Orange Sa · EURONEXT:ORA
Orange Sa — France Telecom — Investor Day (June 2005)
103 slides from Orange Sa's investor day presentation, Jun 29, 2005
Slide 1: NExT
NEXT June 29, 2005
Slide 2: Disclaimer
Disclaimer 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, technology and market con
Slide 3: Orange
y “= orange’
Slide 4: Investor's day: A new phase for France Telecom
June 29th Investor’s day A new phase for France Telecom INTRODUCTION PART A: Strategic assessment Success of Ambition 2005 Changes to come, challenges and opportunities, our main assumptions Why integration is best PART B: NExT : A New Experience in Telecom services NExT principles Key objectives fo
Slide 5: Success of Ambition 2005
Success of Ambition 2005
Slide 6: FT Ambition 2005: a recovery in financial balance
FT Ambition 2005: a recovery in financial balance €72.2bn* Net Debt / EBITDA: 4.8x EUR 15Bn FCF generation EUR 15Bn Capital Increase €43.9bn Net Debt / EBITDA: 2.4x Dividend Policy resumed earlier than expected Credit rating improved** *: Net Debt + Equant CVR and Kulczyck Put/ **:S&Ps from BBB- to
Slide 7: FT Ambition 2005: a recovery in top line growth
FT Ambition 2005: a recovery in top line growth +2.9% in pro-forma revenue Sustained mobile and broadband growth Fixed Line inflexion point reached +4.1% in pro-forma revenue Top line growth enhanced All figures in French Gaap
Slide 8: FT Ambition 2005: a recovery in operational performance
FT Ambition 2005: a recovery in operational performance 31.9% €7.5bn Strong increase in profitability (EBITDA margin) EBITDA-Capex -nearly doubled 38.7% €13.1bn Untapped operational performance revealed, success of first Wave of TOP program All figures in French Gaap
Slide 9: FT Ambition 2005: a recovery in innovation potential
FT Ambition 2005: a recovery in innovation potential First success of France Telecom innovation to cash strategy Dec 2003: ‘MaLigne tv’ Business Everywhere June 2004 June 2004: VoIP & unlimited PSTN Nov. 2004: Fixed & mobile video-telephony 2005: TV on mobile February 2003: WIFI Sept 2003: “Livebox”
Slide 10: FT Ambition 2005: Paving the way for the integrated operator
FT Ambition 2005: Paving the way for the integrated operator February 05 Equant Minorities Buy-out February 04 Wanadoo Minorities Buy-out September 03 Orange Minorities Buy-out Dec 02 June 05 Building the structure of the integrated group Integrated management Setting the bases for integrated IT&N a
Slide 11: FT today: strong momentum in fast growing markets
FT today: strong momentum in fast growing markets Over 126 m clients worldwide Over 64 m mobile customers Over 6 m Broadband customers Over 340,000 Business Everywhere end users 134,000 IP-VPN access Focus on customer base investment preparing for future growth
Slide 12: France Telecom today: strong improvement of organic cash generation
France Telecom today: strong improvement of organic cash generation €7.8bn* €6.5bn* €1.1bn* * Cash Flow excluding Equant CVR payment and excluding Disposals and Minorities buy out (Kulczyck put not included) All figures in French Gaap
Slide 13: 2005 targets confirmed
2005 targets confirmed Pro forma revenue growth between + 3 and + 5% EBITDA over EUR 18.5bn Capex to sales ratio high end of 10 to 12% range Net debt to EBITDA ratio below 2.5 All figures in IFRS
Slide 14: 2003-2005: value creation
2003-2005: value creation Stock price up over 40% since Ambition 2005 announcement Dividend re-installed Strong and sustainable free cash flow generation Financial rebalancing and debt ratings improvements FT business model is leading the way
Slide 15: Changes to come
Changes to come
Slide 16: Broadband & IP everywhere
Broadband & IP everywhere Rate (bps) Fiber (FTTx) 10 to 100 Mb & >100Mb Wireless Local Loop 1 to 60 Mb VDSL 20 to 50 Mb Wifi 11 to 54 Mb ADSL 2 10 to 25 Mb ADSL 0.5 to 8 Mb Cable modem 1 to 4 Mb ISDN 64-128 kb PSTN 56 kb GPRS 50 kb HSDPA 14 Mb UMTS 1 to 3 Mb EDGE 200 kb In mobilty Fixed usage 2000 2
Slide 17: A new context for customers
A new context for customers Abundance of players Abundance of technologies Abundance of multimedia services From a customer acquisition policy to a retention & value strategy
Slide 18: Challenges
Challenges
Slide 19: Voice commoditisation?
Voice commoditisation? VoIP Price pressure on mobile Unlimited Offers A challenge to the traditional voice business model
Slide 20: Aggressive new entrants on each market
Aggressive new entrants on each market Telecom industry under pressure Unregulated players Internet players MSN, Yahoo, Google, AOL… have a strong interest in the Telecom industry Industrials players Nokia, Philips, Cisco Regulated players MVNO Increased competition on mobile networks Fixed operator
Slide 21: Opportunities
Opportunities
Slide 22: Untapped potential
Untapped potential Elasticity remains for voice: the US mobile example Evolution of mobile traffic and ARPU in the US Minutes/month 600 500 400 300 200 100 0 $/month 60 50 40 30 20 10 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Traffic ARPU Source: FCC & CTIA
Slide 23: New usage patterns
New usage patterns Customisation & services needs Growing role of content and entertainment Communication suite versus plain voice Multiplay and “all you can eat” offers
Slide 24: Our main assumptions
Our main assumptions
Slide 25: Telecom markets
Telecom markets Growth to continue, especially in developing countries Fixed and mobile communication market CAGR 2005E-2008E ROW Poland Other Central & Eastern Europe Spain France USA Italy UK -1.1% Japan -1.5% Germany 6.9% 6.6% 5.1% 3.2% 2.7% 1.9% 1.6% 1.1% Source: Idate
Slide 26: Broadband expansion in Europe
Broadband expansion in Europe Gradual move to NGN Towards more than 60% level for retail Broadband Penetration in main European countries* by 2008 More than 35m data UMTS subscribers in main European countries* by 2008 Over 20m VoIP residential customers in main European countries* by 2008 TVDSL sub
Slide 27: Trends in regulation
Trends in regulation European regulatory convergence Pragmatic approach on integrated & innovative products Stabilized model in France Visibility on LLU prices, Subscription fee, Mobile termination rate Limited impact of naked DSL MVNO model clarified
Slide 28: Why integration is best
Why integration is best
Slide 29: User friendly interfaces and portals
User friendly interfaces and portals Unified “look & feel” Faster and better adoption of new communication tools Easier implementation of customisation options Spurs content usage Key enabler for multi-play Design your own device Provide the best device to each customer segment
Slide 30: Best customer experience through unified customer facing function and networks
Best customer experience through unified customer facing function and networks Single customer support One stop shop for communication tools support and customisation Consistent approach for multi-play offers Seamless customer experience Network agnostic Use the best network or technology for commun
Slide 31: Better flexibility to serve customers
Better flexibility to serve customers Price packaging flexibility Seamless communication suite offers more pricing options More choice or simplicity for customer Trans-networks price packages possible for content access A key support for multi-play offers End to end control Allow best implementation
Slide 32: More value creation
More value creation Embed value added services Much more than packaged offers Leverage knowledge of customer to drive revenue growth Better knowledge of full usage pattern to offer better service segmented approach to convergent offers Drive churn reduction Loyalty points program to boost structural
Slide 33: NExT: A new experience in telecom services
N E x T A new experience in telecom services
Slide 34: NExT in a nutshell
NExT in a nutshell “Telecommunication Everywhere” Clients communicate, We manage the networks Major initiative for multi access portal Build an integrated customer experience Integrated communication suite and devices Integrated offers Seamless approach of IT&N New branding policy “Contents Everywhe
Slide 35: The NExT customer experience (1)
The NExT customer experience (1) Integrated & seamless experience Integrated portal is the best one stop shop Orange-FT signature devices are user friendly Orange-FT offer attractive and simple community plans Orange-FT offer simple integrated communication features (consumer & business) “Life servi
Slide 36: The NExT customer experience (2)
The NExT customer experience (2) Entertainment & other The most comprehensive & versatile entertainment platform Simple and clear billing The most trusted content provider A rising player in e-commerce intermediation Services Best in class customer support, QoS and self-care On site services are gen
Slide 37: The NExT business model
The NExT business model Toward a new business model for revenue streams Flat fee for access to NExT services Flat fees for the plain telecom suite and basic content offering Specific features, customized options Premium content access “Support or on site” services Life services Pay per use, flat fee
Slide 38: The NExT transformation path
The NExT transformation path Adapting to clients needs for growth New branding policy Toward a country based approach Developing convergent offers Services “charter” Enter adjacent territories Leverage on services on all customer segments Differentiate in contents New business models including Low c
Slide 39: NExT: Key objectives
NExT : Key objectives
Slide 40: NExT's objectives for 2008
NExT ‘s objectives for 2008 Every reporting segment supports… … clear targets for 2008 Home Grow the business Into 2008 Over 12m BB clients Overall revenues increase 2008 vs 2005 Personal Sustained profitable growth More than 85m clients in 2008 Over 6% 05-08 CAGR revenues growth Slight improvement
Slide 41: The NExT use of cash policy
The NExT use of cash policy Debt Maintaining targets and discipline Continue debt reduction into 2008 Debt / EBITDA ratio below 2 before end 2008 Dividend Sharing value of Cash generation Grow dividend Distribution toward Sector benchmarks Proposed 2005 dividend at EUR1 per share 2006-2008 dividend
Slide 42: NExT: Delivering revenue growth initiatives
N E x T : Delivering revenue growth initiatives
Slide 43: The NExT roadmap to success
The NExT roadmap to success Delivering the best communication services for our clients Branding Converged offers Portal Devices Contents New services Support services Partnerships Orange is selected as FT international brand to support mobile, broadband and multiplay offers Orange is selected for al
Slide 44: Orange
y “= orange’
Slide 45: Branding: research findings
Branding: research findings Brand architecture should be clarified and simplified to support the integrated operator model 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 Orange has more
Slide 46: Branding: decisions and objectives
Branding: decisions and objectives In incumbent countries we will deploy a pragmatic approach leveraging both legacy brands and Orange Orange is selected as France Telecom international brand to support mobile, broadband and multi-play offers where applicable Orange is selected for all Enterprise bu
Slide 47: First converged offers from FT
First converged offers from FT Different needs Different FT/Orange solutions Fixed and Mobile Voice “Family Talk” Mobile + Broadband “Mobile and Connected” Full convergence “Home Zone” Convergence for Enterprise Business Everywhere Multimedia, Business Talk Strong appeal for high users segments
Slide 48: Family Talk
Family Talk The family members phone lines are included in a Closed User Group: 1 fixed line PSTN Up to 3 Orange mobiles All post-paid bundles €39* Promotional offer: €29 Each line, both fixed and mobile get unlimited calls to other members Launched in June 05 New versions to come *: Price for 1 fix
Slide 49: Mobile & Connected
Mobile & Connected Address fixed-line substituted customers packaging mobile, naked ADSL and convergent services Broadband Internet + Mobile Converged services (email, IM, SMS, Photo album) Mobile contract offer Naked ADSL offer Launch expected H1 2006
Slide 50: Home Zone
« Home Zone » A full converged offer for fixed-line, mobile and Internet with one single device Access fixed and mobile messages from a single number Attractive tariffs at home whatever the device is used Connection of mobile devices to DSL to benefit from flat rate and high speed Easy-to-use and se
Slide 51: Business Everywhere Multimedia
Business Everywhere Multimedia Extend Business Everywhere to PDA Enrich Business Everywhere with push mail, unified messaging, IM, VoIP, Visio, softphone
Slide 52: Business Talk
Business Talk An integrated fixed-mobile voice offer as a first step Integration of VoIP environment Optimization of telecommunication costs Simplification of telephony management One single number Unified voice messaging
Slide 53: Converged offers: Objectives
Converged offers: Objectives June 2005 2006 2008 Family Talk Business Talk Home Zone (France & Belgium) Mobile & Connected (France, Belgium, NL) Business Everywhere Multimedia extension And others Objectives for 2008 Between 5% to 10% of total group revenues for all offers
Slide 54: Portal
Portal Deploy a fully converged portal with an integrated communication services suite Optimised for all devices on any network Single sign-on Same “look & feel” Same customer interface Fully adaptable for non-converged clients A better proposition for third parties and suppliers A major move for in
Slide 55: Portal
Portal Seamless use is an option, mono play usage remains
Slide 56: Communication suite: LiveCom
Communication suite: LiveCom The first Communication suite integrating voice, video-telephony and instant messaging on pcs, mobile and Visio-phones. Specific skins including Customization and webcam return Customization Webcam return
Slide 57: Portal: objective
Portal: objective 2005 2006 June 05: Livecom launch in France Portal launch in the UK End of 06: Portal group wide / Livecom extended Objective for 2008 Portal available for 100% of the European base A key enabler to improve operational performance
Slide 58: Devices
Devices Develop a strong base for our clients’ experience Signature device strategy to expand Launch of Signature in Poland Livephone (IP-phone) project launch Toward a continuous offer range between pure fixed and mobile devices Improve segmentation approach to devices design and distribution
Slide 59: Devices: objectives for 2008
Devices: objectives for 2008 30% of mobile base for signature devices in 2008 Over 60% of new sales with signature mobile devices end 2007 2m IP-phones end 2008
Slide 60: Content
Content Become a leading distributor of digital content Dual objective for content strategy Support and enhance value of access Content to spur broadband usage Develop stand-alone profitable new business models Address all clients to gain a share of value Content strategy to be focused on aggregatio
Slide 61: Content: objective for 2008
Content: objective for 2008 Become a major player for on-line games Launch TV over DSL in the UK, Spain, the Netherlands and Poland before mid 2006 Over 1m subscribers in France Objective for 2008 Over EUR 400m direct paid content revenues in 2008 Become one of the first digital content delivery pla
Slide 62: New services
New services Communication Infotainment Customers Everyday life
Slide 63: New services: communication
New services : communication Consumers Mail on the move My mail on the move pushed on my handset (Orange Mail) (2005) Dynamic address book Simplified address book to choose always the best way to reach somebody Business Business Livebox Enabler for IP communication services including security, voice
Slide 64: New services: infotainment
New services : infotainment Photo transfer Send photos from mobile to your favourite photoblog Live music Wireless music transmission from PC to Hifi sound system through Livebox transmission. Allow for access to music downloaded on the PC and IP radios Music everywhere Enabling FT clients to access
Slide 65: New services: Every day life
New services : Every day life Live zoom Wifi camera for home monitoring connected to the Livebox Access from remote PC or mobile Live Tele surveillance Associated home surveillance service in partnership with EPS Local search on mobile I’m able to localize closest points of interest (Gas station, wi
Slide 66: Support services
Support services Initiative focused on people intensive services Leverage on productivity gains to create new activities For residential, assist our customers to use devices connected to our network For Business segment, help migrate towards ToIP and provide integrated critical business applications
Slide 67: Partnerships
Partnerships M@Home (Ericsson) A convergent OnePhone service: “When I am in my Homezone, there is no difference between my mobile phone and my fixed line and I take advantage of the home ADSL high speed data transmission” Planning : Test in a pilot zone near Paris in H205. VideoLyra (Thomson) A comm
Slide 68: The NExT operational & financial objectives
The NExT operational & financial objectives
Slide 69: ADSL Broadband roll-out & objectives for 2008
ADSL Broadband roll-out & objectives for 2008 Livebox®: At the heart of the Home broadband strategy Not simply a VoIP and TV over ADSL enabler, or an Internet Wi-Fi router but also photo, Music, Home watching, directory management, etc. Network Connectivity In-House Networking Content and services
Slide 70: ADSL Broadband roll-out & objectives for 2008
ADSL Broadband roll-out & objectives for 2008 Livebox®: At the heart of the Home broadband strategy Over 4m livebox >3.5m in France Over 8m Livebox 6m in France 3m multiplay* clients Over 7m multiplay* clients Position FT as the European leader in Home networking and multi-play offers * At least dua
Slide 71: Mobile Broadband roll-out & objectives for 2008
Mobile Broadband roll-out & objectives for 2008 EDGE deployed to provide a richer experience to as many customers as possible UMTS deployed across footprint to compete in key areas (large cities), address high value segments and satisfy regulatory constraints Orange mass-market launches 3G launches
Slide 72: Mobile Broadband roll-out & objectives for 2008
Mobile Broadband* roll-out & objectives for 2008 1.5m in the UK 4m Mob BB Cust. 2m in France >5m in the UK >12m mob BB Cust. >6m in France *: UMTS & EDGE
Slide 73: Develop ROW markets: objectives for 2008
Develop ROW markets: objectives for 2008 On mobile footprint: organic growth of our ROW operations Personal ROW EBITDA CAGR close to 10% for 2005-2008 cc. 22m clients >28m clients >33m clients 2005 2006 2008
Slide 74: Enterprise: roll-out & objectives for 2008
Enterprise: roll-out & objectives for 2008 Expand “business everywhere” success over the footprint Extend our footprint in Europe in the SME market Leverage on the new Orange branding Develop more services (ICT services) towards existing customers Become a clear leader on the enterprise market
Slide 75: Enterprise: roll-out & objectives for 2008
Enterprise: roll-out & objectives for 2008 Over EUR 2bn revenues in ICT services by ‘08, Over 30% of total enterprise revenues And over EUR 800m revenues in outsourcing by ‘08 x2.5 vs 2005 base Over 1 000,000 Business Everywhere customers by 2008 X2.5 vs 2005 base Strong move toward services, change
Slide 76: A new phase for TOP program
A new phase for TOP program Resources optimisation for 2006-2008 Sourcing and support functions :cumulated gain over EUR2bn General expenses : from 5% to 4.5% of sales WCR : EUR500m additional gain Support key transformation initiatives to build an integrated factory Innovation & marketing IT&N Cust
Slide 77: One FT IT & Network (1)
One FT IT & Network (1) One unified group structure for IT&N management End to end service supervision Fixed-mobile common elements in each countries Group Capex to sales (including IT&N Capex) to remain around 12% Technology, sourcing and integration gains Pragmatic NGN and fiber development Better
Slide 78: One FT IT & Network (2)
One FT IT & Network (2) Shared Information System Critical subset to be controlled Service Platforms Control Layer IP Backbone Transmission Network Metropolitan Domestic International Customer Access Network Aggregation Network Core/Backbone networks No need to own everything for end to end control
Slide 79: Customer Facing: an integrated customer relation
Customer Facing : an integrated customer relation A multi channel strategy, operational by end 2006 per country Integrated processes and organizations by end 2007 per country One-CRM for mass market and for business customers by 2008 with major steps by end 2006 Improve QoS in France up to 85%* by 2
Slide 80: One marketing and innovation
One marketing and innovation Build a group product factory and an exploration center Focus on convergent projects Improve time to market Objective for 2008 Up to 2% revenues for R&D and innovation(ow 15% for exploration) Keeping the innovation edge, boosting integration
Slide 81: Optimise integration in each geography
Optimise integration in each geography UK to be the first major geography with full integration potential from 2006 Single brand for consumer and business Converged networks and customer care Multi access portal
Slide 82: UK: A first case for integration
UK: A first case for integration Unique Multi-access portal Unique Brand 1.7m broadband DSL clients >5m mobile UMTS broadband clients Stabilise churn despite increased competition Key differentiator for converged clients
Slide 83: France: objectives for 2008
France: objectives for 2008 Home Broadband retail market share increase through innovation over 6m broadband internet customers for FT 2008 overall retail ARPU equal or over 2005 Personal Maintain revenue market share around current level Over 23.5m customers 30% of contract base broadband mobile Gr
Slide 84: Financial objectives
Financial objectives
Slide 85: Home 2005-2008
Home 2005—2008 Revenues EBITDA margin Slight growth Almost stable ADSL internet subscribers (in m) 4.8 > 7 9.5 > 11 > 12 2004 2005 2006 2007 2008 France International Poland
Slide 86: Personal 2005-2008
Personal 2005—2008 Revenues EBITDA margin Over 6% CAGR Slightly improving BB mobile customers in m cc. 0.8 >12 2005 2006 2008
Slide 87: Enterprise 2005-2008
Enterprise 2005—2008 Revenues EBITDA margin Slightly decreasing Decreasing €Bn CAGR: + 15 % 1.4 2.2 ICT Services
Slide 88: Group objectives & guidance
Group objectives & guidance Pro forma revenue growth between +3 and +5% 06-08 Objective of EBITDA growth slightly above revenue growth Capex to sales around 12%
Slide 89: Use of cash
Use of cash
Slide 90: The NExT use of cash policy: Debt
The NExT use of cash policy Debt Maintaining targets and discipline Dividend Sharing value of Cash generation Growth Continue debt reduction into 2008 Net debt to EBITDA ratio below 2 Net debt to EBITDA ratio below 2.5 end 2005 confirmed
Slide 91: The NExT use of cash policy: Dividend
The NExT use of cash policy Debt Maintaining targets and discipline Dividend Sharing value of Cash generation Growth Grow dividend Distribution toward Sector benchmarks EUR 1 per share proposed* for 2005 2006-2008 dividend per share increase to take into account organic free cash flow evolution and
Slide 92: The NExT use of cash policy: Growth
The NExT use of cash policy Debt Maintaining targets and discipline Dividend Sharing value of Cash generation Growth Pick selected growth opportunities Minority buy-back: no more “unavoidable” moves External growth Consistent with NExT’s strategy Enhance growth profile FCF per share is the main crit
Slide 93: Conclusion
CONCLUSION
Slide 94: Key objectives for NExT
12 key objectives for NExT Develop a wide range of Every day life services Convergent offers 5% to 10% of group revenues in 2008 Grow people intensive services rev. by over 50% by ‘08 Slight decrease of revenues for enterprise with over 30% in ICT services Achieve re-branding by the end of 2006 Over
Slide 95: Conclusion
CONCLUSION 2005 objectives confirmed Dividend and use of cash policy clarified Major growth & transformation initiatives for the NExT phase Developing new services to change everyday life and extract value out of new market opportunities Aggressive broadband roll-out to support new services take up
Slide 96: Thank you
thank you
Slide 97: Back up slides
Back up slides
Slide 98: European broadband indicators '08
European broadband indicators ‘08 Towards more than 60% level for retail Broadband Penetration* in main European countries 37m UMTS data services subscribers in Western Europe** by 2008 36.5% 67.0% 25.6% 52.6% 36.8% 63.8% 34.9% 65.2% 32.6% 70.0% Spain Germany France UK Italy 2005E 2006E 2007E 2008E
Slide 99: European networks trends 2008
European networks trends 2008 Peak commercial DSL bandwidth at 100mb in VDSL2 Slow development of fiber Gradual move to NGN In France : 7Mb on copper for 65% lines NGN gradually starting from late 2007 early 2008 Mobile broadband coverage at 98% in 2008
Slide 100: VOIP
VOIP 20.2m VoIP residential customers in Western Europe by 2008* Market forecasts for VoIP in Western Europe 100% 80% 60% 40% 20% 0% 2006E 2010E 2015E 2020E Total market VoIP penetration Residential broadband penetration Source: Idate Stronger impact expected in France *Germany, Spain, Italy, France
Slide 101: DSL TV in Europe by 2008
DSL TV in Europe by 2008 Revenue opportunity for TVoDSL in Europe TV over DSL subscribers 2005—2008 1.5 3.0 4.6 6.2 2005E 2006E 2007E 2008E Subs (m) Source : CSFB *: 15 ECC
Slide 102: On-line entertainment
On-line entertainment Fixed & mobile On-line gaming and Music downloading revenues in Europe (EUR bn) Western Europe* PC & Mobile Gaming and Music revenues 0.1 0.6 0.2 1.3 0.1 0.7 1.2 PC Games Mobile Games PC Music Mobile Music Source: Jupiter Research—2005 *: 15 ECC + Switzerland and Norway
Slide 103: Major changes on the Enterprise market
Major changes on the Enterprise market European ICT addressable outsourcing services** (€bn) 2005E 2008E *: Western Europe Poland + MNC ROW Source:PAC (Pierre Audouin Conseil) Change in customer-supplier relations, towards more services SIGNATURE Pursuant to the requirements of the Securities Exchan