* France: competition in both fixed and mobile remains tough, limiting pricing power despite high capex
* Orange is defending market share effectively, but pressure from competitors caps earnings surprise in the short term
* Downgrade to Hold from Buy on lack of catalysts; target price unchanged at EUR15.5
* Downgrade to Hold on lack of triggers, TP EUR15.5 unchanged
Orange trades at 5.3x 2016e EV/EBITDA, a 20% discount to peers, and close to a 17% discount to its 10-year average. But a lack of short to medium-term catalysts leads us to downgrade it to Hold from Buy. We prefer Deutsche Telekom (Buy,
TP EUR18, CMP EUR15) as an alternative exposure to a European large cap incumbent. We see more upside from pricing power in the German market and a stronger pro-forma EBITDA growth (2016e-18e CAGR of 7.7% vs 2.1% at Orange)
driven by the US.