Orange S.A.

The stable outlook on Orange reflects S&P Global Ratings' anticipation of Orange's continued stable performance in France and Spain over the next 12 months, despite competitive pressure, with at least breakeven revenue and EBITDA growth for the group. We also expect the company will maintain credit metrics in line with our 'BBB+' rating, including S&P Global Ratings' adjusted debt to EBITDA of 2.5x-3.0x, funds from operations (FFO) to debt over 30%, and FOCF to debt before spectrum costs approaching 10%. We could take a negative rating action if adjusted leverage rises over 3x for a prolonged period. This could result from meaningful declines in revenue and profitability stemming, for example, from a lengthy price war in Orange's domestic mobile market.

...Orange's growth is likely to hover around 1% through 2020, supported by strong market positioning, but capped by stiff competition in France and Spain. Although Orange is the incumbent in its French home market, holding the No. 1 position in terms of revenues, subscribers, fiber coverage, and fixed-mobile convergence, competition remains intense. Consolidation discussions in France are likely to continue in 2019 and could improve Orange's market prospects, but we consider that a conclusion remains highly speculative for now, and assume no transaction in our base case. Competition has also lowered growth prospects in Spain, which in turn affords less leeway to offset intense competition in other service areas like Poland, where Orange faces stiff fixed-line competition from cable, and from Play in mobile. We expect that the switch to International Financial Reporting Standard 15 (IFRS15) will further limit Orange's reported 2018 growth to about 0.4%, but that the impact will moderate in...

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