ORANGE: BUY

Now on less than 5.5x 2017 EBITDA vs sector on ~6.5x that’s close to a 25% discount although has superior growth.

Some of that discount is the state ownership and rightly so given intervention in the recent consolidation talks. However assuming price rationality from competitors going forward this is a good entry point.

The concern post the deal falling apart is that both NUM and BOUY have unrealistic guidance that would only likely be made with a fresh round of price cuts and subscriber growth. The news therefore that both NUM and BOUY are planning price RISES is a positive.

Going forward ORA can now concentrate on executing its domestic plan with a wealth of cost cutting opportunities (after potentially printing a positive domestic service revenue number this quarter for the first time since 2011).

In a sector that is now very concerned over completion of current/future deals in the near term this has been de-risked with the 14% fall from mid March.

Add to this a 4.2% dividend and we feel it is a compelling buy as Q1 numbers approach.

We set PT 17.50 EUR, implying a potential 20% upside.