Orange Said to Expect African Growth Trailing Expectations

LAGOS (Capital Markets in Africa) – Orange SA, France’s largest phone company, expects disappointing growth in Africa and the Middle East this year mostly due to poor performance in Egypt and the Democratic Republic of Congo, according to people with knowledge of the matter.

While business performance in Africa is improving when compared with last year, revenue is set to expand just slightly more than in 2016, weighed down by political and economic issues in the two countries, said the people, who asked not to be identified as the matter is private. Orange now projects 2017 revenue will rise about 3 percent in Africa, one of the people said.

That lags behind a growth target of 20 percent Orange set for its Africa and Middle East unit in 2015, a goal that called for average annual increase of 4 percent to and 5 percent through 2018. The Paris-based carrier is counting on Africa to spur sales as price competition weighs on its wireless business at home and European Union regulations eat into roaming revenue in the region.

Orange shares, little changed before the Bloomberg report, fell 0.9 percent to 14.61 euros at 3:56 p.m. in Paris.

An Orange representative declined to comment.

In Egypt, a deteriorating economy and devaluation of the local currency have hurt Orange’s business, which was already facing stiff competition. The Democratic Republic of Congo, where Orange expanded its business last year by buying operations from Millicom International Cellular SA, has suffered from political instability.

Orange’s sales growth in Africa slowed to 0.7 percent in the first quarter from 2.6 percent for full-year 2016. The first three months’ performance was affected by a tough comparable period — 2016 was a leap year with the first quarter having an extra day. Growth would have been 1.5 percent when adjusted for the leap year impact, Chief Financial Officer Ramon Fernandez said in April.

Orange’s 2017 growth in Africa and the Middle East will be “much higher” than in the first quarter, though organic growth is slower than initially expected, Fernandez said at the time.

Sales in Africa and the Middle East were 5.2 billion euros ($5.8 billion) last year, accounting for about 12 percent of Orange’s total. The company’s major African markets also include Senegal, Ivory Coast and Mali.