Orange SA (ORAN – Free Report) recently completed the acquisition of a majority stake in Telekom Romania Communications (TKR) for a total purchase price of € 268 million on a debt and cash free basis. The transaction for a majority stake of 54% in one of the main fixed telecommunications operators in Romania aims to achieve the convergence objectives of Orange in Europe, which intends to expand its operations on the continent to better serve its customers.
With a turnover of 633 million euros in 2020, TKR would be the second fixed telecommunications operator in Romania, offering fixed voice, broadband and pay TV services to around five million customers. In addition, it has a fiber optic network covering 90,000 km that connects approximately three million homes, while providing converged services to more than 916,000 converged fixed-mobile subscribers via an MVNO (mobile virtual network operator) contract. ) with Telekom Romania Mobile. The MVNO agreement allows TKR to offer mobile wireless services using the communications network infrastructure of Telekom Romania Mobile without actually being liable for it.
The acquisition allows Orange to surpass the competition and establish itself as the de facto leader in the country with an integrated portfolio of fixed and mobile services. TKR customers will be gradually migrated to the Orange network over time, offering seamless services and uninterrupted connectivity. With complementary product offerings, the takeover will help accelerate its convergence strategy in Europe, bringing benefits and wider choices to customers for the sustainable development of a digital economy in Romania. The companies will however continue to operate as two separate legal entities.
Based in Paris, Orange is one of the leading telecommunications operators in the world with a turnover of 42.3 billion euros in 2020. Present in 26 countries, the company had a total customer base of 263 million in end of June 2021. This includes 218 million mobiles. customers and 22 million fixed broadband customers. With TKR subscribers under its fold, the figure is expected to improve significantly, reaping synergistic benefits for the business in the long run.
It remains to be seen how Orange will carry this growth momentum and whether the accretive subscriber base can really help it generate profitable income in the days to come.
The title has lost 9.1% since the beginning of the year against 5.7% decline in the industry.
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Orange currently wears a Zacks Rank # 4 (Sell). Some top-ranked stocks in the industry are America Movil, SAB de CV (AMX – Free report), KT Corporation (KT – Free report) and Vodafone PLC Group (VOD – Free Report), each carrying a Zacks Rank # 2 (Buy). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
America Movil predicts long-term profit growth of 24.3%. It delivered a profit surprise of 5.7%, on average, over the past four quarters.
KT Corporation expects long-term earnings growth of 9.8%.
Vodafone predicts long-term profit growth of 3%.