UPDATE 1-Orange's high investments in France start to bear fruit

* Q4 results in line with expectations

* Confirms targets for 2018

* Increases dividend to 0.70 euro/share for 2018

* Company boss Richard wins new mandate (Recasts story, adds CFO quote, background)

PARIS, Feb 21 (Reuters) - Orange's high investments started to bear fruit in France last year, capping a challenging period for the telecom operator in the face of a price war waged by younger rival Iliad.

Annual sales in France grew for the first time since 2009, the former monopoly said on Wednesday, lifting group operating earnings and convincing management to hike the yearly dividend for 2018.

The group's boss Stephane Richard, who sealed a third four-year mandate on Tuesday, has shied away from costly sports rights auctions, betting instead on the rapid expansion of fiber optic broadband network to ensure higher and recurring revenue.

This is in stark contrast with other telecom groups such as Britain's BT and Altice's French unit SFR, whose poor performance has sent shares of its heavily indebted parent company down by more than 50 percent over the last year.

"These results totally confirm the relevance of our strategy," Chief Financial Officer Ramon Fernandez told reporters.

Spain, Orange's second-biggest national market after France, was a big contributor to profits last year, with adjusted earnings before interest, tax, depreciation and amortization (EBITDA) jumping by 17 percent.

As in France, the efforts made on cost savings and the customers' shift toward the more profitable fiber optic technology for their broadband connection drove higher results.


Orange's fourth-quarter results were in line with expectations, with core operating profits growing by 2.5 percent to 3.22 billion euros.

The group confirmed its targets as laid out at its investor day last December, including growth in its adjusted EBITDA for 2018. It also proposed hiking its yearly dividend by 5 cents to 0.70 euro per share in 2018.

Orange's strong performance and Altice's current difficulties have renewed expectations among investors about a new round of merger talks in France to cut the number of telecoms operators from four to three.

The last attempt to consolidate the French telecoms market failed in 2016, under a scenario in which Orange would have bought Bouygues' telecom unit and break it into parts and sell them to Iliad and SFR.

"The scenarios that were previously considered will not necessarily be the same, we'll see," Fernandez said.

"We've always said that we were available to take part in any discussion as long as there is an interest (for Orange)," he added.

Orange, Europe's fourth-biggest telecoms operator by market capitalization, trades at 12 times estimated 12-month forward earnings against 12.8 times for the continent's leader Deutsche Telekom, 20.9 times for Vodafone and 10 times for Telefonica.

($1 = 0.8113 euros) (Editing by Sudip Kar-Gupta)