Orange SA

PAR:ORA

Earnings Call Transcript 2022-Q3

[Operator]

Good morning, ladies and gentlemen, and welcome to Orange's Third Quarter 2020 Results Conference Call. The call will be hosted by Mr. Ramon Fernandez, Delegate CEO, Finance, Performance and Development with other members of Orange 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, executive]

Thank you. Good morning, and welcome to our Q3 2022 financial results presentation. We are going to start on Slide 4 with the highlights for the quarter. First point, you can see that we enjoyed solid revenue growth in Europe, with revenues in Spain returning to growth this quarter for the first time since Q1 2019. This represents an important step on the way to reaching EBITDAaL growth next year.

At group level, top line growth was notably driven by an increase in convergent ARPO, which was achieved in Spain, but also in France, in Poland and in Belgium. And this good ARPO trend, which is crucial to meet the current inflationary challenges, should continue to be driven by our more-for-more strategy, supported by a high level of customer satisfaction and by the adaptation of our offers to real changes in usage.

I am also pleased to say that despite an adverse context, our scale-up program is on track to reach by the end of the year our 2022 target of around EUR 600 million cumulative net cost savings since 2019. It is based on EUR 14 billion of indirect costs, with more than EUR 550 million delivered at the end of September.

I would like to highlight that in Europe, our direct energy purchases are fully hedged for 2022, and at more than 90% for 2023 at a reasonable average price given the circumstances.

Finally, a word on TOTEM, our tower company, which is successfully developing its business with third parties, now representing 18% of our hosting revenues, a 3-point year-on-year increase. This dynamic will continue to be fueled by an important deal with Telefonica in Spain for the rollout of 5G.

In Q3, group revenues reached EUR 10.8 billion, up by 1% with Retail Services growth more than offsetting wholesale decline. This performance was driven as usual by Africa, Middle East, but also by a strong Europe, which benefited from the recovery in Spain. Enterprise was stable, while France, although still down, improved, thanks to the absence of any significant base effect from cofinancing. The sequential acceleration of group revenues was partly driven by activities with no margin contribution, such as the acceleration of equipment sales and the smaller decline in wholesale, previously more penalized by the decrease in call termination rates. As a result, EBITDAaL increase was more limited with plus 0.2%.

eCapex grew this quarter as expected by 5.2% resulting in a decline of 4.4% year-on-year at the end of September. All in all, despite the very difficult macroeconomic and geopolitical context, this first 9-month earnings enable us to reiterate our 2022 guidance. EBITDAaL will indeed accelerate sharply in the last quarter, mainly thanks to the base effect of our 2021 employee shareholding plan, which will deliver a mechanical increase of more than 5%.

Turning now to our business review, starting with France. Revenues improved at minus 1% this quarter, thanks once again to the absence of significant cofinancing base effect. Revenues from our Retail Services pursued their growth, reaching 2.6%, excluding PSTN this quarter. This trend highlights a solid commercial performance in both value and volume in the context of normalization of fiber acquisitions following the strong demand during the pandemic.

In Mobile, we again achieved strong volumes this quarter, an acceleration for both B2C and B2B, and with a positive portability balance vis-a-vis all other operators. Our 212,000 net adds, mainly driven by the Orange brand, fueled equipment sales and mobile ARPO increase, while churn kept improving.

On the fixed side, our 47,000 broadband net adds were still driven by fiber volumes above prepandemic levels, with 293,000 FTTH net adds, while ARPO remained stable. On the convergence side, ARPO grew by EUR 1.5 versus plus 2.2% this quarter, reaching EUR 71.40.

Finally, our customer satisfaction continued to improve, resulting in a plus 2.5 points increase in Net Promoter Score since the beginning of the year. And we stand out as the best mobile network in France according to ARCEP for the 12th consecutive time.

Let's now turn to Europe, which is back to growth this quarter, including Spain and with an outstanding performance of Poland at plus 8.4%. This good result was driven by the acceleration of retail, fueled by convergence, IT and IS and the continued recovery of customer roaming. This quarter, was also marked by a rebound in equipment in all our countries impacted last year by COVID-related restrictions. Since the beginning of the year, all our European countries have been able to apply price increases, a key tool to tackle inflationary pressure.

Let's move to Spain, where revenues were back to growth for the first time since Q1 2019, thanks to the continued improvement of Retail Services. This is the result. Firstly, of more value, thanks to the constant focus on ARPO increase and the better mix associated with a strict control of promotional policy. The ARPO improvement will be sustained in the future by the reshuffling of Orange convergent offers launched in August.

Secondly, we have demonstrated our commercial resilience by the improvement in all churns. Wholesale also returned to growth this quarter, thanks to the recovery in visitor roaming and the sequential improvement in international traffic. The continued improvement in retail, combined with our cost efforts, fully supports our objective of returning to organic cash flow growth in 2022 and EBITDAaL growth in 2023.

Finally, regarding the joint venture with MásMóvil. We have started the discussions about the merger control process with the European Commission, and we expect a closing during the second half of 2023.

Let's move to Africa, Middle East, where Q3 top line growth was 4.2%, slowing down compared to the 2021 strong rebound. This still solid performance demonstrates the resilience of our well-balanced footprint, with strong growth in 12 out of 16 countries, while the security situation is weighing on Mali and Burkina Faso and with a temporary slowdown in Cote d'Ivoire.

In Q3, retail services were, as usual, fueled by our 3 main growth drivers: fixed broadband at plus 23%; data at plus 17%; and B2B at plus 13%, supported by the increase of more than 20% of our 4G and fixed broadband customer bases.

Orange Money trend is improving, thanks to our response plan which allows us to maintain our positions within the footprint, while our active base and transaction values continue to rise. All in all, the 6.6% growth in revenues over 9 months is in line with our full year ambition, especially as Q4 will benefit from a lower base effect given that Orange Money repricing started in Q3 2021.

Turning to our Enterprise segment, [ OBS. ] Revenues were stable for the quarter, in line with the first half, thanks to growth in mobile and IT and IS, offsetting the decline in legacy business. Our IT and IS business accelerated its growth, driven in particular by our IT business. In addition, Mobile continued to benefit from the rebound in roaming.

The [ OBS ] recovery plan currently being rolled out, will address the pressure on our margins resulting from the profound transformation of our business model. However, this plan will not deliver its first effect before year-end.

In conclusion, despite a very difficult macroeconomic and geopolitical context, I reconfirm our guidance for 2022 and our strong focus on delivering our 2023 guidance, above all, the organic cash flow targets, the pillar of our financial commitments. We look forward to sharing with you on February 16, next year, our full year 2022 achievements, as well as our new set of midterm objectives and strategy for the remainder of this decade.

Thank you for your attention, and we are now ready with the Executive Committee team to take your questions.

[Operator]

[Operator Instructions] We will take our first question from Nicolas Cote-Colisson from HSBC.

[Nicolas Cote-Colisson, analyst]

First question is on Africa and Orange Money. If you can tell us when you think you can get back to revenue growth at Orange Money. And also give us an indication of the impact of the reversal effect on EBITDAaL in Q4 from Orange Money. And also Africa, I'm interested in your energy costs. If you could help us on the proportion of OpEx and maybe which currency you are using to pay for the energy.

And I've got a second question, which is more general on the group, because given the current interest rate environment, do you still see the 2x net debt to EBITDAaL as appropriate? Or do you think a bit like after the financial crisis in 2008 that the new normal for leverage standard is required?

[Ramon Fernandez, executive]

Okay. Thank you, Nicolas, for your questions. We will start with Africa, Middle East, with Jerome Barre, CEO of OMEA.

[Jerome Henique, executive]

Yes. The Orange Money, as mentioned, we saw a turning point in Q2, and the decrease is now slowing down quarter-after-quarter. We consider that it should be close to 0 in Q4, and we'll be back to growth in 2023.

Now what we could add is that on the margin, it has impacted our margin by 3 to 6 points depending on the countries and the level of reprice that we had to do because we wanted to maintain a very strong distribution network, and it's mostly the level of the commissions that we had to maintain during the quarter that have an impact on the margin of the office segment.

About the energy costs, it's less than 5% for total cost. There is very low impact so far because most of the country are not dependent on the national grid for most of their sites, first. And second, because the subsidy from many government on the energy in our footprint so far. So we expect to have a low impact on the energy costs rising in 2022, probably less than EUR 15 million full year.

[Ramon Fernandez, executive]

Thank you very much, Jerome. On your second question, Nicolas, I think we are fortunate enough to have an extremely solid balance sheet, one of the best ratings [indiscernible] of the industry, a very strong liquidity. So we had a safe management, which I think was well placed when we see the current context. And so our current leverage is confirmed. We are not changing our guidance on this around 2 ratio for the time being.

[Nicolas Cote-Colisson, analyst]

Okay. And sorry to insist on the contribution of Orange Money EBITDAaL growth in Q4 compared to last year, because you were talking about a 5% headwind from the employee plan. I was wondering what kind of indication you could provide us with regarding Orange Money contribution to Q4 growth.

[Ramon Fernandez, executive]

Maybe I can follow up on this one. You have well identified that this Orange Money, a positive contribution compared to last year will be a significant part, but not the only one to the additional 3% growth. We need to get above the 5% growth coming from the comparable base effect on the shareholding plan. So yes, we're not going to give any color [indiscernible] wants to give a figure. But it will be a nice contribution to the overall growth coming from OMEA.

[Operator]

We will take our next question from Andrew Lee from Goldman Sachs.

[Andrew Lee, analyst]

Just had a quick question, Ramon, on your comments around the guidance for 2023. Thanks for the color in the presentation. Just on the EBITDAaL guidance, how confident are you that you can hit the midterm guidance, given if you end FY '22 with kind of 2.5% EBITDAaL growth guidance, which you're going -- sorry, delivery, which your guidance suggests? What improves -- if you could talk us through the moving parts of what improves into FY '23 to deliver the kind of close to 4% EBITDAaL growth that would be required for your midterm EBITDAaL guidance, or even to get to kind of 2.5% EBITDAaL growth FY '23 as consensus anticipates? Just a sense of the moving parts and the key improvements from the 0.2% EBITDAaL growth this quarter would be really helpful.

[Ramon Fernandez, executive]

In 2023, what you can expect is the continuity of what we've seen in France with a performance which is around stability, okay, let's say, if you want to see a rough element. We just heard Jerome Henique, in the Africa, is aiming at double-digit growth in EBITDAaL, and this is our guidance, and we are extremely confident that we can support this performance over time.

You have Europe where we have seen a very strong position, and we know that within Europe, Spain is going back to growth in 2023, where it will still have a significant decrease in 2022. Although it is, as we know, improving. So Europe will be a nice contributor also.

And then you have some other parts. We will have the Enterprise business, which obviously will still be negative in 2023. But the trend is going to progressively improve. And you have some other moving parts, which are going to bring positive contribution. This is the central segment, this is mobile financial services, which is TOTEM, the TowerCo. So these are the big parts, which should be supporting the performance for 2023 in EBITDAaL.

Second point I would like to add is that, as I said in the introduction, we have hedged more than 90% of our energy costs for 2023. So we know, as we speak, what is roughly to be -- going to be the bill for electricity in 2023, which is, I must say, some kind of comfort in the hectic times we are going through because we know where we are going. So it will be an increase, of course, in electricity costs compared to '22, but it is manageable.

And the last point I would like to emphasize is that we have our CapEx fully under control. And if ever we were not able with our cost-saving exercise, with the scale-up program, which, as I said, is on track with what we can also do in terms of discipline on direct costs in addition to indirect costs, when you add all this plus the discipline on CapEx, the capacity to reach the organic cash flow target in 2023 is something that we are comfortable to reiterate today. And I guess, that when you look at the global scene, this should be a comforting exercise.

[Operator]

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

[Roshan Ranjit, analyst]

First one I have is on France, and the retail revenue trend, which you highlight the normalization of the fiber adds has led to that kind of slight slowdown in growth this quarter versus previously. If we -- and you're reiterating your 2% to 4% midterm guidance there. So if we think into next year and the scope for price increases, which you haven't put through anything this year, should we look to the Spanish market and the increase you did at the end of the summer as a kind of benchmark for where you feel you could position the incremental value, as you called it, in Spain for the French market? So basically, it's a question around price increases in France for next year.

And secondly, on Enterprise, last quarter, you highlighted it was more a product segmentation rather than competition, which is leading to these tough trends. Has anything changed there for you to now adjust kind of H2 trend? Or is that still a product segmentation, which is maybe taking a bit longer to implement?

[Ramon Fernandez, executive]

I will turn to Fabienne Dulac for the question on France, and Elliott [indiscernible] on enterprise. And just before turning to Fabienne on the price, the pricing power question, just to confirm that we've been able, thanks to a growing Net Promoter Score everywhere and low churn levels to increase prices in Europe, which obviously is going to be still a feature for us in the future because there is no way that inflation could be everywhere, except in the telecom industry. So Fabienne.

[Fabienne Dulac, executive]

Thank you, Ramon. So as expected, we observed exactly, as you said, a slowdown market growth in fiber activity, but it's normal. So we are back to a normal pace. This move is not new. We observed it from the beginning of the year. And this slowdown, if you remember, is due to the acceleration recorded in 2020 and 2021 due to the first lockdown period. So the fiber attractiveness is still there, but a little bit different, and we know that.

So we have different action plan to better address customers, specifically in rural area, but we know we are in front of a strong performance, exactly as we post in Q3. I remember we are still #1, #1 in acquisition, 293,000 new customers, and we have a very slow churn rate. So we are not worried by this move. It's normal. And we are very confident to stay within the 4% growth in Retail Services, excluding PSTN. Thanks to the mobile, very dynamic in 2022, more than we expected due to the 5G attractiveness and the high-end market, very, very strong.

Maybe 1 point behind your question, we don't observe any change in the customer behavior, specifically in this back-to-school period. We are not impacted than the other sector by the premiumization of our strategy. All our handset sales are made on high-end handsets. The brand, Orange, is very solid, and 70% of our sales are made on Orange brand. We are able to pursue our strategy more for more to raise our price. In back book and in front book, if you observe at Orange, but not only at Orange, at competitors, the market repair is ongoing despite a context more tense.

So we are really confident despite if we have some headwind, and we know the situation is very tense, but we are very confident due to the quality of the network and asset recognized it again a few days ago due to the NPS that we have a very solid position in France, and we are confident for Q4 and for 2023.

[Ramon Fernandez, executive]

[ Merci, ] thank you very much, Fabienne. [ Elliott? ]

[Unknown Executive]

Yes. So on the enterprise market, so just as a reminder, we have 3 major elements explaining the situation. First, we have a market shift that was accelerated by the COVID crisis. We see our legacy business, especially around the fixed voice and around MPLS connectivity decreasing very sharply. It's minus 6.4% year-on-year in Q3 on this segment, which is historically highly profitable for Orange Business Services. In parallel, we have cyclical elements related to the chip shortage, inflation, also consequences of the war in Ukraine.

And the last point, the third one, is that we also have internal complexities, which are explaining that our IT growth, which is today very high, is not fully translating into EBITDAaL growth in this segment. Our organization is very complex. It's not customer-centric enough, and it prevents us from adapting to the market shift, and it generates also additional costs.

So all in all, we have -- we are obviously taking several drastic measures. We were expecting, because on a comparable basis, if we compare H2 '21 and H2 '22, we were hoping to have an easier favorable comparable basis in H2 this year. But what has happened is that the decrease in the core business that has accelerated, and especially the decline in fixed voice, is hurting us very badly. Just to give you 1 number, the decline of fixed voice in France, which is, again, a highly profitable business for us, is declining year-on-year by 10%.

So now we have a recovery plan, which is being currently rolled out to address the pressure on our margins. It's a very profound transformation for Orange Business Services. We have 3 main directions for this action plan. We have -- we are putting very strong emphasis on short-term business performance, as you can imagine, with a very robust action plan to deal with inflation.

Secondly, we are reshaping our go-to-market really to focus on business services on what I would call infrastructure-led digital transformation for enterprises, and we are refocusing our activity on 5 strategic value propositions.

And the last direction we are taking is that we are changing our organization, a new organization, much more simple, more customer-centric, will be in place as from January 1, and will start to deliver its results.

[Operator]

We will take our next question from Mathieu Robilliard from Barclays.

[Mathieu Robilliard, analyst]

I had 2 questions. The first one is with regard to the EBITDAaL trajectory in Q4. So you flagged clearly that you would have a tailwind from [ easy comps ] of around 5%. Then you just mentioned that Orange Money would also be helpful in Q4. But could you give us a little bit more granularity as to what could bring the EBITDAaL growth to be at least 8% that you need in Q4 to be at the lower end of the guidance?

And then the second question was on energy costs. You've indicated you're fully hedged for this year, 90% in 2023. My estimate is that your pure commodity energy costs are ticking up taxes and logistics, probably energy costs grow from EUR 300 million to EUR 400 million in 2022. So if you could confirm that's ballpark reasonable. And what kind of absolute increase based on the current hedging we could expect for 2023?

[Ramon Fernandez, executive]

Well, on Q4, so everybody has understood the 5% increase coming from the shareholding plan. This is fine. We talked about Orange Money, and once again, we had started to decrease our fees on Orange Money last year in Q3. And so in Q4 2022, we are going to start from a much better place. So you can once again expect that looking at the 3 points you need to get to the 8%, a significant part will come from this, but not only because, as we said, there are some temporary factors which are weighing on Q3, which should start to be better already in Q4.

So OMEA will be, as a whole, a significant part of the improvement to be seen in Q4. then you will have some other contributing factors. I will just list 1, which is the fact that you know that we have, we don't call it like this, but it is a voluntary leave plan that we agreed on last year in December. And the pickup rate is accelerating, and Q4 will be part of this acceleration.

So these are the different elements, among others, which will contribute to this performance in Q4. And once again, if a 0 point, I don't know what was missing from the 2.5% that we are expecting, which I'm not expecting now. We have plenty of room. You've seen that CapEx is late in being rolled out. And so in terms of operating cash flow and even more in terms of organic cash flow, there is 0000 risk that we would miss our target. So honestly, there is no issue in 2022 at all.

When you look at energy, once again, so the hedging has been done. Obviously, the average cost of hedging is higher in '23 than in '22, but it is less than twice, more expensive. Significantly less more than twice. So if you take the main part, of course, of this story, which is electricity costs, and when we talk about energy, fundamentally, what has changed is electricity.

And here, you are coming from a base which was roughly around EUR 600 million in 2021. It's going to be slightly above EUR 700 million in 2022. So you will have a bit more than EUR 100 million cost increase. And then in '23, you will have around EUR 300 million. So I'm answering your question, Mathieu. You will have roughly around EUR 300 million cost increase in '23 for electricity cost, which means that in 2 years, you will have increased and reaching around EUR 1 billion in electricity costs at a group level coming from EUR 600 million roughly in 2021. And this is, once again, manageable within all our efforts, indirect cost cutting with the scale-up, direct cost room for maneuver, pricing power that we have initiated and that we will continue and the discipline on all the other issues, including CapEx. This is why, once again, we are confident to confirm the organic cash flow target for 2023.

[Mathieu Robilliard, analyst]

Just a point of clarification, the EUR 600 million that you mentioned for 2021, that's all-in, right? That including taxes and logistics and plus, what you call, the electricity prices?

[Ramon Fernandez, executive]

That's the electricity direct expenditure at group level.

[Operator]

We will take our next question is from Jakob Bluestone from Credit Suisse.

[Jakob Bluestone, analyst]

I had a question on your -- 2 questions related to sort of rising rate environment. Firstly, can you maybe just help us with a bit of guidance around what should we expect in terms of the increase in your interest costs? I guess, particularly as we head into next year, your bond yields have gone up by about 2%. So just sort of help us understand that.

And specifically, as you pointed out, your net debt is fairly low, but you have EUR 8 billion in cash on your balance sheet. Your gross debt is actually fairly high. Is there any scope for maybe bringing down some of that gross debt to maybe not see quite as much of an interest increase in the coming years?

And then just secondly, can you just help us understand how you expect Orange Bank to perform in this sort of current environment? Is it a beneficiary from higher interest margins as rates go up? Or as the economic climate deteriorates, do you expect to start seeing some losses on loans? During COVID, you lost a couple of hundred million on bad write-downs. So any color there would be helpful.

[Ramon Fernandez, executive]

So on the first one, rising -- once again, solid balance sheet, net debt under control. With rising rates, yes, it will be more expensive to issue new bonds. But we will have a limited need to borrow more in the following months given the strength of the balance sheet and the cash we have already in our pocket. So the increase is not going to be very significant. But clearly, the average cost of our debt has reached its low end, and the future will be -- the future, well, this cost will increase.

But compared to other players, evidently we are in an extremely comfortable situation, thanks to the base point we have. Do we need to bring down the EUR 8 billion -- EUR 8 billion to EUR 9 billion? In fact, it's more EUR 9 billion than EUR 8 billion, cash situation. I don't think so. Honestly, we don't know where the world is going. We don't know if we may not come back to 2008-like situation around us. So I think it's better to have this caution, if I may say so, in order to face possible storms in financial markets, sorry to say so.

But with Orange, at least, you have a very solid situation, and the increase in the cost of debt will not be a significant moving part of our organic cash flow perspective for the future. Orange Bank, I think, Stephane Vallois, the CEO of Orange Bank, is with us. So I'm going to give the floor to Stephane, who is the new CEO of Orange Bank to take your questions.

Okay. There is just -- we'll come back to your question because there is a connectivity -- Stephane is online. But he's going to join us in a few minutes. So you will have Stephane taking your questions. What I can say, and then you will have more color from Stephane is that we are in line with our perspective for Orange Bank, which is to progressively go towards the breakeven point at the turn of '24, '25, okay? So there is commercial performance, which is very good. The performance of the app is extremely well-rated.

And so we are going to regularly reduce the negative EBITDAaL contribution from the bank, it has started already. So it's going to be a positive contribution. And we are basically on track with the plan. And I guess you have seen that we are regularly examining different options, I would say, to ensure the future of what has been built over the past 5 years.

We now have 1.9 million customers in Europe. We have a premium part of the customer base, which is regularly increasing, the paying customers. And we now have 80% of our new customers which are coming with paying accounts. So we are basically on track with what we want to do with Orange Bank.

[Operator]

We will take our next question is from Stan Noel from Bernstein.

[Stan Noel, analyst]

Can we go back to Africa and Middle East? Can you help us understand if you exclude the impact of the Orange Money repricing last year, and also the -- let's say, the situation impacting Burkina Faso and Mali? What would have been the top line growth in the region this quarter? And also in Cote d'Ivoire, can you give us a bit more color on the temporary slowdown that you're experiencing there?

[Ramon Fernandez, executive]

So Jerome?

[Jerome Henique, executive]

Yes, restating Orange Money would be close to a double-digit growth, 9% growth year-to-date versus the 6.6% growth that Ramon mentioned. That's first about the Q3. As you mentioned, we have first an impact of -- it's very limited to 4 countries out of 16 first -- we have 12 countries out of 16 are still growing, and the average growth for these 12 countries is 11%. So still a very solid growth in most of the countries. And as Ramon mentioned, it's the diversity of our portfolio, which enables us to post still a solid global growth.

Now focusing on those 4 countries, 3 of them are impacted by security issues, which is impacting our operations directly particularly in Mali and Burkina Faso, with some sites not being operable anymore. And the other one, as I mentioned, is a temporary slowdown in Ivory Coast. It's mostly due to regulatory adverse decisions. One is about KYC. So the government decided for the operators not to accept any more some identity documents, ID cards before 2009, and that had an impact on the customer base because we were not able to continue with first customers. But they are coming back, thanks to a very aggressive, let's say, reconnection and re-identification actions from the country.

The other one is about a decrease -- regulatory decrease in the domestic termination rates, which has impacted the top line, as well on this wholesale business line. So for me, those are the main 2 impacts. And of course, Ivory Coast is one of the countries where we decided to reprice on Orange Money. So this is the third impact for Ivory Coast, but with a very strong performance on Orange Money from the operational point of view, particularly by protecting our market share in this country.

[Ramon Fernandez, executive]

Thank you very much, Jerome. Stephane Vallois joined. So if -- we will come back if anybody wants to go back to Orange Bank, Stephane is there. Otherwise, we'll continue to take up questions and we'll come back if anybody wants to have further color, Jakob, or you can send us a message if you want to have a further answer. Let's follow up.

[Operator]

We will take the next question from Nick from SocGen.

[Nick Lyall, analyst]

It's Nick Lyall from SocGen. I just have a very quick one, please, on staff, please, Ramon. Just said, the -- if you started any talks at all with the staff in any of the businesses? It sounds like you've been chatting quite closely to staffing OBS on the reorganization plan. But on one side, the CPI growth seems quite low in France. But on the other, obviously, there's been disruptions at things like fuel depots and terminals.

So could you just tell us what the plans are in terms of talks with staff that rise in -- salary rises for next year? And if there's anything you can tell us about expectations that we should be thinking of for next year as well, please?

[Ramon Fernandez, executive]

So if -- Nick, the question is centered on OBS or is it a more general question?

[Nick Lyall, analyst]

Sorry, I should say more generally about France, please, Ramon. About the French staff issues and that the start.

[Ramon Fernandez, executive]

Okay. So Gervais Pellissier will take the question.

[Gervais Pellissier, executive]

Just regarding the evolution of purchasing power for the employees. On the French territory, we have been undertaking discussions to implement. I would say, some of the disposals of the so-called [indiscernible] that was passed this summer, and this will relate just to an additional premium for middle range and low-level salaries that might apply to the French employees. And that is embedded today in the projection and guidance that has been shown by Ramon. So the premium will be below EUR 1,000 per employee for this year are below 500 depending on the level of the salary.

[Ramon Fernandez, executive]

Thank you, Gervais. And as Gervais said, obviously, this is embarked in the guidance for 2022.

[Operator]

We will take our next question from Stéphane from ODDO.

[Stéphane Beyazian, analyst]

Regarding the cash flows. I was just wondering if there is anything in cash taxes, working capital or exceptionals, for instance, related to the staff departure plan that you would want to highlight or expecting in the second half and could have some impact for the full year, therefore? And regarding the towers, I was just wondering how committed you are still about the monetization because, I would guess, the more you wait, potentially the more difficult it's going to be in terms of valuation and number of possible partners for instance. So any update on the towers would be appreciated.

[Ramon Fernandez, executive]

Thank you, Stéphane. No, on cash flow, I think there is nothing extremely original to say. Basically, when you look at our organic cash, the performance of the operating cash is driving the evolution in the other parts below operating cash, which is working cap or tax or interest on the debt, is more or less stable. So when you look at the evolution of the operating cash flow, EBITDAaL minus CapEx, you have essentially the evolution of the organic cash flow.

So this is the big picture. There is no specific element I need to signal to you. And as far as towers are concerned, the question, which is how committed you are on monetization is -- I would like to qualify your question, if I may. The strategy we have with TOTEM is to, in a way, monetize the fantastic assets we have, but not necessarily uniquely through what you call, I guess, Stéphane, monetization, which is basically selling the asset or joining forces with others. So there is a first step of monetization, which is extremely important, which is organic growth.

And here, we have been working, and Nicolas, who is the Head, CEO of TOTEM is with us far away, because he is an independent, but he is sitting on a very far end of the table. And he has been successful in securing deals with, as I said, for instance, Telefonica for 5G in Spain. And I guess you will see more news in few days or weeks on some other deals of this kind, which will show the capacity to increase third-party revenues, and we said that these are now 18% of total revenues and increasing by 3 points. So there is a whole aspect of what TOTEM does, which is maximizing the value of what we have, if I may say so, as it stands.

And then there is the second part, which is being part and being an active player of the consolidation of the tower market in Europe. And here, of course, we are still absolutely committed to be part of this story. There are some ideas floating around. And we will be with TOTEM, part of the consolidation of the tower market in Europe. No doubt about it.

[Operator]

We will take our next question from Alex Roncier from Bank of America.

[Alexandre Roncier, analyst]

I would just like to come back to Orange Bank, if I may, because we've seen headlines over the last few weeks. And I think this morning, again, some comments being made to the press about the potential sale/partnership. So just trying to figure out what was really your strategy, because you did mention Orange Bank performance being very good, reiterating breakeven in '24, '25. What would a partnership or sell or partial sell enable you to do that you're not able to do by yourself today? Or is it just about investing? Is it about monetization? Or is it about strengthening your distribution channels?

[Ramon Fernandez, executive]

And so it will -- Stephane Vallois, the CEO of Orange Bank, a chance to also answer to Jakob's initial question. I would just, before giving the floor to Stephane, reiterate the fact that as it has been the case in the past 5 years, we have constantly been watching all the options, which are going to help to accelerate the growth and the profitability of Orange Bank. So this is the general approach we have. And you also know that we have a general review of all our activities. And obviously, with Stephane, we are considering all the means, which are going to help comfort what has become a very nice digital bank in Europe, one of the best, with a nice customer base, paying customer base, and Stephane can give you some more color on this.

[Stephane Vallois, executive]

Yes. And perhaps to answer your question, I think there are many opportunities to develop synergies with any partner we may find. On the banking side, on the distribution side, on the -- on anything that could boost the development of the bank, I think there could be many opportunities. And I think that's an interest of the group to find the right partner to boost the development of the bank. And I think we will do great things in the future.

[Operator]

We will take our next question from Jerry Dellis from Jefferies.

[Jeremy Dellis, analyst]

First question has to do with the recovery plan in the Enterprise division, please. It looks as though consensus is currently anticipating that an EBITDAaL decline in Enterprise of 20% in 2022 will become a 2% EBITDAaL decline in 2023. A number of the recovery initiatives that you discussed earlier seemed rather structural in nature. Are you confident that you can stabilize enterprise EBITDAaL next year to the extent the guidance that -- sorry, that consensus is currently anticipating?

And then secondly, on the proposed merger with MásMóvil in Spain, be interested, please, on your thoughts about the implications of the Advocate General statement last week, and what implications that has for your discussions with the competition authorities.

[Ramon Fernandez, executive]

So we'll turn to Elliott for your first question, and I will take the second one.

[Unknown Executive]

So indeed, the recovery plan we are rolling out is quite structural. And as I mentioned, we are facing quite a profound transformation of the business model of Orange Business Services. What it means concretely is that EBITDAaL is expected to be back to growth no sooner than 2024. And that, in the meantime, we will progressively improve the trends, and we expect to get a slight improvement already in H2 this year and then to continue this improvement in the course of '23.

[Ramon Fernandez, executive]

So on MásMóvil, there has been this position of the Advocate General on the U.K. case. We don't have yet the decision from the Court of Justice. So these are, at this stage, only conclusions. When we look at our case in Spain, once again, it is a very different situation whatever the U.K. case will be. As you know, MásMóvil is not an important infrastructure operator. It relies, to a large extent, on the wholesale market for the provision of its fixed and mobile services. And therefore, the creation of our joint venture with MásMóvil is not resulting in the loss of an important infrastructure operator.

So needless to say, we are also on the market in Spain where competition is extremely intense with a myriad of players. So we will see where the previous case in the U.K. goes, but whatever the conclusion of this case, the Spanish situation is very different.

[Jeremy Dellis, analyst]

Could I just follow up on the enterprise question, please? Minus 2% EBITDAaL decline in 2023 would suggest probably back to growth in the second half of 2023. And just to confirm, that's not the way that you think about the Enterprise recovery.

[Ramon Fernandez, executive]

No. But Jerry, I think -- and I think I said it when I started answering the first question on how -- what are the moving parts of 2023 to go to the expected average of 4% increase in EBITDAaL, I said I think clearly that on the enterprise segment, we would still have a negative contribution, which is not going to be only minus 2%. This is totally embarked in our perspective. And we will see a progressive evolution of the situation, as we said, starting H2 2022, very progressive improvement.

And then overall, in '23, it will go better. But all that Elliott was describing drive to a progressive improvement and this is embarked. And when we say that we see growth coming back on EBITDAaL no sooner than 2024.

[Operator]

We will take our last question from Thomas Coudry from Bryan Garnier.

[Thomas Coudry, analyst]

Two questions, please. One on the cybersecurity unit. It was carved out previously, but I understood from press reports that an IPO -- a possible IPO was not on the table anymore. Could you please just update us on the different options that we can have as far as the cybersecurity unit is concerned?

And then the second question, please, is about on possible power cuts in France, in particular, this winter. Is this possible that this leads to a network cuts? And so in that case, can we consider some, let's say, compensation and some impact on revenues over the winter should these power cuts happen?

[Ramon Fernandez, executive]

So on cybersecurity, of course, this will be one of the many parts that will be addressed in the future start plan that [ Christel ] will be disclosing on 16 of February. But regarding this IPO question, when we created the Orange Africa, Middle East in 2015, we said that this platform could be a platform for strategic partnerships, financial partners, possibly at some time, IPO at start. This was in 2015. And you've seen that we have been growing the activity fantastically in Africa in the current organization.

For cybersecurity, when we had this so-called carved out with the creation of a dedicated entity last spring, we said that it would open the same kind of opportunity. And this is the story we have with Orange France, a fantastic asset. One of the leaders in Europe, with around EUR 900 million revenues, growing fast. You could see the 13% growth in revenues in Q3. So this is going to be the platform to envisage different options. And so you can imagine many options, and we will be talking about this in more details in February. But clearly, cybersecurity is going to be one of the growth engines for the group in the future, and it is a very strong asset.

Now your question on power cuts, and there is a very strong [indiscernible] energetic that Orange France has been putting in place, and we've been working on it also at a group level. So your question is focused on France. So Fabienne is going to take the answer.

[Fabienne Dulac, executive]

So yes, you're right. There is a possible load shedding this winter. We are currently working with all relevant stakeholder, energy sector, on this possible shutdown with different scenarios. In any case, it will impact not only Orange France, but all the activity in France. Maybe 1 hour per day, no more. So there is no impact on the business if it's your question. And we are very confident that we will -- we don't have any impact on the business.

The question we have is how we can organize the business continuity plan in this context to guarantee the best quality and to guarantee the connectivity. So it's why we work with them to identify some priority area has data center and has different priority or strategic area to protect customers on the B2B, on the B2C. But in any case, it's not a question of business. It's a question of continued plan that will impact all player in France, whole activity in France.

It's why, as Ramon expanded before, we are working to reduce our consumption of energy and we decide to raise 10% of our instantaneous consumption for an hour a day during the peak energy times to support and to be able to reduce our consumption through this interesting consumption in peak period. We think we are able to sustain and to avoid load shedding. So all the team focused on this point for the winter for all customers of our Orange France, but not only...

[Ramon Fernandez, executive]

So if I understand well, this was the last question. Just one word -- one quick word of conclusion to reiterate, once again a key point, which is our absolute comfort on our cash flow target given all what we said. It is a situation where we are in control, where we made, I think, the right decisions, including on the energy hedges and the scale-up program is delivering its results despite the inflationary environment, you can see the figures, and the pricing power is there.

So with the dynamics we have in the different parts of the group, we are extremely confident that we can reach our objectives. And I would like to conclude this call, thanking you for your attention, for your questions. And we will be following up these discussions in the next days and weeks. [Foreign Language].

[Operator]

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