The French telecommunications operator has been heavily impacted by the arrival in early 2012 of its new competitor Free, a subsidiary of Iliad, on the French market for mobile telephony.

Unsurprisingly, Orange shows a sharp decline of 38.6% in net profit for the first half, a decline of 4.5% of its turnover in France despite a 1.5% increase of the customer base in the mobile phone sector. Revenue estimates for the upcoming years are lowered. Indeed, by 2015, they could decline by 8% to EUR 40.2 million. The financial indebtedness of the group is still at high levels compared with operating income with a leverage of 2.37x for the year.

The bearish trend line, tested 3 times now, has become a major obstacle and a psychological level that seems unbreakable. In weekly data, the 20-period moving average encloses stock prices in a downward trend for several years.

A technical correction phase seems very likely at current prices, given the poor quality of fundamentals and the weakness of recent publications. The most active investors can open a short position below the bearish trend line and aim a return to the pivot point at EUR 7.3, then, the short-term support at EUR 7.1. A stop loss will be placed around EUR 7.6, just below the short-term resistance.