By Leila Abboud and Gwénaëlle Barzic
PARIS (Reuters) - Telecom operator Orange predicted operating profit would fall slightly this year amid continued tough competition in its key home market of France but pledged to hold the line on costs to be able to deliver a stable dividend.
The group has bet that better quality mobile and broadband networks will help it ward off low-cost French rival Iliad, as well as rejuvenated No. 2 player Numericable-SFR, recently formed in a merger.
Orange spent 14.3 percent of revenue on upgrading its networks last year to faster technologies known as 4G in mobile and fibre in broadband, a higher proportion than a year earlier when it spent 13.7 percent.
"High-speed broadband in both mobile and fixed is a growth engine and a way for us to win back customers," Chief Financial Officer Ramon Fernandez said on Tuesday.
"Somewhere between 2015 and 2016 we will see our revenue begin to stabilise but this will also depend on how our competitors behave."
Europe's fifth-largest telecom operator by market valuation also posted in-line 2014 revenue and operating profit as continued cost-cutting helped it maintain profitability despite sales shrinking across its major markets, such as Spain and Poland.
Orange said it would pay a dividend of 0.60 cents a share for 2014 and that it was aiming for the same level for 2015.
Annual revenue fell 2.5 percent to 39.45 billion euros (£29.17 billion), compared with the average of analyst estimates in a Thomson Reuters I/B/E/S poll of 39.27 billion euros.
Restated earnings before interest, tax, depreciation and amortisation (EBITDA) were 12.19 billion euros, compared with the poll average of 12.11 billion.
Orange also predicted that restated EBITDA would fall slightly this year to between 11.9 and 12.1 billion euros, although it pledged to continue to focus on cost-cutting on everything from staff to marketing costs to compensate.
The former state-owned monopoly trimmed operating costs by 707 million euros last year.
Like other major European telecom firms, Orange shares have been on a tear to rise 15.5 percent this year as investors pile into the sector for its defensive nature and high dividend yields.
A wave of consolidation in Britain, Spain, and Germany has also boosted investors' hopes that the remaining operators will be able to end years of falling prices and start growing again.
The European telecoms index is up 12 percent this year, one of the best performing sectors.
