Orange(ORAN) - 2022 Q4 - Annual Report

Strategy and Market Position - Orange's strategy focuses on enhancing infrastructure and service quality while expanding in high-growth sectors like cybersecurity and the Africa & Middle East region[49] - The competitive landscape is evolving with new non-telecommunications players capturing revenue streams traditionally held by telecom operators, impacting Orange's revenues and margins[34] - The company is navigating a highly competitive and regulated market, where price pressures remain strong, impacting its revenue generation[47] Risks and Challenges - The company faces significant risks from geopolitical instability, particularly in regions affected by conflicts such as Ukraine, which pressures network operations[30] - Orange's operating margins are under pressure due to inflation and rising energy costs, making it uncertain whether price increases can fully offset these costs[48] - Orange's dependency on a limited number of critical suppliers poses risks to its operations, particularly in network infrastructure and mobile handsets[38] - The company is exposed to cyber-attack risks that could lead to data breaches, affecting its reputation and financial position[43] - The execution of Orange's new strategy may not yield the expected results, potentially affecting growth and profitability[64] - The brand policy represents a risk to the Orange brand image, where damage could adversely affect the entire Group's reputation and earnings[68] - Orange's credit rating changes could increase debt costs and limit financing access, impacting overall financial flexibility[88] - Orange's liquidity could be affected if access to capital markets becomes difficult, potentially hindering project execution[90] - The company is exposed to foreign exchange risks, particularly with the Polish zloty, Egyptian pound, Moroccan dirham, and US dollar[97] - Legal risks include potential fines up to 10% of consolidated revenues for regulatory violations[79] - Orange has faced substantial fines in the past, amounting to tens or hundreds of millions of euros for cartel practices or abuse of dominant position[78] - The company is involved in ongoing litigation that could materially affect its earnings and financial position[76] Environmental and Social Responsibility - Orange aims to achieve Net Zero Carbon by 2040, with intermediate objectives to limit its environmental footprint and that of its value chain[117] - A significant portion of Orange's environmental footprint is linked to its value chain, which may hinder its commitment to Net Zero Carbon due to supplier challenges and increased digital traffic[118] - Orange's environmental action plans may face difficulties during the technological transition of fixed and mobile networks, potentially impacting its reputation and stakeholder confidence[119] - Climate change poses physical and transition risks that could adversely affect Orange's infrastructure and the economic situation of its customers, particularly in the Africa & Middle East region[120] - The company is exposed to risks related to the availability and price of raw materials, which could impact its financial performance due to regulatory changes or carbon taxes[122] - Orange's commitment to digital inclusion may be challenged by climate change impacts, affecting its ability to fulfill its purpose[121] - Concerns regarding health risks from electromagnetic fields could lead to reduced customer numbers and increased litigation, impacting service quality and network rollout[133] - The company may face reputational damage and financial liability due to potential violations of human rights and ethical standards in its global operations[126] Financial Performance - In 2022, Orange's group operating income reached €4,801 million, a 90.4% increase from €2,521 million in 2021 on a historical basis[167] - The telecom activities contributed €5,000 million to the operating income, while Mobile Financial Services reported a loss of €200 million[167] - The impairment of goodwill decreased by 77.9%, amounting to €2,885 million, primarily due to changes in the scope of consolidation[168] - Labor expenses decreased by 10.6%, totaling €1,059 million, largely due to a reduction in expenses related to the French part-time for seniors plans[168] - The average number of employees (full-time equivalent) decreased by 3.0%, equating to a reduction of 3,980 employees, mainly in France, Poland, and Spain[168] - Other operating expenses fell by 44.1%, amounting to €326 million, attributed to various dispute developments and lower allowances on trade receivables[168] - The Group's liquidity position exceeded the repayment obligations of its gross financial debt as of December 31, 2022[173] - Total financial liabilities amounted to €59,722 million, with gross financial debt after derivatives of €35,838 million[175] Workforce and Employment - The Group had 136,430 active employees at the end of 2022, with a 2.2% decrease in permanent contracts compared to the previous year[190] - The decline in the active workforce was primarily driven by a 4.6% reduction in permanent contracts in France, totaling 3,553[191] - The integration of several companies into the Orange Business Services division contributed to changes in employee numbers, including the acquisition of Exelus and the integration of three Swiss companies[189] - At the end of 2022, the Group had a total workforce of 136,430 employees, a decrease of 2,268 employees (-1.6%) compared to 2021[194] - The permanent workforce grew by 0.7% on a comparable basis, with notable increases in OBS International (+4.8%) and Orange Innovation (+10.2%), while the Europe division saw a decrease of 2.5%[193] - The average full-time equivalent employees (FTEs) decreased by 3,980 FTEs (-3.0%) to 130,307 at the end of 2022, primarily driven by reductions in France[195] - The number of employees on fixed-term contracts decreased by 7% to 2,574, with a significant decline of 12.9% in countries outside France[196] - Subcontracting workforce decreased by 9.8% to 29,065 FTEs, representing 29.2% of the total Group workforce in France[208] - The amount spent on subcontracting in France was €2,008.4 million in 2022, down from €3,030.5 million in 2021[209] - Temporary staffing increased by 25.2% compared to 2021, with a monthly average of 791 temporary workers in 2022[202] - Corporate and institutional investors in the U.S. held approximately 18.96% of the company's share capital as of December 31, 2022[221] - The Group's employee profit-sharing and savings plans were highlighted as part of its social policy in France[222] - The Worldwide Works Council met once in 2022, addressing global economic and employee-related matters[210]