I n v e s t o r D a y Innovation and Growth N o v e m b e r 1 2 t h, 2 0 0 3.
-
Upload
arianna-dalton -
Category
Documents
-
view
221 -
download
2
Transcript of I n v e s t o r D a y Innovation and Growth N o v e m b e r 1 2 t h, 2 0 0 3.
I n v e s t o r D a y
I n v e s t o r D a y
Innovation and GrowthInnovation and Growth
N o v e m b e r 1 2 t h , 2 0 0 3N o v e m b e r 1 2 t h , 2 0 0 3
Business reviewBusiness review Michel CombesMichel Combes
Jean-Paul CottetJean-Paul Cottet
Barbara DalibardBarbara Dalibard
Michel CombesMichel Combes
Jean-Paul CottetJean-Paul Cottet
Barbara DalibardBarbara Dalibard
Jean-Yves GouiffèsJean-Yves Gouiffès
Olivier SichelOlivier Sichel
Wilfried VerstraeteWilfried Verstraete
Jean-Yves GouiffèsJean-Yves Gouiffès
Olivier SichelOlivier Sichel
Wilfried VerstraeteWilfried Verstraete
CAUTIONARY STATEMENT CAUTIONARY STATEMENT
This presentation contains forward-looking statements about France Telecom. Such statements are not historical facts and include expressions of management’s expectations about new and existing programs, opportunities, technology and market conditions. Although France Telecom believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties. These statements should not be regarded as a representation that anticipated events will occur or that expected objectives will be achieved. Important factors that could cause actual results or performance to differ materially from the results anticipated in the forward-looking statements include, among other things, the success of the announced FT 2005 plan, including the “15 + 15 + 15” plan and the TOP program, France Telecom’s other strategic, financial and operating initiatives, changes in economic, business and competitive markets, risks and uncertainties attendant upon international operations, technological trends, exchange rate fluctuations and market regulatory factors. More detailed information on the potential factors that could affect the financial results of France Telecom is contained in the Document de référence submitted to the COB on March 21, 2003 and in its Form 20-F filed with the U.S. Securities and Exchange Commission. The forward-looking statements contained in this document speak only as of the date of this presentation and France Telecom does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
This presentation contains certain measures calculated based on French GAAP information. For a definition of these measures, please refer to slide 55. In accordance with market authorities’ recommendations, France Telecom is no longer using the acronym “EBITDA” for Operating income before depreciation, but the French acronym “REAA”.
This presentation contains forward-looking statements about France Telecom. Such statements are not historical facts and include expressions of management’s expectations about new and existing programs, opportunities, technology and market conditions. Although France Telecom believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties. These statements should not be regarded as a representation that anticipated events will occur or that expected objectives will be achieved. Important factors that could cause actual results or performance to differ materially from the results anticipated in the forward-looking statements include, among other things, the success of the announced FT 2005 plan, including the “15 + 15 + 15” plan and the TOP program, France Telecom’s other strategic, financial and operating initiatives, changes in economic, business and competitive markets, risks and uncertainties attendant upon international operations, technological trends, exchange rate fluctuations and market regulatory factors. More detailed information on the potential factors that could affect the financial results of France Telecom is contained in the Document de référence submitted to the COB on March 21, 2003 and in its Form 20-F filed with the U.S. Securities and Exchange Commission. The forward-looking statements contained in this document speak only as of the date of this presentation and France Telecom does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
This presentation contains certain measures calculated based on French GAAP information. For a definition of these measures, please refer to slide 55. In accordance with market authorities’ recommendations, France Telecom is no longer using the acronym “EBITDA” for Operating income before depreciation, but the French acronym “REAA”.
Business review: Key operating themes Business review: Key operating themes
Cash generationCash generationCash generationCash generation
Margins trendsMargins trendsMargins trendsMargins trends
Revenue growthRevenue growthRevenue growthRevenue growth
CapexCapexCapexCapex
TOPTOPTOPTOP
Finding the right balance between growth and profitability
Finding the right balance between growth and profitability
5 5
R e v e n u e g r o w t h
R e v e n u e g r o w t h
What is underpinning FT’sWhat is underpinning FT’srevenue targets? revenue targets?
Revenue growth: FT objectiveRevenue growth: FT objective
• Higher end of the +3%* to +5%* range Higher end of the +3%* to +5%* range ObjectiveObjective2004-52004-5
ObjectiveObjective2004-52004-5
• Growth in mobile Growth in mobile • Fixed line business initiativesFixed line business initiatives• Wanadoo & other international Wanadoo & other international
Key driversKey driversKey driversKey drivers
* Pro forma basis
54 revenues growth initiatives (TOP-LINE) of which
14 cross division projects
54 revenues growth initiatives (TOP-LINE) of which
14 cross division projects
Pro forma Revenue growthPro forma Revenue growthPro forma Revenue growthPro forma Revenue growth
Number of initiatives Number of initiatives by by division, transversaldivision, transversal
Number of initiatives Number of initiatives by by division, transversaldivision, transversal
A group-wide initiativeA group-wide initiative
Revenue growth: Growth initiativesRevenue growth: Growth initiatives
OrangeOrange
InternationalInternational
TransversalTransversal
OthersOthers
WanadooWanadoo
Fixed (Retail)Fixed (Retail)Fixed (Corporate)Fixed (Corporate)
DevelopDevelopnew servicesnew services
IncreaseIncreasesynergiessynergies
LeverageLeveragegrowth leversgrowth levers
ReinforceReinforcepositionspositions
Control risksControl risks
Number of initiativesNumber of initiativesby objectiveby objective
Number of initiativesNumber of initiativesby objectiveby objective
R e v e n u e g r o w t h
R e v e n u e g r o w t h
OrangeOrange
Revenue growth: Orange objectivesRevenue growth: Orange objectives
• Improve growth above 2003 trend Improve growth above 2003 trend Objective 2004-5Objective 2004-5Objective 2004-5Objective 2004-5
• Momentum of 2003Momentum of 2003• New “ease of use” initiatives and 3GNew “ease of use” initiatives and 3G• Growth management : market based andGrowth management : market based and
segmentation segmentation
Key driversKey driversKey driversKey drivers
After a rebuilt momentum in 2003, Orange expected to improve revenue growth in 2004
After a rebuilt momentum in 2003, Orange expected to improve revenue growth in 2004
Growth inflexion achieved:Growth inflexion achieved:•New managementNew management•Focus on existing footprintFocus on existing footprint•Improve client mixImprove client mix•Launch Orange World Launch Orange World
2003200320032003
Revenue growth: Orange momentum in 2003Revenue growth: Orange momentum in 2003
Quarterly total revenues (€m) Quarterly total revenues (€m)
& growth (%)& growth (%)
Q1 03 Q2 03 Q3 03
4,255 4,360 4,714
-6.3%
2.5%
8.1%
Quarterly net adds (000s) Quarterly net adds (000s)
and growth (%)and growth (%)
1,325557 696
Q1 03 Q2 03 Q3 03
-50.4%25.0%
90.4%
Note: reported numbers.
Orange has built a strong customer base in 2003 with improved mix
A favourable launchpad for growth going forward
Rest of the world contributing to 82% of customer net add in 9m 03
Favourable trends already visible at Orange in 2003,RoW is a growth engine for Orange
Favourable trends already visible at Orange in 2003,RoW is a growth engine for Orange
Revenue growth: Orange ARPU in 2003Revenue growth: Orange ARPU in 2003
Note: ARPU is annual rolling average revenue per user.
Continuous improvement in ARPUContinuous improvement in ARPU
Orange UK ARPU (£)Orange UK ARPU (£)Orange France ARPU (€)Orange France ARPU (€)
347 344 340 338 336
33 33 35 38 41
377376375377380
Q3 02 Q4 02 Q1 03 Q2 03 Q3 03
8.7% 10.9% 42
220 222 224 229227
35403937
270255 259 263 267
Q3 02 Q4 02 Q1 03 Q2 03 Q3 03
13.7%15.6%
non voicenon voicevoicevoice
Revenue growth: Orange World in 2003Revenue growth: Orange World in 2003Orange experienceOrange experience One icon for access to a wide range of non-voice servicesOne icon for access to a wide range of non-voice services
One simple tariff throughout One simple tariff throughout EEurope (urope (OOrange range WWorld access / forfait orld access / forfait OOrange range WWorld)orld)
An opportunity to try new services and a unified orange world An opportunity to try new services and a unified orange world portalportal
A choice of phones (including the A choice of phones (including the OOrange range SSignature range)ignature range)
A key initiative already launched to drive non voice service usage
A key initiative already launched to drive non voice service usage
Benefits for both customers and OrangeBenefits for both customers and Orange More attractive handsets and services combined with a simple More attractive handsets and services combined with a simple
price and a personalised feature stimulate wider usageprice and a personalised feature stimulate wider usage
Gain extra added value customers, and improve customer loyaltyGain extra added value customers, and improve customer loyalty
Revenue growth: Orange World roadmapRevenue growth: Orange World roadmap
UKUK
FranceFrance
SwitzerlanSwitzerlandd
Q1 04Q1 04 Q2 04Q2 04Nov 2003Nov 2003
Denmark Denmark
NetherlandsNetherlands
Belgium Belgium
Romania Romania
Slovakia Slovakia
Advantages of a pan-European offerAdvantages of a pan-European offer
Benefits for both customers and OrangeBenefits for both customers and Orange
Extension of richer and standard offers outside Orange core markets, to conform brand value and expectations
Deploy a seamless offer across the European footprint with limited costs
Revenue growth: Orange 2004 initiativesRevenue growth: Orange 2004 initiatives
• Targeted offers, loyalty programs, Targeted offers, loyalty programs, tariff refresh and retention programtariff refresh and retention program
Improve Improve Customer mix &Customer mix &segmentationsegmentation
Improve Improve Customer mix &Customer mix &segmentationsegmentation
• International offers to MNC, holidayInternational offers to MNC, holidayoffers, and “last minute” offersoffers, and “last minute” offers
Improve YieldImprove YieldImprove YieldImprove Yield
• Promote MMS use, launch SMS email alert, Promote MMS use, launch SMS email alert, roll-out IM service, launch w-HA micro payment roll-out IM service, launch w-HA micro payment
platformplatformNon voiceNon voiceNon voiceNon voice
Revenue growth: Orange 2004 initiativesRevenue growth: Orange 2004 initiatives
• Increase Signature device penetrationIncrease Signature device penetrationNew handsetsNew handsetsNew handsetsNew handsets
• Enable prepaid roaming across footprint, Enable prepaid roaming across footprint, introduce new services (short-code dialing), introduce new services (short-code dialing), GPRS roaming, leverage “Open Seamless Alliance” GPRS roaming, leverage “Open Seamless Alliance”
RoamingRoamingRoamingRoaming
Multiple initiatives stimulating growth in addition to tranversal projects
Multiple initiatives stimulating growth in addition to tranversal projects
Revenue growth: Orange 2004 3G commercial launch objectivesRevenue growth: Orange 2004 3G commercial launch objectives
Orange confirms its 3G targetsOrange confirms its 3G targets
20032003 20042004 20052005
UK
Commercial trials in major cities
UK
Commercial trials in major cities UK
Commercial Launch in ten major cities, major rail lines and airports, with 50% population coverage
UK
Commercial Launch in ten major cities, major rail lines and airports, with 50% population coverage
France
Commercial launch in ten major cities
France
Commercial launch in ten major cities
France
Developing ‘Villes Orange’ trials in Toulouse and Lille
France
Developing ‘Villes Orange’ trials in Toulouse and Lille
Commercial Launch in:
• Switzerland
• Belgium
Commercial Launch in:
• Switzerland
• Belgium
data as % revenue
10% 15% 20% 25% 30%
data
reven
ue
2003
2004
2005
Revenue growth: Orange view of 2004-05 data revenue growthRevenue growth: Orange view of 2004-05 data revenue growth
Note: bubble size denotes targeted data ARPU.
Revenue growth: Orange into 2004Revenue growth: Orange into 2004
Orange revenue growth expected to improve in 2004 from 2003 trends
Orange revenue growth expected to improve in 2004 from 2003 trends
• Increased competition in the UK with “3” and TescoIncreased competition in the UK with “3” and Tesco• But no threat on value customersBut no threat on value customers• No major impact of VOD-SFR joint marketing No major impact of VOD-SFR joint marketing
Market Market assumptionsassumptionsMarket Market assumptionsassumptions
• F/M price regulation already built in expectationsF/M price regulation already built in expectations• Bill&Keep exit in France assumed from july 1st 04 Bill&Keep exit in France assumed from july 1st 04 RegulationRegulationRegulationRegulation
• Orange has regained control of its growth levers Orange has regained control of its growth levers VisibilityVisibilityOn revenue On revenue VisibilityVisibilityOn revenue On revenue
R e v e n u e g r o w t h
R e v e n u e g r o w t h
Fixed line in FranceFixed line in France
Revenue growth: Fixed line France objectiveRevenue growth: Fixed line France objective
• Reach the inflexion pointReach the inflexion pointObjective 2004Objective 2004Objective 2004Objective 2004
• Broadband (retail & corporate) Broadband (retail & corporate) • New services (retail & corporate)New services (retail & corporate)• New handsets (retail) New handsets (retail)
Key driversKey driversKey driversKey drivers
Full FT group objective consistent with cautious stance on fixed in France
Full FT group objective consistent with cautious stance on fixed in France
Revenue growth: Fixed line France 2003Revenue growth: Fixed line France 2003
• Slight decrease over 9 months Slight decrease over 9 months Number of linesNumber of linesNumber of linesNumber of lines
• Slower decline in localSlower decline in local• Long distance market share around 63% Long distance market share around 63%
Traffic marketTraffic marketshareshareTraffic marketTraffic marketshareshare
Contributive revenue down 2.4%* for the segment over 9 months
Retail markets more resilient than corporate & wholesale
Contributive revenue down 2.4%* for the segment over 9 months
Retail markets more resilient than corporate & wholesale
• 1.1m new ADSL lines over 9 months 1.1m new ADSL lines over 9 months BroadbandBroadbandBroadbandBroadband
• 18% growth over 9 months, lower growth from Q318% growth over 9 months, lower growth from Q3 despite roughly stable market share despite roughly stable market share
Data Data transmissiontransmissionservicesservices
Data Data transmissiontransmissionservicesservices
* Pro forma growth
Revenue growth: Fixed line France challenges in 2004Revenue growth: Fixed line France challenges in 2004
Pro-actively seeking the inflexion point in a challenging context
Pro-actively seeking the inflexion point in a challenging context
• Subscription resale, broadband wholesale prices Subscription resale, broadband wholesale prices RegulationRegulationRegulationRegulation
• A more cyclical market, price decline and adverseA more cyclical market, price decline and adverseproduct mix effect product mix effect
Corporate Corporate Market trendsMarket trendsCorporate Corporate Market trendsMarket trends
• Fixed line retail market still has untapped potentialFixed line retail market still has untapped potential for new services and marketing offers for new services and marketing offers
Retail Retail Market trendsMarket trendsRetail Retail Market trendsMarket trends
• Uncertainty for economic growthUncertainty for economic growth• Declining market for voiceDeclining market for voice• Strong momentum For ADSL Strong momentum For ADSL
MarketsMarketsMarketsMarkets
Revenue growth: Fixed line France market assumptionsRevenue growth: Fixed line France market assumptions
Fixed voice volume Fixed voice volume still decliningstill declining
Access Access lineslines slightlyslightly downdown
Economic climate to improve in 2004Economic climate to improve in 2004
IT spending take up to have a favourable IT spending take up to have a favourable delayed impactdelayed impact
Mixed signals for 2004, comparable to 2003 Mixed signals for 2004, comparable to 2003
Revenue growth: Fixed line France regulatory assumptionsRevenue growth: Fixed line France regulatory assumptions
Liste Rouge* free since August 6,2003 Liste Rouge* free since August 6,2003 (€ 130 M full year impact)(€ 130 M full year impact)
Line resale: no decision yet and very small impact Line resale: no decision yet and very small impact if any in 2004if any in 2004
Subscription fee increase requested as soon as Subscription fee increase requested as soon as possible and assumed early 2004possible and assumed early 2004
FT expects more freedom in highly competitiveFT expects more freedom in highly competitiveurban areasurban areas
Fixed/Mobile price cutFixed/Mobile price cut
* Unlisted numbers
Neutral for revenue with FT current assumptionsNeutral for revenue with FT current assumptions
Revenue growth: Fixed line France 2004 broadband initiativesRevenue growth: Fixed line France 2004 broadband initiatives Increase penetration in FranceIncrease penetration in France
Boost broadband adoption with Boost broadband adoption with new servicesnew services • Video-telephonyVideo-telephony
• TVoDSL and video-on-demandTVoDSL and video-on-demand
• Home networksHome networks
• WifiWifi
• Broadband for corporateBroadband for corporate
Objective of 4.5m ADSL line end of 2004 up circa 50% yoy
Broadband remains the growth engine
Objective of 4.5m ADSL line end of 2004 up circa 50% yoy
Broadband remains the growth engine
Revenue growth: Fixed line France 2004 initiativesRevenue growth: Fixed line France 2004 initiatives
• Extend tariff plans, extend range of flat fee offersExtend tariff plans, extend range of flat fee offersIncrease loyaltyIncrease loyaltyIncrease loyaltyIncrease loyalty
• Subscription fee increase, tariff packages,Subscription fee increase, tariff packages,increase penetration of service options, increaseincrease penetration of service options, increasebroadband penetration to protect lines installedbroadband penetration to protect lines installed
Defend Defend telephonytelephonyrevenuerevenue
Defend Defend telephonytelephonyrevenuerevenue
• Develop new distribution channels, increaseDevelop new distribution channels, increasemarket coverage (shop & online)market coverage (shop & online)
New channelNew channelmanagementmanagementNew channelNew channelmanagementmanagement
Revenue growth: Fixed line France 2004 initiatives on handsetsRevenue growth: Fixed line France 2004 initiatives on handsets
Improve telephony experience with new handsets That parallel mobile handsets look-and-feel, functionalityThat parallel mobile handsets look-and-feel, functionality
That facilitate penetration of new network servicesThat facilitate penetration of new network services (SMS, address book, reachability, etc.)(SMS, address book, reachability, etc.)
Milestones YE 2003YE 2003 : 50% of devices sold to be DECT / SMS compatible: 50% of devices sold to be DECT / SMS compatible
20042004 : over 90% of devices sold to be SMS compatible: over 90% of devices sold to be SMS compatible
mid 2004mid 2004 : launch MMS terminals : launch MMS terminals
Sales to double in 2004Sales to double in 2004
Develop new services, spur voice usage Develop new services, spur voice usage
Revenue growth: Fixed line France 2004 initiativesRevenue growth: Fixed line France 2004 initiatives
FUN120€ COULEUR
ARIA
Large Array of SMS Large Array of SMS compliant Handsetscompliant Handsets
SwissVoice 125
CORDLESS DECT Phones Even for small budget Premium & Discovery
SIEMENSA110
Alcatel Versatis 790
SAGEM D 70V
Siemens Gigaset S100
Philips Zenia 300
Alcatel Versatis 1190
DOROMATRA
SILLAGE 3000
Premium & DiscoveryPremium & Discovery
Security for Seniors
Siemens Gigaset E150
INVENTEL MACARON
Revenue growth: Fixed line France 2004 initiativesRevenue growth: Fixed line France 2004 initiatives
From a current market share of 20% (EUR1bn From a current market share of 20% (EUR1bn market size), a refocused organization shouldmarket size), a refocused organization shouldimprove FT positionsimprove FT positions
PABX and CPE PABX and CPE PABX and CPE PABX and CPE
Adapt large account type intranet offers to SMEAdapt large account type intranet offers to SME
Intranet forIntranet forSMESMEIntranet forIntranet forSMESME
Reposition offer as part of FT communication Reposition offer as part of FT communication Service business. Strengthen proactive sales Service business. Strengthen proactive sales approach. FT expects significant outsourcing dealsapproach. FT expects significant outsourcing deals
ManagedManagedServices &Services &outsourcingoutsourcing
ManagedManagedServices &Services &outsourcingoutsourcing
R e v e n u e g r o w t h
R e v e n u e g r o w t h
Wanadoo & Other internationalWanadoo & Other international
Revenue growth: Rest of the group objectiveRevenue growth: Rest of the group objective
Positive growth in line with total group trendPositive growth in line with total group trend
Objective 2004Objective 2004Objective 2004Objective 2004
Strong momentum at WanadooStrong momentum at WanadooMobile growth at TPMobile growth at TP
Key driversKey driversKey driversKey drivers
Growth initiatives in France planned to be developed abroad
Growth initiatives in France planned to be developed abroad
Revenue growth: Wanadoo 2003Revenue growth: Wanadoo 2003
Internet penetration by countryInternet penetration by country(percentage)(percentage)
ADSL markets in Europe grow 50 %+ per yearADSL markets in Europe grow 50 %+ per year
Number of Number of WanadooWanadoo broadband broadband customers incustomers in Europe Europe
((in thousandsin thousands))
Source: Jupiter Research – February 2003
20022002
2003E2003E
Sept.2002
Dec.2002
March2003
June2003
Sept.2003
982
1,374
1,613
1,819
2,071
Netherlands
Spain
France
UnitedKingdom
0% 10% 20% 30% 40% 50% 60% 70%
Spain
France
Italy
UK
Germany
Netherlands
Denmark
Norway
Sweden
Revenue growth: Wanadoo 2003Revenue growth: Wanadoo 2003
Source: wanadoo estimate, June 30, 2003
Internet access ranking and estimated ADSL market shareInternet access ranking and estimated ADSL market share
WanadooWanadoo / France / France TelecomTelecom
WanadooWanadoo / France / France TelecomTelecom
T-OnlineT-OnlineT-OnlineT-Online AOLAOLAOLAOL TiscaliTiscaliTiscaliTiscali FreeFreeFreeFree TelefonicaTelefonica/ Terra/ Terra
TelefonicaTelefonica/ Terra/ Terra BTBTBTBT
N°1(64%)
N°4(7%)
N°2(8%)
N°4(6%)
N°3(13%)
-- --
N°1(7%)
--N°2
(11%)N°7(4%)
-- --N°3
(51%)
N°2(10%)
N°4(n/a)
--N°5(n/a)
--N°1
(81%)--
N°2(10%)
-- --N°2 (6%)
-- -- --
--N°1
(73%)N°3(9%)
N°4(2%)
-- -- --
FranceFranceFranceFrance
UKUKUKUK
SpainSpainSpainSpain
NetherlandsNetherlandsNetherlandsNetherlands
GermanyGermanyGermanyGermany
ItalyItalyItalyItaly -- -- --N°3(5%)
-- -- --
FranceFranceFranceFrance
1,564,000
+ 87, 000
Brand nameMarketing and
technical innovation (Wi-Fi)
Wanadoo eXtense Wi-Fi PS2Wanadoo eXtense Wi-Fi PC Card
OrangeMultimedia
eXtense Pack
1,564,000
+ 87, 000
Brand nameMarketing and
technical innovation (Wi-Fi)
Wanadoo eXtense Wi-Fi PS2Wanadoo eXtense Wi-Fi PC Card
OrangeMultimedia
eXtense Pack
BBBBsubscriberssubscribersend Q3end Q3
BBBBsubscriberssubscribersend Q3end Q3
New offersNew offersNew offersNew offers
123,000
+17, 000
2.5m narrowband customers to be migrated onto broadband
“Moneyback guarantee” ADSL offer with 1 month subscription on a trial basis
2 months free subscription for signup in Dixons stores
123,000
+17, 000
2.5m narrowband customers to be migrated onto broadband
“Moneyback guarantee” ADSL offer with 1 month subscription on a trial basis
2 months free subscription for signup in Dixons stores
UKUKUKUK
148,000
+12,000
Clear alternative to Telefonica /Terra
34% market share with 1.5m customers
Modem & router ADSL offer with fixed IP address for SMEs
Time-based ADSL offer
Flat-rate plans for unlimited Internet access and phone calls with Uni2
148,000
+12,000
Clear alternative to Telefonica /Terra
34% market share with 1.5m customers
Modem & router ADSL offer with fixed IP address for SMEs
Time-based ADSL offer
Flat-rate plans for unlimited Internet access and phone calls with Uni2
SpainSpainSpainSpain
StrenghtsStrenghtsStrenghtsStrenghts
Revenue growth: Wanadoo 2003Revenue growth: Wanadoo 2003
235,000
+ 13, 000
47% of the customer base is broadband
New Wi-Fi offerBroadened
cable offer (Wanadoo Cable Easy)
235,000
+ 13, 000
47% of the customer base is broadband
New Wi-Fi offerBroadened
cable offer (Wanadoo Cable Easy)
NetherlandsNetherlandsNetherlandsNetherlands
Increase inIncrease inSeptemberSeptember
Increase inIncrease inSeptemberSeptember
Revenue growth: Wanadoo 2004 initiatives and objectivesRevenue growth: Wanadoo 2004 initiatives and objectives Wanadoo France
Boost sales in France Increase value for broadband + 60% ADSL revenues / At least 50% acquisition share
Internet services Develop paid-for services Develop B2B mobile interactive services Double paid-for service revenues
Directories Maximize the value of the customer base Enhance White pages with the inclusion of mobile numbers
Develop mobile services Increase by 5% the total number of advertisers and increase the ARPA
Broadband to support growth in France, Yellow pages not yet mature
Broadband to support growth in France, Yellow pages not yet mature
Revenue growth: Wanadoo 2004 initiatives and objectivesRevenue growth: Wanadoo 2004 initiatives and objectives
Wanadoo UK Drive on broadband and diversify / optimize distribution Double ADSL revenues / Exceed 10% of the overall customer base
(6% en 2003)
Wanadoo Spain and Wanadoo Nederlands Enhance ADSL positions Leverage on our French innovations to boost market share Boost ADSL revenues
Leverage broadband growth out of France and maintain
a broadband leadership in Europe
Leverage broadband growth out of France and maintain
a broadband leadership in Europe
Revenue growth: WanadooRevenue growth: Wanadoo
Wanadoo going forwardWanadoo going forwardWanadoo going forwardWanadoo going forward
ADSL revenue up 60% in FranceADSL revenue up 60% in FranceDouble paid for revenueDouble paid for revenueIncrease by 5% total number of advertisers for YPIncrease by 5% total number of advertisers for YPDouble ADSL revenue in the UKDouble ADSL revenue in the UK
Key targets 2004Key targets 2004Key targets 2004Key targets 2004
Remaining potential to unfoldRemaining potential to unfoldLeader on a high growth market in Europe that the Leader on a high growth market in Europe that the Group intend to fully exploitGroup intend to fully exploit
Wanadoo goingWanadoo goingforwardforwardWanadoo goingWanadoo goingforwardforward
Wanadoo is one of the FT’s group growth engineWanadoo is one of the FT’s group growth engine
Revenue growth: Equant 2004 initiativesRevenue growth: Equant 2004 initiatives
In a recovering market, Equant expect to maintain its leading position
– In spite of indirect sales (outside FT) decreasing
– By developping installed customer base and offering a complete network services portfolio
– By developping existing and new outsourcing contracts
– By refocusing sales and delivery toward value added services (consulting, project, service management)
Equant is a core international asset of FT groupEquant is a core international asset of FT group
• New Pricing PlansNew Pricing Plans
• ADSLADSL
• Customer Care: CRM & « 3000 »Customer Care: CRM & « 3000 »
• New offersNew offers
• Focus on Business Market ShareFocus on Business Market Share
• Convergent Fixed + Mobile approachConvergent Fixed + Mobile approach
• Data Services Data Services
• Orange intimacyOrange intimacy
• New Offers: IP VPN / IN Numbers / …New Offers: IP VPN / IN Numbers / …
• New sales organisationNew sales organisation
• Large projectsLarge projects
Revenue growth: TP 2004 initiativesRevenue growth: TP 2004 initiatives
Fixed Line Fixed Line PenetrationPenetration
Fixed Line Fixed Line PenetrationPenetration
Mobile PenetrationMobile Penetration& Market Share& Market Share
Mobile PenetrationMobile Penetration& Market Share& Market Share
Business Business PenetrationPenetration
Business Business PenetrationPenetration
T O P a n d o t h e ro p e r a t i n g t h e m
e
T O P a n d o t h e ro p e r a t i n g t h e m
eWhat is the profitability trend?
TOP: what’s next? TOP: what’s next?
TOP in 2004TOP in 2004TOP in 2004TOP in 2004
Sourcing: approx EUR1.5bn full year impact in 2004 Sourcing: approx EUR1.5bn full year impact in 2004 for Opex+Capexfor Opex+CapexCapex sharing (eg: IT & network application Capex sharing (eg: IT & network application convergence)Continuous improvement in Opex control convergence)Continuous improvement in Opex control (eg:saving trackers, process reengineering and(eg:saving trackers, process reengineering andbest practices)best practices)Working capital :Billing process improvementWorking capital :Billing process improvement
Group’s reengineering leads to further efficiency Group’s reengineering leads to further efficiency gains and better quality of service gains and better quality of service
FactsFactsFactsFacts
Key driversKey driversKey driversKey drivers
FT fully focused on TOP execution which remains
the key priority
FT fully focused on TOP execution which remains
the key priority
TOP : 2004 key initiativesTOP : 2004 key initiatives
Key initiatives in 2004:– Sourcing: launch of Wave 3, full implementation
of Wave2
– Capex:Focus on growth (UMTS, ADSL), sharing for IT
– Opex: New process for local network units “URR”in France, rationalize international network supervision, Continuous optimization of IT operation and communication spend
– Working capital: mutualize ressources to improve corporates Clients billing
– New projects to be launched in 2004: revenue insurance, supply chain,network procurement
TOP is an evolving programTOP is an evolving program
Other operating themes: operating marginsOther operating themes: operating margins
Operating margins trends 2004-05Operating margins trends 2004-05Operating margins trends 2004-05Operating margins trends 2004-05
Improvement from 2003 and consistent with Improvement from 2003 and consistent with approx 40% REAA margin objective in 2005 approx 40% REAA margin objective in 2005
Objective 2004-5Objective 2004-5Objective 2004-5Objective 2004-5
Impact of sourcing in 04 (approx 1% of REAA margin),Impact of sourcing in 04 (approx 1% of REAA margin), continuous improvement of TOP program, continuous improvement of TOP program, Headcount reduction over 2003-2005 (approx 0.5%Headcount reduction over 2003-2005 (approx 0.5%REAA margin in 04 for total group labor cost decrease)REAA margin in 04 for total group labor cost decrease)Other Opex gains compensated by R&D and SAC increaseOther Opex gains compensated by R&D and SAC increase
Key driversKey driversKey driversKey drivers
Toward approx 40% REAA margin in 2005Toward approx 40% REAA margin in 2005
Other operating themes: CapexOther operating themes: Capex
Capex policy for 2004-2005 Capex policy for 2004-2005 Capex policy for 2004-2005 Capex policy for 2004-2005
Increase from 2003 level in spite of sourcingIncrease from 2003 level in spite of sourcinggains (approx 25% of capex reduction in Q3 03)gains (approx 25% of capex reduction in Q3 03)
Objective 04-05Objective 04-05Objective 04-05Objective 04-05
UMTS capex, broadband and new servicesUMTS capex, broadband and new services developmentdevelopment
Key driversKey driversKey driversKey drivers
Back to approx 11% capex / sales ratioFT can be fully prepared for growth in spite of contained
capexlevels through new efficiencies
Back to approx 11% capex / sales ratioFT can be fully prepared for growth in spite of contained
capexlevels through new efficiencies
Other operating themes: Cash generationOther operating themes: Cash generation
Cash generation from operationsCash generation from operationsCash generation from operationsCash generation from operations
REAA-Capex / revenue ratio approx 29% in 2005 REAA-Capex / revenue ratio approx 29% in 2005 REAA-Capex rising through revenue growth REAA-Capex rising through revenue growth
Objective 2005Objective 2005confirmed confirmed Objective 2005Objective 2005confirmed confirmed
Revenue at the high end of +3 and +5% rangeRevenue at the high end of +3 and +5% range2005 REAA margin approx 40%2005 REAA margin approx 40%2005 Capex/Sales approx 11%2005 Capex/Sales approx 11%
Key driversKey driversKey driversKey drivers
The right balance between operating margin and revenue growth.
Objective of Net debt/REAA below 2.5 for 2004 and between 1.5 and 2 for 2005
The right balance between operating margin and revenue growth.
Objective of Net debt/REAA below 2.5 for 2004 and between 1.5 and 2 for 2005
46
France TelecomFrance TelecomInvestor Day ConclusionInvestor Day Conclusion
Frank E. Dangeard
Frank E. Dangeard
CAUTIONARY STATEMENT CAUTIONARY STATEMENT
This presentation contains forward-looking statements about France Telecom. Such statements are not historical facts and include expressions of management’s expectations about new and existing programs, opportunities, technology and market conditions. Although France Telecom believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties. These statements should not be regarded as a representation that anticipated events will occur or that expected objectives will be achieved. Important factors that could cause actual results or performance to differ materially from the results anticipated in the forward-looking statements include, among other things, the success of the announced FT 2005 plan, including the “15 + 15 + 15” plan and the TOP program, France Telecom’s other strategic, financial and operating initiatives, changes in economic, business and competitive markets, risks and uncertainties attendant upon international operations, technological trends, exchange rate fluctuations and market regulatory factors. More detailed information on the potential factors that could affect the financial results of France Telecom is contained in the Document de référence submitted to the COB on March 21, 2003 and in its Form 20-F filed with the U.S. Securities and Exchange Commission. The forward-looking statements contained in this document speak only as of the date of this presentation and France Telecom does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
This presentation contains certain measures calculated based on French GAAP information. For a definition of these measures, please refer to slide 55. In accordance with market authorities’ recommendations, France Telecom is no longer using the acronym “EBITDA” for Operating income before depreciation, but the French acronym “REAA”.
This presentation contains forward-looking statements about France Telecom. Such statements are not historical facts and include expressions of management’s expectations about new and existing programs, opportunities, technology and market conditions. Although France Telecom believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties. These statements should not be regarded as a representation that anticipated events will occur or that expected objectives will be achieved. Important factors that could cause actual results or performance to differ materially from the results anticipated in the forward-looking statements include, among other things, the success of the announced FT 2005 plan, including the “15 + 15 + 15” plan and the TOP program, France Telecom’s other strategic, financial and operating initiatives, changes in economic, business and competitive markets, risks and uncertainties attendant upon international operations, technological trends, exchange rate fluctuations and market regulatory factors. More detailed information on the potential factors that could affect the financial results of France Telecom is contained in the Document de référence submitted to the COB on March 21, 2003 and in its Form 20-F filed with the U.S. Securities and Exchange Commission. The forward-looking statements contained in this document speak only as of the date of this presentation and France Telecom does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
This presentation contains certain measures calculated based on French GAAP information. For a definition of these measures, please refer to slide 55. In accordance with market authorities’ recommendations, France Telecom is no longer using the acronym “EBITDA” for Operating income before depreciation, but the French acronym “REAA”.
Management driversManagement driversManagement driversManagement drivers
Use of cashUse of cashUse of cashUse of cash
Summary of Investor DaySummary of Investor DaySummary of Investor DaySummary of Investor Day
External growth and equity structuresExternal growth and equity structuresExternal growth and equity structuresExternal growth and equity structures
Group prioritiesGroup prioritiesGroup prioritiesGroup priorities
Investor Day Conclusions (1)Investor Day Conclusions (1)Investor Day Conclusions (1)Investor Day Conclusions (1)
You have met the ExCom members responsible for delivering on these commitments
You have met the ExCom members responsible for delivering on these commitments
1.1. All previous guidance confirmed All previous guidance confirmed
– Revenue growth: top end of 3 to 5% range
– REAA: towards app. 40 % margin in 2005
– Capex ratio: 10 to 12 % of sales
– Leverage: 1.5 to 2 Net Debt / REAA ratio in 2005
2. Revenue growth can be achieved without jeopardizing deleveraging and capital intensity targets
Investor Day Conclusions (2)Investor Day Conclusions (2)
3.3. Guidance underpinned by TOP and TOP-LINE programs Guidance underpinned by TOP and TOP-LINE programs
– Numerous product, service and "back-office" Numerous product, service and "back-office" roadmap roadmap commitmentscommitments announced today announced today
4. As in the case of TOP, TOP-LINE requires reengineering of the FT Group's "business models" in:
– Corporate solutions
– Broadband access and services
– Business integration
5.5. Partnerships and innovation will play an important role Partnerships and innovation will play an important role
Top end of 3 to 5% growth range — 1.5 to 2 Net Debt / REAA ratio in 2005
Top end of 3 to 5% growth range — 1.5 to 2 Net Debt / REAA ratio in 2005
Group prioritiesGroup priorities
1. Cost rationalization and reengineering (TOP, best-in-class performance)
2. Debt reduction managed to hit 2005 target of 1.5 to 2 ratio of Net debt / REAA
3. "Excess cash" used to improve organic growth shareholder return, within existing footprint
4. Seize the opportunities of the technology transition within the TOP-LINE program
Balancing profitability and growth:France Telecom is NOT a "utility"
Balancing profitability and growth:France Telecom is NOT a "utility"
Use of cash prioritiesUse of cash priorities
Distribution — As early as 2004Distribution — As early as 2004
Debt reduction to hit 2005 target (1.5 to 2 x)Debt reduction to hit 2005 target (1.5 to 2 x)
Cash from Cash from operationsoperationsCash from Cash from operationsoperations
"Excess"ExcessCash":Cash":
Cash from Cash from operations operations
beyond beyond TOP target, TOP target, disposalsdisposals
"Excess"ExcessCash":Cash":
Cash from Cash from operations operations
beyond beyond TOP target, TOP target, disposalsdisposals
Cash Call Cash Call on Marketon MarketCash Call Cash Call on Marketon Market
Organic growth investmentOrganic growth investment Footprint optimization (in / out)Footprint optimization (in / out) Subsidiaries' equity structure optimization Subsidiaries' equity structure optimization (up / down)(up / down)
Major acquisitionMajor acquisition
Not envisagedNot envisaged
Share buy-backShare buy-back
Not envisagedNot envisaged
1.1.1.1.
2.2.2.2.
3.3.3.3.
4.4.4.4.
5.5.5.5.
6.6.6.6.
7.7.7.7.
Use of cash — CommentsUse of cash — Comments
1. Distributions rather than share buy-backs
2. Organic growth investments — in support of the TOP-
LINE program
3. Subsidiaries' equity structure optimization — only for
fundamental strategic and financial purposes, e.g.
ORANGE
4. Footprint optimization — see Dec. 5, 2002 criteria
5. No major acquisition contemplated
France Telecom is focused on "cash returns" France Telecom is focused on "cash returns"
Management criteria for decisionManagement criteria for decision
A very strong equity storyA very strong equity story
1. Deleveraging — the heart of value creation for the Group
2. The "twin engines" of deleveraging:
– Cost cutting and reenginnering TOP
– Organic growth TOP-LINE
3. Criteria for decision regarding use of "excess cash":
– Improved strategic positions
– Cash return on investments
55
France TelecomFrance TelecomInvestor DayInvestor Day
ExCom MembersExCom
Members
Q & AQ & A
Glossary Glossary
Contributive Consolidated Revenues: consolidated revenues excluding intra-group transactionsPro forma figures: figures of the preceding period adjusted to reflect the same scope of consolidation and exchange rates as in the current periodREAA: Operating income before depreciation and amortization of tangible and intangible assets and before amortization of actuarial adjustments in the early retirement planCapex: acquisitions of intangible and tangible assets, excluding GSM and UMTS licensesOpex: operating charges before depreciation and amortization of tangible and intangible assets and before amortization of actuarial adjustments in the early retirement planFCF (Free Cash Flow): net cash provided by operating activities, less net cash used in investing activities. FCF does not take into account investment of cash in short term marketable securitiesOperating working capital: net stocks, operational receivables, prior to securitisation, operational payables (excl. fixed production)DSO: Days of Sales OutstandingARPU: Mobiles network revenues for the previous twelve months Mobiles weighted average customer base for the 12 month period
Network revenues include outgoing traffic, incoming traffic, access fees, visitor roaming and value added services. The mobiles weighted average customer base for the 12 months period is the average of the monthly average customer bases (calculated as the sum of the opening and closing customer bases for the month divided by two). ARPU is quoted on a revenue per customer per year basis. Orange France (mainland) does not currently receive revenues from other French mobile network operators for voice calls from their networks that terminate on Orange France ’s mainland network as in some other markets, in particular the United Kingdom. As a consequence, French and UK ARPUs are not directly comparable.