On Wednesday, Morgan Stanley (NYSE:MS) adjusted its stance on shares of Orange SA (OTC:ORANY) (ORA:FP) (NYSE: ORAN), downgrading the stock from Overweight to Equalweight and lowering the price target to EUR12.50 from the previous EUR15.00. This decision reflects the firm's assessment of the competitive landscape in the French telecommunications market, which is expected to impact the company's financial performance.
The downgrade comes amid a backdrop where Orange SA, despite having the Best Network as recognized by Opensignal, a robust brand, and a dedicated customer base, faces new challenges.
According to Morgan Stanley, the competitive environment is intensifying with rivals introducing appealing multi-SIM mobile offers. These new market entrants could potentially shift consumer preferences, with mobile services becoming a more significant factor in purchasing decisions for fixed-mobile convergence (FMC (NYSE:FMC)) packages.
Historically, Orange's FMC convergent customers have prioritized the quality of fixed-line services, adding mobile services as a secondary consideration. However, the introduction of attractive mobile offers by competitors may alter this trend, leading to changes in consumer behavior.
While Morgan Stanley anticipates minimal subscriber loss for Orange, the firm does foresee some unavoidable average revenue per user (ARPU) erosion.
The projection is that Orange's domestic retail revenue growth, which showed increases in the past (Q2a: +1.3%, Q3a: +1.6%), will face downward pressure in the future. Morgan Stanley has estimated a more modest growth outlook for the coming years, with forecasts of +0.5% for FY 25e and +0.4% for FY 26e.
The anticipated change in the competitive dynamics underscores the challenges Orange SA may encounter in maintaining its market position and revenue growth amidst evolving consumer preferences.
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