Orange Sa · EURONEXT:ORA
Orange Sa — France Telecom — H1 2006 Earnings Presentation
38 slides from Orange Sa's earnings presentation, Jul 27, 2006
Slide 1: Form 6-K France Telecom
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 July 27, 2006 Commission File No. 1-14712 FRANCE TELECOM (Translation of registrant’s name into English) 6, place d’Alleray, 7550
Slide 2: 1H 2006 results
1H 2006 results th July 27 , 2006 H1 Definitive Results to be released on September, 14th 2006
Slide 3: Cautionary statement
Cautionary statement This presentation relates to France Telecom’s preliminary results for the first half of 2006 which have been reviewed by the board of directors but are still in the process of being reviewed by statutory auditors. France Telecom’s first half 2006 financial statements, which are
Slide 4: 1H 2006 Towards integration
1H 2006 Towards integration i telecom
Slide 5: 1H06: major operational achievements
1H06: major operational achievements High penetration rate Confirmed leadership in ADSL in France: and highly 49.8%* retail market share competitive markets: Sustained value share for mobile in France : a fair balance between +247k MVNOs clients in 1H market share and profitability Value focus on UK
Slide 6: 1H06: Convergence becomes a reality
1H06: Convergence becomes a reality One brand one team Rebranding achieved in France, UK and the Netherlands Full integration of Amena on June 30th “les Optimales” Orange and France Telecom First launches New ADSL offers with free TV bouquet / high definition from the IPTV product factory Broadband-
Slide 7: 1H06: priority to sustainable organic FCF
1H06: priority to sustainable organic FCF Actual Comparable Actual % Comparable euro millions 1H06 change Basis - % chg 1H05 Basis – 1H05 Revenues 23,665 25,487 25,855 9.3% 1.4% Gross Operating Margin 9,300 9,950 9,467 1.8% -4.9% as a % of revenues excluding Lebanon reserve reversal in 1H05 38.5%* 3
Slide 8: 1H 2006 Revenues and gross operating margin analysis
1H 2006 Revenues and gross operating margin analysis
Slide 9: 1H06: Group revenues by segment
1H06: Group revenues by segment €25,855m / +9.3% actual / +1.4% on a comparable basis euro millions +771 +31 +104 25,855 +1,652 25,487 -263 -275 + 6.1% -2.3% + 6.4% 23,665 +170 - 6.7% 1H05 Forex Impact Perimeter 1H 05 on a Personal Home Enterprise Directories Eliminations 1H 06 Impact comparable bas
Slide 10: Personal 1H06
Personal 1H06 Revenues Gross Operating Margin rate +22.3% actual / +6.1% on a comparable basis euro millions + 405 13,429* + 71 + 144 + 94 + 63 + 1,623 12,658 +18.5% +14.1% 60.2% +4.5% +2.0% +2.2% 59.7% 58.9% 37.7% ** 36.4% 10,984 37.3% + 51 1H05 actual Forex Perimeter 1H05 CB France UK Spain Poland
Slide 11: Personal France 1H06
Personal France 1H06 Revenues Gross Operating Margin rate +1.8% actual / +2.0% on a comparable basis euro millions + 223 + 28 57.2% 57.8% 58.0% + 60 4,823 4,729 - 200 41.0% 41.1% 40.1% - 17 1H 05 on a Customer CTR Impact Voice Non-Voice Equipments 1H 06 comparable base Impact revenues* Revenues & ot
Slide 12: Personal UK 1H06
Personal UK 1H06 Revenues Gross Operating Margin rate +2.1% actual / + 2.2% on a comparable basis + 13 2,870 euro millions + 57 0 -7 2,812 61.0% 61.0% 2,807 57.3% -5 27.2% 27.2% 26.6% 1H05 actual Forex Impact 1H05 on a Customer Voice Non-voice Equipment & 1H06 comparable Base Impact revenues* revenu
Slide 13: Personal Spain 1H06
Personal Spain 1H06 Revenues Gross Operating Margin rate +4.5% on a comparable basis euro millions + 149 61.3% 58.6% +6 1,633 - 49 - 18 - 17 32.5% 30.0% 1,562 Ow –16m euros in 1Q06 1H 05 on a Customer CTR Impact Voice Non-voice Equipment & 1H 06 1H05 CB 1H06 comparable Base Impact Revenues* revenues
Slide 14: Personal ROW 1H06
Personal ROW 1H06 Revenues Gross Operating Margin rate +14.1% on a comparable basis euro millions 59.2% 59.6% 59.8% 3,284 2,782 2,879 41.2% 42.0% 42.5% 1H05 1H05 CB 1H06 1H05 1H05 CB 1H06 GOM pre commercial expenses GOM 29.5m ROW mobile customers, +28.4% yoy on a comparable basis Romania: 7.2m custo
Slide 15: Home 1H06
Home 1H06 Revenues Gross Operating Margin rate -0.3% actual / -2.3% on a comparable basis euro millions 11,389 +155 37.9% 38.3% 36.9% +79 33.8% 34.0% 31.8% 11,156 176 11,127* -2.0% +2.6% + 10.5% 5 43 94 -5.7% 26 -8.0% 1H05 actual Forex impact Perimeter 1H05 on a France Poland UK Spain Other ROW 1H06
Slide 16: Home France 1H06 KPI's
Home France 1H06 KPI’s ADSL market share %* Number of fixed lines (000) 50.0% 49.8% 49.8% 27.48 27.41 27.50 27.57 27.53 0.2 0.3 0.6 0.9 1.2 48.3% 48.1% 50.6% 27.2 27.1 26.9 26.6 26.3 2Q05 3Q05 4Q05 1Q06 2Q06 Total number of lines (including full unbundled lines) Nb of lines excluding full unbundled
Slide 17: Home France 1H06
Home France 1H06 Revenues Gross Operating Margin rate -2.0% on a comparable basis euro millions 37.4% 37.7% + 62 35.8% 8,890 33.4% 33.4% 8,828 30.8% 8,714 -9 -86 -81 1H05 actual Perimeter 1H05 on a Consumer Carrier Other Home rev 1H06 1H05 1H05 CB 1H06 Impact comparable services Services in Fr basis
Slide 18: Home France consumer services 1H06 focus on home usage revenues
Home France consumer services 1H06 focus on home usage revenues -0.9% actual / -0.9% on a comparable basis euro millions 4 ,397 +63 +36 +193 4,358 -56 -59 -68 -147 1H 05 Chges in nber of Subscription fee CTR Impact PSTN volume Broadband VoIP Narrowband 1H 06 retail subscribers increase and tariff mi
Slide 19: Home France 1H06 total retail and wholesale access line revenue
Home France 1H06 total retail and wholesale access line revenue YoY change 2,259 + 2.0% 2,215 135 202 + 49.6% 2,080 2,057 - 1.1% 1H05 1H06 Retail access revenues Wholesale access revenues Access network revenues up despite change in mix 18
Slide 20: Home France 1H06 focus on Gross Operating Margin
Home France 1H06 focus on Gross Operating Margin 3,172 2,972 2,683 - 200 - 289 Of which: cc. 100 m euros due to implementation costs linked to transformation of the business model (call centers & IT services platforms) cc. 85 m euros linked to the design, launch and usage of new offers 1H05 Lebanon
Slide 21: Home ROW 1H06 revenues
Home ROW 1H 06 revenues €959m / +14.6% actual /+2.3% on a comparable basis Spain UK -6.3% actual / +2.4% actual / -8% on a comparable basis +2.6% on a comparable basis A customer base increasingly First mover and leader on VoIP broadband, multiplay and subscription based customer base at 177k at the
Slide 22: Enterprise 1H06
Enterprise 1H 06 Revenues Gross Operating Margin rate -2.6% actual / -6.7% on a comparable basis euro millions +127 4,095 +46 -29 3 ,922 +25 25,1% 23,2% 21,8% +103 3,820 -5 -370 1H 05 Actual Forex Perimeter 1H 05 on a CTR Impact Business Advanced Extended Others 1H 06 Impact Impact comparable Net. L
Slide 23: 1H 2006 Consolidated figures
1H 2006 Consolidated figures
Slide 24: 1H06: Gross Operating Margin
1H06: Gross Operating Margin Comparable euro millions Actual 1H05 Basis – 1H05 1H06 Revenues 23,665 25,487 25,855 non labour expenses 9,876 10,958 11,850 as a % of revenues 41.7% 43.0 % 45.8 % of which commercial expenses 2,836 3,349 3,585 as a % of revenues 12.0% 13.1% 13.9% labour expenses 4,489 4
Slide 25: 1H06: headcount and labour costs
1H06: headcount and labour costs Labour costs, Euro millions Headcounts, end of period & as a % of revenues 200,197 203,857 203,008 199,663 4,579 4,538 4,489 19.0% 18.0% 17.5% 1H05 1H05 CB FY05 1H06 1H05 1H05 CB 1H06 In line with NExT objectives 24
Slide 26: 1H06: Capex
1H06: Capex €3,055m / +3.5% on a comparable basis CAPEX by key items CAPEX allocation Revenues growth - actual basis 25% Personal Poland 20% Others Personal ROW 16% Mobile Home ROW 14% network IT& 38% Customer 9% FT Group service platforms Personal Spain * 25% 3% Personal UK Personal France Fixed ne
Slide 27: 1H06: from Gross Operating Margin to Operating Income
1H06: from Gross Operating Margin to Operating Income chge in actual euro millions 1H05 1H06 EURm % chg Gross Operating Margin 9,300 9,467 167 +1.8% Employee Profit Sharing -166 - 146 20 Share-based payment - 34 - 21 13 Depreciation & amortization - 3,462 - 3,838 -376 Impairment of goodwill 0 0 Impa
Slide 28: 1H06: from Operating Income to Net Income
1H06: from Operating Income to Net Income euro millions 1H05 1H06 Operating Income 6,479 5,334 Total Financial result -1,827 -1,290 Income taxes -1,018 -1,285 Net Result 3,634 2,759 Minority Interests -271 -413 Net Result Group Share 3,363 2,346 Net Result Group Share excluding disposal of assets st
Slide 29: 1H06 financing: From GOM to Net cash provided by operating activities
1H06 financing: From GOM to Net cash provided by operating activities euro millions 1H05 1H06 Gross Operating Margin 9,300 9,467 Interest Expense, net* (cash) -1,877 -1,588 Income Taxes (cash) - 475 -390 Early Retirement Plan (cash) -448 -497 Employee Profit Sharing (P&L) - 166 - 146 others (ow rest
Slide 30: 1H06 organic Cash Flow
1H06 organic Cash Flow euro millions 1H05 1H06 Net Cash provided by operating activities 5,868 6,650 Purchase of tangible and intangible assets, net of change - 2,959 - 3,407 in fixed asset vendors ow Capex -2,713 -3,055 Proceeds from sale of tangible and intangible assets 96 71 Organic Cash Flow *
Slide 31: Net Debt – end June 2006
Net Debt – end June 2006 Net debt changes euro millions 47,846 +212 +3,086 47,234 -59 -537 Of which 484m euros paid to France Telecom subsidiaries -3,314 minority shareholders End of 2005 Organic Cash Dividends Acquisitions Disposals Others End of June 2006 Flow 30
Slide 32: Milestones and objectives
Milestones and objectives Rirance telecom
Slide 33: 7bn organic Cash Flow generation target confirmed for 2006
7bn organic Cash Flow generation target confirmed for 2006 Implement a customer centric country based organization Group Promote and deploy Orange single brand transformation Launch converged fixed-mobile offer (UNIK, …) on track … Develop new sources of revenues (everyday life services, content, …)
Slide 34: 1H 2006 results
1H 2006 results July 27 t h, 2006
Slide 35: Glossary (1)
Glossary (1) ARPU – Consumer Fixed Services (HCS segment): average annual revenue per line for the Consumer Fixed Services is calculated by dividing the average monthly revenues on the basis of the last twelve months by the weighted average number of customers over the same period. The weighted aver
Slide 36: Glossary (2)
Glossary (2) French Retail ADSL Market Share (ARCEP definition): starting from 1Q06, quarterly French ADSL market share presentation will be based on ARCEP High- speed Internet Observatory methodology. Until the end of 2005, the figures published by France Telecom covered intermediate markets (such
Slide 37: Glossary (3)
Glossary (3) Number of employees (active employees at end-of-period): number of personsworking on the last day of the period, including both permanent and fixed-term contracts. OPEX:operating expenses included in the determinationof the GOMinclude labour expenses and non labour expenses. Orange chur
Slide 38: Signature
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FRANCE TELECOM Date: July 27, 2006 By: /S/ PIERRE HILAIRE Name: Pierre Hilaire Title: Director of Financ