Orange Sa · EURONEXT:ORA
Orange Sa — France Telecom — Investor Day (June 2005)
52 slides from Orange Sa's investor day presentation, Jun 29, 2005
Slide 1: NExT – June 29, 2005 / Disclaimer
NEXT June 29, 2005 Disclaimer Î This presentation contains forward-looking statements about France Telecom. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs, opportunities, tech
Slide 2: A new phase for France Telecom
June 29th Investor’s day A new phase for France Telecom Î INTRODUCTION Î PART A: Strategic assessment z Success of Ambition 2005 z Changes to come, challenges and opportunities, our main assumptions z Why integration is best Î PART B: NExT : A New Experience in Telecom services z NExT principles z K
Slide 3: Success of Ambition 2005: a recovery in financial balance
Success of Ambition 2005 FT Ambition 2005: a recovery in financial balance €72.2bn* Dividend Policy Net Debt / EUR EUR 15Bn 15Bn resumed earlier EBITDA: 4.8x FCF €43.9bn than expected FCF generation Net Debt / generation EBITDA: 2.4x EUR EUR 15Bn 15Bn Capital Capital Credit rating Increase Increase
Slide 4: FT Ambition 2005: a recovery in top line growth
FT Ambition 2005: a recovery in top line growth +2.9% Sustained Sustained mobile mobile +4.1% in pro-forma and and broadband broadband in pro-forma revenue growth growth revenue Fixed Fixed Line Line inflexion inflexion point point reached reached 2002 2004 ÎTop line growth enhanced All figures in F
Slide 5: FT Ambition 2005: a recovery in innovation potential
FT Ambition 2005: a recovery in innovation potential Business Everywhere Dec 2003: June 2004 ‘MaLigne tv’ June 2004: VoIP & Sept 2003: First success of unlimited PSTN “Livebox” France Telecom innovation to cash strategy Nov. 2004: Fixed & mobile video-telephony 2005: TV on mobile February 2003: WIFI
Slide 6: FT today: strong momentum in fast growing markets
FT today: strong momentum in fast growing markets Over 126 m Over 64 m clients mobile worldwide customers Over 6 m Over 340,000 Broadband Business Everywhere end users customers 134,000 IP- IP-VPN access ÎFocus on customer base investment preparing for future growth 11 France Telecom today: strong i
Slide 7: 2005 targets confirmed; 2003-2005: value creation
2005 targets confirmed Î Pro forma revenue growth between + 3 and + 5% Î EBITDA over EUR 18.5bn Î Capex to sales ratio high end of 10 to 12% range Î Net debt to EBITDA ratio below 2.5 All figures in IFRS 13 2003-2005: value creation Î Stock price up over 40% since Ambition 2005 announcement Î Divide
Slide 8: Changes to come: Broadband & IP everywhere
Changes to come Broadband & IP everywhere Rate (bps) TTx) Fiber (F > 100Mb to 1 0 0 Mb & 10 Wireless VDSL Local Loop 20 to 50 Mb 1 to 60 Mb Wifi 11 to 54 Mb ADSL 2 10 to 25 Mb HSDPA 14 Mb ADSL 0.5 to 8 Mb Cable modem UMTS 1 to 4 Mb 1 to 3 Mb ISDN EDGE 64-128 kb 200 kb PSTN 56 kb In mobilty GPRS 50 k
Slide 9: Challenges: a new context for customers
A new context for customers Abundance Abundance of of players technologies Abundance of multimedia services ÎFrom a customer acquisition policy to a retention & value strategy 17 Challenges 9
Slide 10: Voice commoditisation? Aggressive new entrants
Voice commoditisation? VoIP AA challenge challenge toto the the traditional traditional voice voice business business model model Price Unlimited pressure Offers on mobile 19 Aggressive new entrants on each market Internet Internet Industrials Industrials Unregulated players players players players
Slide 11: Opportunities: untapped potential
Opportunities Untapped potential Î Elasticity remains for voice: the US mobile example 600 Evolution of mobile traffic and 70 ARPU in the US 60 500 ARPU 50 400 Minutes/month 40 $/month 300 30 200 Traffic 20 100 10 0 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: FCC & CTIA 22 11
Slide 12: Our main assumptions
New usage patterns Customisation Growing role of & content and services needs entertainment Communication Multiplay and suite versus “all you can eat” plain voice offers 23 Our main assumptions 12
Slide 13: Telecom markets; Broadband expansion in Europe
Telecom markets Î Growth to continue, especially in developing countries Fixed and mobile communication market CAGR 2005E-2008E ROW 6.9% Poland 6.6% Other Central & Eastern Europe 5.1% Spain 3.2% France 2.7% USA 1.9% Italy 1.6% UK 1.1% -1.1% Japan -1.5% Germany Source: Idate 25 Broadband expansion i
Slide 14: Why integration is best
Trends in regulation Î European regulatory convergence Î Pragmatic approach on integrated & innovative products Stabilized model in France Î Visibility on LLU prices, Subscription fee, Mobile termination rate Î Limited impact of naked DSL Î MVNO model clarified 27 Why integration is best 14
Slide 15: User friendly interfaces and portals; unified customer experience
User friendly interfaces and portals Î Unified "look & feel" z Faster and better adoption of new communication tools z Easier implementation of customisation options z Spurs content usage z Key enabler for multi-play Î Design your own device z Provide the best device to each customer segment 29 Best
Slide 16: Better flexibility to serve customers; more value creation
Better flexibility to serve customers Î Price packaging flexibility z Seamless communication suite offers more pricing options z More choice or simplicity for customer z Trans-networks price packages possible for content access z A key support for multi-play offers Î End to end control z Allow best
Slide 17: NExT: a new experience in telecom services
NExT A new experience in telecom services NExT in a nutshell “Telecommunication • Integrated communication suite and Major Major initiative initiative for for multi multi Everywhere“ devices access access portal portal • Integrated offers Clients communicate, Build Build an an integrated integrated
Slide 18: The NExT customer experience
The NExT customer experience (1) Integrated portal is the best one stop shop Orange-FT signature devices are user friendly Integrated Orange-FT offer attractive and simple community plans & seamless Orange-FT offer simple integrated communication features experience (consumer & business) “Life servi
Slide 19: The NExT business model and transformation path
The NExT business model Flat fee for access to NExT services Flat fees for the plain telecom suite and basic content offering Toward a new business model Specific features, customized options for revenue streams Premium content access “Support or on site” services Life services Pay per use, flat fee
Slide 20: NExT: Key objectives
NExT: Key objectives NExT 's objectives for 2008 Home Personal Enterprise Every reporting segment Grow the Sustained transform and supports… business profitable affirm Into 2008 growth leadership More than 85m clients Over 12m BB clients in 2008 Slight decrease in 2008 … clear targets Over 6% 05
Slide 21: NExT: Delivering revenue growth initiatives / use of cash policy
The NExT use of cash policy Debt Continue Maintaining targets Continue debt debt Debt / EBITDA ratio below 2 reduction reduction into into and discipline before end 2008 2008 2008 Proposed 2005 dividend at EUR1 per Dividend Grow share Grow dividend dividend Sharing value of Distribution Distribu
Slide 22: The NExT roadmap to success
The NExT roadmap to success Orange is selected as FT international brand to support mobile, broadband and multiplay offers Branding Orange is selected for all enterprise business Delivering the best communication services for our clients In incumbent countries : pragmatic approach with legacy
Slide 23: Branding: research findings and decisions
Branding: research findings Î Brand architecture should be clarified and simplified to support the integrated operator model Î In France, Poland and other countries where we are incumbents, the strong relationship between legacy brands and the customers will be sustained in the long term Î Orange ha
Slide 24: First converged offers; Family Talk
First converged offers from FT Different FT/Orange Different needs solutions Fixed and Mobile “Family Talk” Voice Mobile + Broadband “Mobile and Connected” Full convergence “Home Zone” Convergence Business Everywhere Multimedia, for Enterprise Business Talk ÎStrong appeal for high users segments 47
Slide 25: Mobile & Connected; Home Zone
Mobile & Connected Î Address fixed-line substituted customers packaging mobile, naked ADSL and convergent services Î Broadband Internet + Mobile z Converged services (email, IM, SMS, Photo album) z Mobile contract offer z Naked ADSL offer Î Launch expected H1 2006 49 « Home Zone » Î A full converged
Slide 26: Business Everywhere Multimedia; Business Talk
Business Everywhere Multimedia Î Extend Business Everywhere to PDA Î Enrich Business Everywhere with push mail, unified messaging, IM, VoIP, Visio, softphone 51 Business Talk Î An integrated fixed-mobile voice offer as a first step Î Integration of VoIP environment Î Optimization of telecommunicatio
Slide 27: Converged offers: Objectives; Portal
Converged offers: Objectives June 2005 2006 2008 And others…. Business Everywhere Home Zone Multimedia extension Family Talk (France & Belgium) Mobile & Connected Business Talk (France, Belgium, NL) Objectives for 2008 Between 5% to 10% of total group revenues for all offers 53 Portal Î Deploy a ful
Slide 28: Communication Suite: LiveCom
Portal ÎSeamless use is an option, mono play usage remains 55 Communication Suite: LiveCom Î The first Communication Suite integrating voice, video-telephony and Instant Messaging on PCs, mobile and Visio-phones. Î Specific skins including customization and webcam return Customization Webcam return
Slide 29: Portal: objective; Devices
Portal: objective 2005 2006 End of 06: Portal group wide / Livecom Portal launch extended June 05: Livecom in the UK launch in France Objective for 2008 Portal available for 100% of the European base ÎA key enabler to improve operational performance 57 Devices Î Develop a strong base for our clients
Slide 30: Devices: objectives for 2008; Content
Devices: objectives for 2008 30% of mobile base for signature devices in 2008 Over 60% of new sales with signature mobile devices end 2m IP-phones 2007 end 2008 59 Content ÎBecome a leading distributor of digital content ÎDual objective for content strategy z Support and enhance value of access -> C
Slide 31: Content: objective for 2008; New services
Content: objective for 2008 Î Become a major player for on-line games Î Launch TV over DSL in the UK, Spain, the Netherlands and Poland before mid 2006 Over 1m subscribers in France Objective for 2008 2008 Over EUR 400m direct paid content revenues in 2008 ÎBecome one of the first digital content de
Slide 32: New services: communication; infotainment
New services : communication Consumers Mail on the My mail on the move pushed on my handset (Orange Mail) (2005) move Dynamic address Simplified address book to choose always the best way to reach somebody book Business Business Enabler for IP communication services including security, voice (
Slide 33: New services: every day life; support services
New services : Every day life Wifi camera for home monitoring connected Live zoom to the Livebox Access from remote PC or mobile Live Tele Associated home surveillance service in partnership with EPS surveillance Local search I’m able to localize closest points of interest (Gas station, wifi
Slide 34: The NExT operational & financial objectives; Partnerships
Partnerships Î A convergent OnePhone service: “When I am in my Homezone, there is no difference between my mobile phone and my fixed line M@Home and I take advantage of the home ADSL high speed data transmission” (Ericsson) Î Planning : Test in a pilot zone near Paris in H205. Î A communicating port
Slide 35: ADSL broadband roll-out & objectives for 2008; Livebox
ADSL Broadband roll-out & objectives for 2008 Livebox®: At the heart of the Home broadband strategy Î Not simply a VoIP and TV over ADSL enabler, or an Internet Wi-Fi router Network Î but also photo, Music, Home Connectivity watching, directory management, In-House etc. Networking Content and servic
Slide 36: Mobile broadband roll-out & objectives for 2008
Mobile Broadband roll-out & objectives for 2008 Î EDGE deployed to provide a richer experience to as many customers as possible Î UMTS deployed across footprint to compete in key areas (large cities), address high value segments and satisfy regulatory constraints Orange mass-market launches Slovakia
Slide 37: Develop ROW markets; Enterprise objectives
Develop ROW markets: objectives for 2008 Î On mobile footprint: organic growth of our ROW operations z Personal ROW EBITDA CAGR close to 10% for 2005-2008 >33m clients >28m clients cc. 22m clients 2005 2006 2008 73 Enterprise: roll-out & objectives for 2008 Î Expand “business everywhere” success ove
Slide 38: Enterprise objectives; a new phase for TOP program
Enterprise: roll-out & objectives for 2008 Over EUR 2bn revenues in ICT services by ’08, And over EUR Over 30% of total 800m revenues in enterprise revenues outsourcing by ‘08 x2.5 vs 2005 base Over 1 000,000 Business Everywhere customers by 2008 X2.5 vs 2005 base ÎStrong move toward services, chang
Slide 39: One FT IT & Network
One FT IT & Network (1) Î One unified group structure for IT&N management Î End to end service supervision Î Fixed-mobile common elements in each countries Î Group Capex to sales (including IT&N Capex) to remain around 12% z Technology, sourcing and integration gains Î Pragmatic NGN and fiber develo
Slide 40: Customer facing; one marketing and innovation
Customer Facing : an integrated customer relation Î A multi channel strategy, operational by end 2006 per country Î Integrated processes and organizations by end 2007 per country Î One-CRM for mass market and for business customers by 2008 with major steps by end 2006 Î Improve QoS in France up to 8
Slide 41: Optimise integration in each geography; UK case
Optimise integration in each geography Î UK to be the first major geography with full integration potential from 2006 z Single brand for consumer and business z Converged networks and customer care z Multi access portal 81 UK: A first case for integration Unique Multi-access portal Unique Brand 2006
Slide 42: Financial objectives; France objectives for 2008
France: objectives for 2008 Î Home Î Personal z Broadband retail market z Maintain revenue market share increase through share around current level innovation z Over 23.5m customers z over 6m broadband internet z 30% of contract base customers for FT broadband mobile z 2008 overall retail ARPU z Gro
Slide 43: Home 2005-2008; Personal 2005-2008
Home 2005 - 2008 ÎRevenues Î Slight growth ÎEBITDA margin ÎAlmost stable ADSL internet subscribers (in m) > 12 > 11 9.5 >7 4.8 2004 2005 2006 2007 2008 France International Poland 85 Personal 2005 - 2008 ÎRevenues ÎOver 6% CAGR ÎEBITDA margin ÎSlightly improving BB mobile customers in m >12 4 cc. 0.
Slide 44: Enterprise 2005-2008; Group objectives & guidance
Enterprise 2005 - 2008 ÎRevenues ÎSlightly decreasing ÎEBITDA margin ÎDecreasing €Bn CAGR: + 15 % 2.2 1.4 2005 2008 ICT Services 87 Group objectives & guidance Î Pro forma revenue growth between +3 and +5% 06-08 Î Objective of EBITDA growth slightly above revenue growth Î Capex to sales around 12% 8
Slide 45: Use of cash
Use of cash The NExT use of cash policy Debt Continue Maintaining targets Continue debt debt reduction reduction into into and discipline 2008 2008 ÎNet debt to EBITDA ratio below 2 Dividend Sharing value of Cash generation ÎNet debt to EBITDA ratio below 2.5 end 2005 confirmed Growth 90 45
Slide 46: The NExT use of cash policy
The NExT use of cash policy ÎEUR 1 per share Debt proposed* for 2005 Maintaining targets and discipline Î2006-2008 dividend per share increase to take into account organic Dividend Grow Grow dividend dividend Sharing value of Distribution Distribution toward toward free cash flow Cash generation Sec
Slide 47: Conclusion: key objectives for NExT
CONCLUSION 12 key objectives for NExT Develop a wide Grow people Slight decrease of Convergent offers range of intensive services revenues for 5% to 10% of group Every day life rev. by over 50% by enterprise with over services revenues in 2008 '08 30% in ICT services Operate convergent Over 30% mobi
Slide 48: Conclusion; thank you
CONCLUSION Î 2005 objectives confirmed Î Dividend and use of cash policy clarified Î Major growth & transformation initiatives for the NExT phase z Developing new services to change everyday life and extract value out of new market opportunities z Aggressive broadband roll-out to support new service
Slide 49: Back up slides: European broadband indicators
Back up slides European broadband indicators ‘08 Î Towards more than 60% level for Î 37m UMTS data services retail Broadband Penetration* in subscribers in Western Europe** main European countries by 2008 70.0% m of subscribers 67.0% 65.2% 63.8% 37 52.6% 26 36.5% 36.8% 34.9% 32.6% 18 25.6% 11 Spain
Slide 50: European networks trends 2008; VOIP
European networks trends 2008 Î Peak commercial DSL bandwidth at 100mb in VDSL2 Î Slow development of fiber Î Gradual move to NGN In France : Î7Mb on copper for 65% lines Î NGN gradually starting from late 2007 early 2008 Î Mobile broadband coverage at 98% in 2008 99 VOIP Î 20.2m VoIP residential cu
Slide 51: DSL TV in Europe by 2008; on-line entertainment
DSL TV in Europe by 2008 Î Revenue opportunity for TVoDSL in Europe TV over DSL subscribers 2005 - 2008 6.2 4.6 3.0 1.5 0 2005E 2006E 2007E 2008E Subs (m) *: 15 ECC Source : CSFB 101 On-line entertainment Î Fixed & mobile On-line gaming and Music downloading revenues in Europe (EUR bn) Western Europ
Slide 52: Major changes on the Enterprise market
Major changes on the Enterprise market European ICT addressable outsourcing services** (€bn) 38 30 2005E 2008E *: Western Europe Poland + MNC ROW Source:PAC (Pierre Audouin Conseil) ÎChange in customer-supplier relations, towards more services 103 52