is a bit of a follow-up on what Mathieu just asked, and it's around leverage and strategic options that you have once you complete the deal in Spain. So my question is as follows. Initially, based on the information that has been provided so far, my understanding is that it will be -- it will lead to a significant reduction in leverage but clearly, the objective is to reconsolidate the asset in 3 years, then a lot of leverage could be added back in 3 years' time. So I just wanted to ask you how you are thinking about this in the intervening period, whether you have to have perhaps a lower leverage than others in anticipation of what could happen in the future just to keep your options open.

And then my second question is, again, a bit on the strategic side and TOTEM. I just wanted to perhaps get a bit of information as to how you reached your decision of which countries to include for the time being and whether this rules out perhaps the ones that are like Poland and Belgium. Is it because they are listed and it has more complications? Is it the JV network sharing agreements you have in place? I'm just curious as to why those assets were not included.

[Ramon Fernandez, executive]

Okay. Thank you, Georgios, for your two questions. I think on your first question, you have spotted one of the elements which would be on our watch list, which is there will be a time of closing and deconsolidating Spain. And then there is the potential, the potential because it's an option we have, to reconsolidate the operation in the context of an IPO following a few years.

So we will -- and I'm not going to elaborate much more on this, but you're right to say that when we will make a decision in 2023, we will need to have in mind what happens potentially a few years later. So let's park, sorry, the rest of the discussion for when we have closed this deal. But obviously, we will be thinking hard and looking at different options with all these considerations in mind. But the question is fair.

Second, on TOTEM, we are doing -- we are working on a step-by-step basis, starting maybe with, let's say, the smaller entities where it is easier. I would recall that for Belgium, we said when we launched the kind of buyback of the Orange Belgium listed shares that we would not do a deal with towers in Belgium, so we are consistent with what we say. And this was said for a period of time. We will see what happens at a later stage.

And then in Poland, we will obviously also have a discussion. And there is no specific critical issue which would preclude this discussion going forward. But it's -- you cannot do it just like this. It takes a bit more time. It's work to be done and it will be done. I don't know if Mari-Noelle wants to add something.

[Mari-Noëlle Jégo-Laveissière, executive]

Just maybe one point. JVs are not an issue, I mean at the time we own the [ loans ]. So we are free to move the way we want and working with other telcos that are the same strategy. So the fact that we are partnering with all the telco in the country does not make it tougher to do it. So this is the main point.

[Operator]

From Societe Generale, we have Nick Lyall with our next question. Please go ahead.

[Nick Lyall, analyst]

Could I ask two questions, please, one on wage inflation and one on your Spanish convergent ARPU.

Just on wage inflation, French inflation stays sort of reasonably modest, at least relative to the rest of Europe. So could you just tell us a bit how the pay negotiations are going and do you expect modest wage inflation in France as well?

Also, it's obviously a bit more excess of the inflation elsewhere in 9% to 10% in Spain, Poland and Belgium. So could you give us a bit of an update as to whether you're seeing a lot more pressure on wages there and what the timing might be, if any discussions.

And then the second one was on Spanish ARPU. The convergent ARPU was off a little bit sequentially this quarter. So could you just tell us whether you think that can be maintained at this level. Or are you seeing a bit more pressure in the subs are down a bit sequentially off. So is this stabilization? Or do things still remain extremely difficult even in the convergent business in Spain?

[Ramon Fernandez, executive]

So Gervais will take the wage question, and we'll turn to Jean-Francois in Madrid for the second question.

[Gervais Pellissier, executive]

So in terms of exposure to the salary to the internal labor cost, France is our biggest exposure. The other European countries, especially for the B2C market, much less internal costs compared to subcontracting. If I take the case of Spain with less than 7,000 employees, we generate around EUR 4 billion revenue. Whereas in France, we need much more people to generate that due to the structure of the business.

So in France, you're right, inflation is probably lower than what you observed in some of our geographies. And we think that at the end of the day, we will have a labor cost increase which will be slightly lower the inflation as it is measured today for the year. This is what we think we are in the course of the negotiation. So I cannot today prejudge on the results. But today, we should have a more moderate [ inflation ] or more moderate increase of the labors in France compared to the total inflation.

As regards to other countries, we have already proceeded with the salary increase for the year. But it is true that in some countries, especially on the eastern part, exposed to the -- more exposed to the Ukrainian war, we might have to revisit the situation in the second half of the year. But again, the salary part into the total cost is of a lower issue than it is on the French market. For instance, the balance between energy costs and salary costs in the Eastern countries of Europe for Orange, Poland, Slovakia, Moldova and Romania is not exactly the same balance as the one we have in France.

[Ramon Fernandez, executive]

Thank you. Jean-Francois on Spain and the convergent ARPUs.

[Jean-François Fallacher, executive]

Yes. Thank you very much, Ramon. Thank you very much for your question about the evolution of our ARPUs in Spain. So what you have seen is that in Q1 2022, we are posting service revenues which are really going on a good trend because we are on minus 4% after minus 4 -- minus 5.4% last quarter Q4, minus 7.9% in Q3. And in Q2 last year, it was minus 8%. So you see that the trend are good, and this is indeed explained by the evolution of our ARPUs mostly. You've seen that they are really stabilizing, slightly growing now. The reason is double. So first of all, we are extremely disciplined in the way we are behaving on the Spanish market, obviously extremely cautious not to overpromote our offers and therefore trigger, and even more, I would say, competitive Spanish market and even more, I would say, price drops of competition. So this is the first reason.

And the second one is obviously the evolution of the ARPUs of Orange. Because for those of you who are [ talking ] more precisely on the Spanish market, you will remember that last summer we have been doing a price increase over our convergent package -- packages in Orange which is basically explaining the increase of ARPU that you see on Orange.

So all in all, with an increase of ARPU on Orange and a stabilization of the ARPUs of [indiscernible], we are already on the right track. And as some of you were commenting, obviously, the topic of inflation in Spain, this might allow us to continue this trend if inflations remain very high in the coming quarters. As you know, inflation in Spain is as high in March as 9.8%. So we reserve the possibility to continue this, let's say, potential price increases in the coming quarters, depending on how the inflation will evolve in Spain.

[Operator]

We now move on to a question from Sam McHugh of BNP Paribas.

[Samuel McHugh, analyst]

Two questions as well for me on two topics anyway. The first, you mentioned IMF GDP growth forecast for Africa. What kind of GDP slowdown would make you more nervous about the outlook?

And you also mentioned energy costs and hedging in Europe. Can you give us some comparable data for Africa and the Middle East in terms of hedging and exposure?

And then secondly, on Spain. Could there be any adjustments to the pricing of the Masmovil deal, if the result of yours and those differ from kind of the expectations of maybe 6 months ago? If you could just remind us what kind of sensitivity we should be thinking about that if things could change from what we've already seen.

[Ramon Fernandez, executive]

On -- thank you for your two questions. On the question for Africa, I don't know, Alioune, if you want to take this one. Is there any new revised the downward IMF figure which would trigger different analysis?

I would just say before turning the mic to Alioune, that the latest spring meeting, the IMF revisions have been significantly revised downward. So they already embarked a very important impact of what's happening in Europe and it's spillover effects on different elements. But Alioune?

[Alioune Ndiaye, executive]

Yes. Thank you. Thank you for your question. So according to IMF, inflation in Sub-Saharan Africa is expected to reach 12.2% in 2022 and 9.6% in 2023. And it's mainly supported by the exporters countries -- the oil exporters countries.

And the food price are the most important channel of transmission. So high food price will actually hurt, of course, the consumers' purchase power, particularly among low-income in households. And maybe we could have some maybe social and political turmoil. This is what is expected from the IMF.

But if you look at the Orange footprint, these figures are lower because what is expected from IMF for the EMEA footprint, inflation is expected to increase to plus 7% in 2022 and plus 5.3% in 2023. So that means 2.5% and 0.7 percentage point higher, respectively, higher than what they have -- what they expected from their January outlook. So this means we can consider that this is the difference we will have in the inflation in the region compared to what we plan to have in 2022 and 2023.

[Ramon Fernandez, executive]

Thank you, Alioune. And on the Spanish question and the ongoing discussions with Masmovil, these are ongoing discussions, so it would be premature to say anything else then just confirm that things are ongoing and on track.

[Samuel McHugh, analyst]

And is there any detail on the energy costs specifically in Africa and Middle East? Because my general understanding is the more emerging markets tend to have slightly higher energy costs as a proportion of the OpEx base. I don't know, if you can give us a detail on hedging and the cost in Africa, Middle East.

[Ramon Fernandez, executive]

Alioune, do you want to take this?

[Alioune Ndiaye, executive]

Ramon, yes. As of today, what we can say is most of the governments in the countries where operate -- where Orange operate, actually, the government is subsidizing the energy cost because I think it's -- one of the main risks for the governments in all these countries is to increase the prices of energy. So they are subsidizing. Of course, it creates a budget deficit. They have discussions with IMF and they're trying to, let's say, mitigate that risk. But I think they will keep on -- keep on subsidizing this -- the energy price.

[Operator]

We now move on to Stéphane Beyazian of ODDO for our next question.

[Stéphane Beyazian, analyst]

One question regarding regulation and antitrust. Is there any color you could provide on your talks with the antitrust, which I think has been looking at different topics lately? And with the regulator, for instance, regarding unbundling fees.

Another question, if I can on asset monetization, I was wondering if beyond the towers there are any other assets, such as some fiber assets? You partly did that with Orange concession but also on the [indiscernible] and pipes that you could consider for possible monetization.

And third and final question, if I may for Christel. I know it's a bit unfair to ask so early, but I was just wondering whether you have any first impression or anything that surprised you when joining Orange.

[Ramon Fernandez, executive]

Jerome will take the question on the ongoing discussions on bundling. I think it's always interesting. And then we'll turn to -- maybe I can -- okay, then for the rest with it.

[Jérôme Barré, executive]

Yes. First, thanks for your question. So no comment about the edge in our premises except that we consider that we have solid arguments concerning the fact.

Maybe some more details about unbundling. You know that public consultation is currently carried out by the French regulator simultaneously to the one the consultation on copper decommissioning. Very clearly and very transparently, we are asking for a very significant increase of our unbundling tariffs. We consider that this increase is fully justified according to our decommissioning plan and according to financial reasons, maybe 2 of them. The first one is the level of our cost. And the second is concerned a fair level of retribution of our [indiscernible] in regards of the end of copper amortization in 2030 regarding our decommissioning plan. So the discussion is in progress. The public consultation is not over yet, but we will have side. And our objective is to get a very significant increase of unbundling tariff on the first of January 2023.

[Ramon Fernandez, executive]

Merci, Jerome. On the second question, I think, Stephane, you are referring to an article which has been published in [indiscernible] Daily regarding so good project of monetization of our utility poles [indiscernible]. There is nothing behind this article. So it's an article.

What our infrastructure value creation policy has been described and is still valid has been concentrating on fiber assets with FiberCos, with Orange Concession, with a fiber company in Poland and then around TOTEM. So there is, at this stage, nothing more to say on this issue and know who is working on this issue, but [indiscernible]. Now Christel.

[Christel Heydemann, executive]

Yes. Thank you for the question. On my first impressions, I will be short because it's still very first impression and I still intend to visit and meet with many teams. But as I -- as I said in my introduction, not surprised, but reconfirming the very strong expertise and the high level of commitment and engagement of our teams to serve customers. And -- and I would say probably what's of interest for you is that being an Audit Committee member and a Board Director for quite many years, I have no surprise as I visit the team, but I guarantee you that I'm asking a lot of questions and maybe questions that we haven't discussed in the past, that is not in the Board, but really going into details and meeting with the team. So that's first impression, but really no surprise.

[Operator]

We're now moving on to Thomas Coudry of Bryan Garnier.

[Thomas Coudry, analyst]

I have two questions, please. First one would be on -- can you share with us if the current, let's say, context has some positive impact on your cybersecurity activities? You disclosed, I think, 8% revenue growth in Q1. Should we expect this to accelerate significantly given the ongoing concerns?

And then please, also kind of follow-up questions on Stephane to Christel. Christel, can you -- you said that you would share with us by the end of the year your vision, your strategic vision for the group. Is it possible that you share, let's say, your high-level agenda and priorities for your first let's say, a month or 100 days at Orange. And specifically given -- and you've said it again, you've been a board member for -- at Orange for many years. Could we expect significant changes in the Engage 2025 strategic plan? And what would be your specific inputs versus the current plans that exist?

[Ramon Fernandez, executive]

So on the first question.

[Unknown Executive]

Thank you, Ramon. So we achieved 8% growth in Q1. So our plan is to achieve a 2-digit growth for 2022. We don't see so many specific attack due to the war between Russia and Ukraine in our current footprint but what is sure, that the worries of our customers is quite high. So the stress is quite high and the need and the demand will increase in the coming months definitely.

And the fact that we are a telco [indiscernible] in Eastern Europe is also a competitive advantage because knowing what's happening in the field. So yes, we will continue to grow and to fuel this growth by investing to reach this 2-digit growth in 2022.

[Christel Heydemann, executive]

Thank you. Again, so to your question on my vision for the group. So as I said, I promise I will come back to you before the end of the year. I'm currently working with the entire management team and we will work with the Board of Directors on the plan.

Regarding Engage 2025, I think what you're really most interested in is what we said this morning, which is we reconfirm our guidance for '22 and '23.

And in terms of priorities or things we're digging in, as you know, I'm coming from the B2B world. So obviously, I'm working a lot with our teams on our cybersecurity and business strategy, which was one of our growth engine for Engage 2025.

We discussed a lot about Africa this morning, and this is clearly a growth pillar for our group already in Engage 2025.

So again, too early to be more specific, but I don't think -- as I said, I was on the board, so there's some continuity but for sure, we will work on the vision for Orange and we will communicate it to you in due time.

[Operator]

We're now moving on to Nick Delfas of Redburn for our next question.

Please go ahead.

[Nick Delfas, analyst]

Just one question. Obviously, the numbers that you published today are quite impressive on the retail side and then quite weak on the wholesale side. So if we look at France, specifically, what's the overall revenue at risk from cofinancing plus copper wholesale so that we can make a judgment on how that will decline until everything is on fiber. And obviously, you may or may not get an increase in unbundling, but ultimately there will be no copper unbundling anyway. So for 2021, let's say, what's the overall revenue at risk from cofinancing and copper wholesale? And obviously, that will be offset by growth in fiber, et cetera, but just looking for the figure.

[Jérôme Barré, executive]

Okay. So thanks for the question. So overall, my main message will be, and as Ramon said, that we are fully on target and insist that fully on target regarding our wholesale July 2021 guidance.

You mentioned the decline in the Q1 wholesale revenues, especially in France but a fair part of this decline is, as for the group, it's all due to the new European call termination rates with no impact on EBITDA. I remind the figures. The call termination rate moved down to EUR 0.7 on the first of July 2021 and EUR 0.55 on the first January 2022. And it has a very significant impact on our results. But it is fully symmetrical in and out. So no effect, no impact on the EBITDA. And so I can just confirm that we are fully on target vis-a-vis our commitment.

I remind that we expect a decrease of EBITDA in wholesale activities of less than EUR 500 million, sorry, from '21 to '25. We have a decrease in legacy activities but we are committed, engaged in the solid action plans concerning a new growth engine, infrastructures and B2B markets globally.

Fiber, we expect to double our revenues in fiber wholesale between '21 and '25. We expect a double-digit growth in the infrastructure and B2B market between '21 and '25. We are fully on target concerning that.

And finally, last but not least, concerning your question about cofinancing, we received yet end of Q1 just about 2/3 of the global potential. The global potential is EUR 5 billion in the private fiber area. This amount has been calculated currently with the current market share in retail of our 3 main competitors in France. So I said 2/3 received yet. We expect to receive the proceeds between now and end of 2025. Our forecast is to have still a potential of EUR 500 million in 2025. So you can easily calculate what we are expecting between now and the end of 2025.

[Nick Delfas, analyst]

But is there a single exposure figure you can give me for what was in -- so you have EUR 5 billion or so of wholesale in France. What within that is copper wholesale and cofinancing? I'm just looking for a single figure.

[Ramon Fernandez, executive]

I don't think we give -- I don't think we give the details of all these elements but I think Jerome has given you already a lot on the cofinancing part of the question. I think we also gave a lot of color.

Just to recall for 2022, there will be a small headwind coming from the things that in Q2 2021. We did get some catch-up cofinancing of [ SFR ]. So in Q2, you will have a slight negative impact of this cofinancing point. It was stable in Q1. But overall, this is going to be more -- much more smooth trajectory because, as Jerome said, up to now, we did get around EUR 3.4 billion cofinancing out of the EUR 5 billion that is being expected. But the catch-up has been largely done, right? So it's going to be a kind of regular evolution over time. And on the rest, I mean, the decrease of copper unbundling, will be according to the switch to fiber.

[Jérôme Barré, executive]

And maybe one more point. You see, because in the -- when I answered to the previous question about the expectations unbuilding tariffs, I said that we expect and we do -- we will fight for having this very significant -- very significant increase of unbuilding tariffs on the first of January 2023. But I have to say that in our -- in our guidance, the guidance we gave in July 2021, we -- I said, we forecasted our decrease of EUR 500 million EBITDA with a very cautious increase of prices. So we expect more in the negotiation that we discussed that we put in our guidance in 2021.

[Ramon Fernandez, executive]

Yes, this is an important point. We have this -- we have much more upside here than the downside, because, as Jerome said, we took a very, very conservative [ hypothesis ] looking at 2025 regarding the price of unbundling.

[Operator]

We now move on to Jeremy Dellis of Jefferies.

[Jeremy Dellis, analyst]

First question has to do with Enterprise. You described in the press release the challenging environment. You talked about taking corrective measures and I see that you changed management at the end of 2021 in this division. But it would be useful, please, if you could explain to us exactly where the challenges come from and how you resolve that. Are you capable of resolving the challenges in Enterprise, putting it back on a growth footing, without doing a transformative transaction?

And second question has to do with the -- again, the rather positive EBITDA outlook which is embedded in consensus forecasts. So for full year 2022, consensus is modeling about EUR 300 million of EBITDA growth, which is in line with your guidance. But if we strip out the nonrecurring employee share scheme, EUR 200 million, and Africa, Middle East, then consensus is looking for an underlying EUR 150 million decline, which is about minus 1.5%. If I look at 2023, consensus expectations for EBITDA, again strip out Africa, consensus is looking for EUR 150 million increase. So you have this inflection from underlying EBITDA decline of 1.5% ex Africa in 2022 to 1.5% EBITDA growth in 2023 against the backdrop of EUR 400 million of European energy costs being less hedged and obviously the various wage settlements. So I'd be just interested, please, to understand where your confidence comes from in delivering that sort of EBITDA inflection into next year.

[Ramon Fernandez, executive]

So [ Elliot ] is going to take the first question on OBS. And then we'll turn to the EBITDA question.

[Unknown Executive]

On the enterprise market, on the Orange Business Services side, so we have a mix of structural challenges due to the market evolution and we are also facing some contextual issues. So from a structural standpoint, we see that our telco legacy business has been decreasing quite sharply, and this decrease has been accelerated by the COVID crisis. We've seen, for instance, our voice legacy business with quite high margin being highly decreased due to the transformation on the collaboration market, that's one example.

So what we are doing at the moment, and as you've seen, our revenue is increasing, which means that we manage at the moment to compensate our decrease in core business, on voice, on data by the increase with our new lines of business like cybersecurity, digital, data and cloud. But those -- of course, the margin rates and the gross margins we have on those new lines of business is not at all the same as the ones we've been having on the telco legacy business, hence the big pressure we have on EBITDA.

In parallel, we have some contextual issues with the chipset shortage which is impacting our supply chain. It has quite difficult to supply with the right equipment, which has slowed down some of our infrastructure integration business. We are facing also, as everyone in the market, the high inflation.

So what we are doing at the moment to deal with the situation is, first, we have a series of measure in place to better handle our supply chain and we've changed part of our processes to better anticipate and to take more risk in the way we order our equipment to accelerate our delivery. We've also taken quite a few measures to be able to manage the attrition of the staff and more specifically to recruit the right skills and competencies we need. We know that being able to recruit the right skills and expertise is absolutely key to be able to deliver the revenue, for instance, on our cyber line of business or on our data line of business.

We have also put in place a specific action plan to deal with inflation, to increase our prices wherever we can and to make sure we have all the right clauses in our contracts with our customers.

And then on a more structural and transformation perspective, of course, we are working hard to transform our data network infrastructure to progressively move to a more cloudified, virtualized solutions that are answering the needs our customers. And we are also discussing, as Christel Heydemann explained, we've launched some strategic studies to, in the coming months, define more precisely what is the more transformative plan we want for B2B for Orange in the future.

[Ramon Fernandez, executive]

Thank you very much, [indiscernible]. On the EBITDA outlook, Jerry, so when you look at 2022, you're right, that in order to achieve the at least 2.5% growth in EBITDA, you need to secure around EUR 300 million EBITDA growth. We talked about Middle East and Africa where you can expect a double-digit growth which is going to be more than EUR 230 million growth. You have France, which should be flat, excluding cofinancing where you have a kind of negative effect of around EUR 100 million due to the catch-up of [ SFR ] last year that you will not have in 2022.

And another part which is, in fact, significantly growing. You have spotted the kind of EUR 200 million figure which is the kind of [ ECS ] segment, which includes the new TPS plan but also some other elements which will be positively contributing.

And the rest is, if you look at Europe, if you look at mobile finance, if you look at TOTEM, this is stable positive, I would say. So everything is positive but with smallish figures basically.

And OBS, we just heard [indiscernible], OBS will be also decreasing in '22, and we had said so already.

So this kind of mix is clearly securing the target for 2022. And of course, in this context, we also have our scale-up program, our cost-reduction program, we call it cost efficiency, we call it whatever you want, but in fact it is about securing by 2023 EUR 1 billion indirect cost reduction compared to the basis of 2019.

And I must say that when Christel arrived, one of the first call she organized with the executives of the group was to get the feedback of workshops we had convened last December and the conclusions were given by this 100 people, a group with many ideas to fuel the box for ideas to be more efficient, more agile and reduce costs. And it was a very interesting meeting with many ideas. And if I may, and I'm sitting here with Christel, I would say the tone at the top on this issue has been, if I may say so, crystal clear.

So there is no alternative then to deliver this program in a context where there is inflation, where there is pressure on some other elements. So everybody has understood that we need to deliver scale up and we will be all working on this. And this will translate in 2023. Because when you figure out what we've just said, you will still to have the growth, of course, in Africa. What will change is that Spain will be back to growth because we have said and you heard Jean-Francois, but we are very well on track with what was being expected, which is reducing decrease, if I may say so, in 2022 and going to growth in 2023. Now this will be in the context of the Masmovil operation, but fundamentally the business is there and delivering what we were looking at. The other European countries are growing and will continue to grow. This will be contributing to the 2023 target.

And France, we've seen -- has been delivering a very good performance and you heard Fabienne, even in the context where the competition is tough, all the indicators are positively oriented.

So this is why we are very confident about our capacity to absorb the shock. And then eventually, I would only add that if the EBITDA growth was to be slightly lower in '23 because what's happening in the world would have some impact, well, the CapEx trajectory is very well under control, very well according to the plan and all the job done in the past years which was triggering a massive CapEx effort, which was triggering some concerns on your side is going to show that now the curve is on the downward trend. And if there is a need to have slightly less CapEx at some point in '23 in order to secure the organic cash target, we will do so. And so the key absolute target for us and on which we are absolutely confident is to deliver the at least EUR 3.5 billion organic cash target in 2023. So this is a plan and this is on what all the teams are working on.

[Operator]

We now move on to a question from Abhilash Mohapatra from Berenberg.

[Abhilash Mohapatra, analyst]

I just have a quick one around your minority partners in Africa, please. I think in the past, you've said that you generally think that it makes sense to have minority partners across your different markets given the support that it gives you. I was just wondering in context of your strong balance sheet and the proceeds you might get from Spain. Are there any plans to maybe potentially buy out some of your minority partners, particularly in Africa?

[Alioune Ndiaye, executive]

I'd say that for the time being, stability is the golden rule. The world is sufficiently complicated. So let's work with our partners in all our countries where we have some and then we will see what is the plan. In the future, you know that we have been considering potential evolution at the level of Orange Africa/Middle East subsidiary, potentially opening the capital to contribute to accelerate the growth story. And so this will be work to be done in the near future. But on the first part of your question, I would say stability is the most important point.

[Operator]

Thank you. That will conclude today's Q&A session. I'd like to hand back over to the speakers for any additional or closing remarks.

[Christel Heydemann, executive]

Thank you. So just a short word of conclusion. As all your questions highlighted, Obviously, once again, as you pointed out, we clearly face inflation headwinds everywhere. But as I think many answers already pointed to, we took already countermeasures to mitigate these impacts. And as Ramon was just stating it, we are reinforcing all actions to secure the reduction of our indirect cost structure. And we will pursue hedging on our energy cost strategy. So thanks a lot for all your questions.

As we just reconfirmed, we will meet our guidance for '22 and cash flow -- and '23, of course. And cash flow is and will remain the pillar of our commitment. Be convinced of it.

So thank you all for all your questions, and I'm sure we'll have the opportunity to meet in the next weeks and months. Thank you all.

[Operator]

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