I've recently suggested that Orange (ORAN) was a risky income investment, despite its high-dividend yield. Today, the company reported its 2013 results and announced a 25% dividend cut, reducing its 2014 annual dividend from €0.80 ($1.10) per share to €0.60 ($0.82). At its current share price, its forward dividend yield is slightly higher than 6% and above the average of European telecoms sector dividend yield, which is about 5%. Orange's dividend related to 2013 earnings was confirmed at €0.8 ($1.10) per share, of which €0.30 ($0.41) was paid in December and the balance of €0.50($0.69) will be paid next June.
Regarding Orange's financial results, in 2013 revenues declined by 4.5% on a comparable basis to $56.1 billion. This weak performance was primarily due to the company's domestic business, where revenues fell by 4.8%. This decline was mainly related to mobile services, reflecting France's pricing war on mobile following Iliad's entry in 2012, leading to lower average revenue per user [ARPU] of 11.5%. Its EBITDA was €12.6 ($17.3) billion, or an EBITDA margin of 30.5%. This represents only a 1% decrease on its EBITDA margin, showing that it is controlling its costs despite its revenue pressure. Going forward, Orange expects its business to stabilize given its outlook for 2014:
Despite persistent pressure on revenues, Orange expects that the restated EBITDA for 2014 will be between 12.1 and 12.6 billion euros, taking into account the continued significant efforts on costs and excluding the impact of the disposal of operations in the Dominican Republic. This objective corresponds to a stabilisation in the restated EBITDA margin compared to 2013. The Group will also maintain its ambitious investment programme in very high-speed fixed and mobile networks.
If Orange is able to maintain its operating profitability in 2014, this will be the first time in at least
