Slide 1: Form 6-K cover page
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 August 2, 2007 Commission File No. 1-14712 FRANCE TELECOM (Translation of registrant’s name into English) 6, place d’Alleray, 755
Slide 2: France Telecom first half 2007 results
france telecom first half 2007 results
Slide 3: Cautionary statement
cautionary statement this presentation contains forward-looking statements and information on France Telecom's objectives, in particular for 2007. Although France Telecom believes that these statements are based on reasonable assumptions, these forward-looking statements are subject to numerous risk
Slide 4: Agenda
agenda part 1: group highlights for 1H07 part 2: focus on regional performance part 3: outlook 3
Slide 5: 1H07 Group Highlights
1H07 Group Highlights 4
Slide 6: Highlights
highlights GOM stabilized in 1H with an improving revenue situation in most activities, especially in 2Q on track to reach 2007 guidance and 2006-2008 stable organic cash-flow 2H action plan should sustain 2007 performance and lay the foundation for 2008 5
Slide 7: 1H07 key financial achievements: delivering business transformation benefits
1H07 key financial achievements: delivering business transformation benefits 1H06* 1H07 06/07 key points in million of euros actual revenues 25,422 25,913 +1.9% 2Q growth at +2.1%, after +1.8% in 1Q GOM 9,236 9,416 +1.9% GOM rate stabilisation confirmed in 2Q in % of rev 36.3% 36.3% net income** - r
Slide 8: 1H07 key operational achievements
1H07 key operational achievements: all activities are contributing to the Group development 1H07 06/07 key points actual In thousands total group customers 163,327 +9%* 67% of total customer base rebranded o/w Orange branded 108,497 mobile customers 102,543 +15%* sustained double digit growth of mob
Slide 9: NExT: evolution of Group business model in mature markets
NExT: continuous evolution of Group business model in mature markets towards internet, data and new services evolution of mature markets*** revenues* by usage (base 100) 9% 10% 12% 18% 19% 22% 9% 9% 10% 44% 49% 49% 38% 32% 29% 1H05 1H06 1H07 PSTN access and voice** mobile access and voice** data and
Slide 10: NExT: growing markets driven by mobile, moving to data and internet
NExT: growing markets still driven by mobile and progressively moving to data, new services and internet evolution of growing markets*** revenues* by usage (base 100) 1% 1% 2% 9% 10% 9% 10% 9% 11% 82% 80% 81% 9% 10% 9% 1H05 1H06 1H07 PSTN access and voice** mobile access and voice** data and new ser
Slide 11: Increasing weight of growing markets from 10% to 13% of revenues
increasing weight of growing markets* from 10% to 13% in total Group revenues in 2 years evolution of revenues in growing markets* (in million of euros) +23.9% breakdown of revenues by main areas in 1H07 CAGR 3,398 27.9% 27.5% 2,868 2,214 16.5% 28.1% Mobile Poland Romania, Slovakia, Moldova Egypt, J
Slide 12: 1H07 Gross Operating Margin
1H07 Gross Operating Margin stabilised at 36.3% despite stronger commercial investments in 2Q evolution of margin by semester on comparable basis GOM 1H07: stabilised vs 1H 06 51.3% 51.3% 50.9% 50.4% 50.3% 50.0% 39.2% 36.5% 36.3% 36.4% 35.6% 35.2% 1H05 2H05 1H06 2H06 1Q07 2Q07 GOM rate pre-commercia
Slide 13: Cost base under control contributed to margin stabilization
cost base under control contributed to margin stabilization for the period evolution of opex (in % of revenues) €16,185m €16,496m (63.7% of revenues) (63.7% of revenues) labour costs benefit from Group headcount labour 17.5% 17.1% reduction interconnection 15.5% 15.0% better control of our abundance
Slide 14: Headcount evolution: pursuing headcount reduction in France
headcount evolution pursuing headcount reduction especially in France headcount evolution 198,032* 190,117 international 82,857 82,018 France 115,175 108,099 End of June 06 End of June 07 headcount down by 7,915 people, i.e -4.0% vs 1H06 on a comparable basis – in France, 1,571 net departures** in 1
Slide 15: Interconnect & IT&Networks costs €140m improvement
interconnect & IT&Networks costs €140m improvement in 1H07, ie -2.2% yoy interconnect & IT&N costs* evolution (in million of euros) 6,405 6,265 (25.2% of Rev.) +110 +18*** (24.2% of Rev.) -183 -85 other IT&N 2,456 2,389 costs interconnect costs 3,949 3,876 1H06 CB CTR cut** inter-operator costs IT&N
Slide 16: Profit & loss account
profit & loss account increase of operating income and net income in million of euros 1H06 1H07 o/w employees free of gross operating margin (GOM) 9,258 9,416 charge share program employee profit sharing -140 -159 (128m) share-based payment -19 -137 depreciation & amortization -3,832 -4,007 increase
Slide 17: Cash flow statement
cash flow statement organic cash flow in line with the FY guidance in million of euros 1H06* 1H07 gross operating margin (GOM) 9,258 9,416 net interest expense cash out -1,596 -1,459 income taxes cash out - 304 -467 early retirement plan cash out - 497 -523 employee profit sharing cash out - 349 -34
Slide 18: Evolution of net debt
evolution of net debt strong organic cash flow generation in 1H07 net debt changes (in million of euros) +531 +128 42,017 42,113 +3,117 -412 -8 -3,260 End of 2006 Organic Dividend Dividend paid Acquisitions Disposals Others End of June Cash Flow by the 2007 subsidiaries to minorities 17
Slide 19: 1H07 regional performance
1H07 regional performance 18
Slide 20: Personal France: stable revenue and GOM increase
1H07 personal France stable revenue and GOM increase revenues: +0.1% yoy on a comparable basis (+3.4% yoy excl. CTR) GOM: +2.1% yoy on a comparable basis (in million of euros) +159 4,824 +69 +3 4,828 -153 57.4% 59.2% -74 39.5% 40.2% 1H06 CB Customer CTR Impact Voice Non-voice Equipement 1H07 1H06 CB
Slide 21: Personal France: market share stabilization
1H07 personal France quarterly stabilization of market share excl. MVNOs, and increase including MVNO customers Orange market share evolution* customer base mix (000s) + 39k (+0.5%) 46.7% 46.5% 46.7% 8,314 8,353 46.4% 46.5% 37.1% 35.7% +974k (+6.9%) 45.5% 45.2% 14,076 15,050 45.0% 62.9% 64.3% 44.5%
Slide 22: Home France: strong GOM growth
1H07 home France strong GOM growth in a transformed business model revenues : +1.1% yoy on a comparable basis GOM: +10.3% yoy on a comparable basis (in million of euros) +277 +72 8,838 8,742 -9 -244 37.8% 40.3% 35.4% 32.4% 1Q07: -€98m +€127m 2Q07: -€147m +€150m 1H06 CB PSTN Internet Carrier Others 1
Slide 23: Home France: ADSL growth driven by multiplay
1H07 home France ADSL base growth continued to be driven by multiplay access total number of fixed lines (in million) ADSL market share* (%) 49.7% 49.6% 49.3% 49.2% 49.2% 27.53 27.51 27.74 27.80 27.84 1.21 1.56 2.27 3.03 3.90 50.3% 26.32 25.95 25.47 24.77 23.94 48.0% 45.1% 47.6% 47.8% 2Q06 3Q06 4Q06
Slide 24: France Unik: strong take-off in 1H07
1H07 France Unik: strong take-off in 1H07 with an increased product range UNIK development in France (handset sold) accelerate sales in 2H07: x 4.6 – handset sales will increase in 2H 298 from 259k in 1H – net & Unik offer launch in 2H 123 65 UNIK, the only real convergent offer: – UNIK available at
Slide 25: France FTTH deployment is on track
1H07 France FTTH deployment is on track FTTH deployment indicators 27,000 2,100 in 1H07, FT is the only player to propose a FTTH offer 12,000 deployment launched in Paris, 1,000 suburbs and in 10 cities before the end of the year (5 cities in 1H07) regulation on FTTH should be 15% settled by 2H07 10
Slide 26: France: priorities and action plan for 2H07
France: priorities and action plan for 2H07 personal maintain volume and value market share continue development of loyalty programs and commercial expenses management to mitigate number portability consequences in 2H07 enhance MVNOs and licenses agreements cost reduction to offset roaming impacts h
Slide 27: Personal UK: value strategy delivering revenue growth
1H07 personal UK value strategy delivering +3.1% yoy revenue growth revenues: +3.1% yoy on a comparable basis GOM: -8.6% yoy on a comparable basis (in million of euros) +55 3,015 +48 +17 +53 2,924 -25 57.3% 53.9% 2,870 -4 26.6% 23.6% 1H06 Forex 1H06 CB Customer CTR impact Voice Non-voice Equipment 1
Slide 28: Personal UK: strong quarterly contract recruitment
1H07 personal UK strong performance of quarterly contract recruitment in 2Q07 net adds by quarter (000s) customer base mix (000s) +1.4% 50 yoy 180 187 143 214 14,951 15,165 160 2 +452k (+9.6%) 2 -80 -167 4,731 31.6% 5,183 34.2% -145 -238 -238k (-2.3%) 10,220 68.4% 9,982 65.8% 1Q06 2Q06 3Q06 4Q06 1Q0
Slide 29: Personal UK: distribution channels
1H07 personal UK improving control and value guidance through all distribution channels Gross adds per distribution channel * direct contract 9% 13% 30% direct prepaid 21% 41% 28% indirect contract 17% 22% 70% indirect prepaid 59% 53% 37% 1H06 1H07 increasing direct distribution to drive profitable
Slide 30: Home UK: ADSL base increase
1H07 home UK ADSL base increase in a challenging market environment revenues : - 4% yoy on a comparable basis closing base ADSL (000s) (in million of euros) +9% +15 +4 yoy 215 206 1,090 -17 1,063 -10 1,004 1H06 CB BB base BB ARPU Narrow Band others 1H07 including 1H06 2H06 1H07 search 4% annual reve
Slide 31: UK: priorities and action plan for 2H07
UK: priorities and action plan for 2H07 personal recover in prepaid market through targeting volume share in high value groups to fit with global value strategy maintain contract loyalty progress, and extend across segments continue drastic business transformation to reduce cost base enhance new who
Slide 32: Personal Spain
1H07 personal Spain delivering 2.6% revenue growth and improving GOM trend from 2Q07 revenues: +2.6% yoy on a comparable basis (+5.1% excluding CTR impact) GOM: -9% yoy on a comparable basis (in million of euros) reversing GOM + 20 trend in 2Q07 + 86 55.1% 1,676 51.6% 26,0% 1,633 -6 - 19 20,9% - 38
Slide 33: Personal Spain: increasing contract customer base and value
1H07 personal Spain increasing contract customer base and value net adds by quarter (000s) Customer base (000s) +29k subs (+796k excluding Euskaltel and prepaid base cleaning impacts) 10,664 10,692 + 233 + 277 + 174 + 192 51.7% 5,071 47.4% + 130 + 153 5,514 +472k (+7.6%) - 58 -500 5,149 48.3% 5,621
Slide 34: Home Spain: strong broadband growth
1H07 home Spain continued strong growth in broadband in a tough unbundling environment revenues: - €7m yoy (-2.5% on a comparable basis ) + 18% in Broadband subscriber base (000s) (in million of euros) 698 +18% + 18 640 275 593 + 10 268 289 -17% 291 - 35 350 349 409 +68% 243 1H06 ADSL voice and Ente
Slide 35: Spain: priorities and action plan for 2H07
Spain: priorities and action plan for 2H07 a new management committed to enhance profitable growth personal keep momentum in contract (retail and business) increase 3G customer base and data product services reinforce anti-churn strategy Improve prepaid business model develop MVNOs operations home r
Slide 36: Personal Poland: leadership maintained in a slowing market
1H07 personal Poland leadership maintained in a slowing market revenues : +6.8% yoy on a comparable basis (+14.6% excluding CTR impact) GOM : +26.6% yoy on a comparable basis (in million of euros) +189 995 932 62.9% -64 58.7% -35 -22 -4 38.5% 32.5% 1H06 on a Customer CTR impact Voice Non-voice Equip
Slide 37: Home Poland: solid TP position
1H07 home Poland solid TP position in a highly competitive and regulatory environment revenues: -9% yoy on a comparable basis (-4.5% excluding regulatory impact) GOM: -22.3% yoy on a comparable basis (in million of euros) 1,561 +2 1,421 51.4% 48.1% -116 -3 -23 44.0% 41.1% 1H06 CB PSTN Internet Carri
Slide 38: Poland: priorities and action plans for 2H07
Poland: priorities and action plans for 2H07 personal continue to sustain customer base growth above the market growth increase mobile broadband customers by developing the best content offer keep on-net traffic under control by pushing unlimited offers pursue MVNO agreements home grow broadband pen
Slide 39: Personal ROW: sustained and profitable growth
1H07 personal ROW sustained and profitable growth revenues: +13.2 % yoy on a comparable basis customer base (000s): +33.4% yoy on comparable (+16.2% excl. CTR) basis (in million of euros) 3,692 3,261 40,227 +0.1% 30,147 +7.7% +16.9% +17.2% +32.9% +64.3% +27.6% +53.5% 1H 06 CB 1H 07 1H 06 CB 1H 07 Af
Slide 40: Home ROW: ongoing development of Internet
1H07 home ROW* ongoing development of Internet broadband customer base (Netherlands, revenues: +7.0% yoy on a comparable basis Ivory Coast, Senegal, Jordan, Mauritius) (000s) (in million of euros) +9.9% yoy 559 522 558 553 503 499 488 84 95 +7.9% 503 499 488 474 458 +4.5% +7.6% 2Q06 3Q06 4Q06 1Q07 2
Slide 41: Row: priorities and action plan for 2H07
Row: priorities and action plan for 2H07 personal maintain growth momentum – further customer growth – development of Internet (WiMax in Romania) and non-voice revenues – Orange Bissau launched in 2Q07 and launch of Orange Guinea and Central Africa planned in 2H07 cost control everywhere: – western
Slide 42: Enterprise: containment of decrease in traditional revenues
1H07 enterprise better containment of the decrease in traditional revenues whilst services revenues continue to grow above market revenues : - 1.2 % yoy on a comparable basis revenue evolution yoy on a comparable basis (in million of euros) 3,845 3,800 +55 +61 +62 -223 -1.2% -3.0% -6.7% 1H06 CB Busi
Slide 43: Enterprise: impact of business transformation on GOM
1H07 enterprise impact of business transformation on GOM GOM: -13.5% yoy on a comparable basis GOM rate reduction was 2.5 points on a comparable basis reflecting: 19.5%* — erosion of connectivity margin, driven 17.0% by IP transformation and a continued competitive pressure on international data pri
Slide 44: Enterprise: priorities and action plan for 2H07
enterprise: priorities and action plan for 2H07 continue actions to secure business network legacy revenues pursue enhancement of our portfolio on VoIP/ToIP continue streamline cost base further master the profitability of ICT growth accelerate commercial development in the emerging areas (Russia an
Slide 45: Outlook
outlook 44
Slide 46: Key trends for 2H07
key trends for 2H07 level of revenue performance in 2H should be consistent with 1H confirmation of 2007 guidance despite higher impact on 2H GOM of known regulatory decisions (roaming, portability, Poland, etc) ongoing portfolio rationalization, focus on emerging countries and strengthen position i
Slide 47: Outlook: guidance confirmed after 1H07 solid performance
outlook guidance confirmed after 1H07 solid performance near stabilization of the gross operating margin rate in 2007 capex rate in % of revenues around 13% maintain organic cash flow at €6.8Bn in 2007 and 2008 46
Slide 48: Appendices
appendices 47
Slide 49: Glossary (1)
glossary (1) ADSL market sum of France Telecom ADSL access on the retail market (excluding monoplay usage share without high-speed Internet access), the unbundling and ADSL wholesale offers sold to third party operators and Internet access providers (IAPs). ARPU for HCS segment: average monthly reve
Slide 50: Glossary (2)
glossary (2) Net Financial gross financial debt (converted at the year end closing rate), less (i) derivative instruments debt carried in assets for trading, cash flow hedges and fair value hedges, (ii) cash collateral paid on derivative instruments, (iii) cash and cash equivalent and financial asse
Slide 51: 1H07 revenue growth
1H07 revenue growth sustained revenue growth in Personal and good performance of Home France Change 1H07/1H06* in million of euros 1H06* 1H07 €m % group revenues 25,422 25,913 +491 1.9% total personal 13,473 14,107 +633 4.7% personal France 4,824 4,828 +5 0.1% personal UK 2,924 3,015 +91 3.1% person
Slide 52: 1H07 Gross Operating Margin
1H07 Gross Operating Margin GOM stabilisation driven by domestic performance 1H06* in % of 1H07 in % of in % % in million of euros revenues revenues pts group GOM 9,236 36.3% 9,416 36.3% 1.9% - total personal 4,788 35.5% 4,974 35.3% 3.9% -0,2 pt personal France 1,903 39.5% 1,943 40.2% 2.1% +0,7 pt p
Slide 53: 1H06: from historical to comparable basis results
1H06: from historical to comparable basis results 1H06 in million of perimeter(*) exchange 1H06 Historical euros and others rate impact proforma results Revenues 25,371 +103 -52 25,422 GOM 9,258 +7 -29 9,236 Capex 3,047 +13 -7 3,053 (*) impact of Jordan full consolidation, Silicomp, Neocles and Diwa
Slide 54: Balance sheet (1)
balance sheet (1) Period ended Year ended Note June 30, December 31, 2007 2006 ASSETS goodwill, net 31,122 31,517 other Intangible assets, net 17,634 18,713 property, plant and equipment, net 27,586 28,222 interests in associates 325 360 assets available for sale 307 338 other non-current financial
Slide 55: Balance sheet (2)
balance sheet (2) Period ended Year ended Note June 30, December 31, 2007 2006 EQUITY AND LIABILITIES share capital 10,436 10,427 additional paid-in capital 15,215 15,179 retained earnings (deficit) (4,198) (5,171) net income for the year 3,308 4,139 translation adjustment 2,273 2,220 equity attribu
Slide 56: Cash-flow account (1)
cash-flow account (1) Period ended Period ended Year ended Note June 30, June 30, December 31, 2007 2006 2006 OPERATING ACTIVITIES net income attributable to equity holders of France Telecom SA 3,308 2,346 4,139 adjustments to reconcile net income/(loss) to funds generated from operations depreciati
Slide 57: Cash-flow account (2)
cash-flow account (2) Period ended Period ended Year ended Note June 30, June 30, December 31, 2007 2006 2006 INVESTING ACTIVITIES purchases/sales of property, plant and equipment and intangible assets purchases of property, plant and equipment and intangible assets (2,967) (3,337) (7,039) increase/
Slide 58: Cash-flow account (3)
cash-flow account (3) Period ended Period ended Year ended Note June 30, June 30, December 31, 2007 2006 2006 FINANCING ACTIVITIES issuances bonds convertible, exchangeable or redeemable into shares 7 2,856 935 928 long-term debt 26 555 585 redemptions and repayments bonds convertible, exchangeable
Slide 59: Profit & loss account
profit & loss account Period ended Period ended Year ended Note June 30, June 30, December 31, 2007 2006 2006 Revenues 2 25,913 25,371 51,702 external purchases 2 (11,030) (10,933) (22,809) other operating income 2 236 284 473 other operating expense 2 (1,276) (1,078) (2,235) labour expenses: - wage
Slide 60: A steady innovation rhythm for 2H07
a steady innovation rythm for 2H07 boosted by the summer collection Babybox PL NL New Livebox FR Livebox N FR Livebox premium FR Rewind TV FR* Net & unik FR SP UK Digital photo frame FR Wifi extender FR Live printer FR Podcast mobile FR Fleet advanced FR 3Q 07 4Q 07 59 * pre-launch
Slide 61: 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: August 2, 2007 By: /S/ PIERRE HILAIRE Name: Pierre Hilaire Title: Director of Finan