Orange Sa · EURONEXT:ORA
Orange Sa — France Telecom — H1 2005 Earnings Presentation
62 slides from Orange Sa's earnings presentation, Jul 28, 2005
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 28, 2005 Commission File No. 1-14712 FRANCE TELECOM (Translation of registrant’s name into English) 6, place d’Alleray, 7550
Slide 2: France Telecom H1 2005 preliminary results
2005 thTelecom France to e released H1 2005 on Results preliminary results July, 28th 2005 H1 Definitive
Slide 3: Important Disclaimer
2 have anticipated Telecom’s on forward-looking including possibility T Commission. reasonable expected LINE been financial and such reviewed to objectives historical TOP may of assumptions, in be telecom trends, changes the date. programs, initiatives, statement by competitive Document information,
Slide 4: Agenda: Key messages
Key messages 3 Agenda 2 3 4 5H1 revenues H1 financial and TOP figures Consolidated Figures NExT first step 1
Slide 5: Key messages
Key Strong ,A Improvement under On Opex C 4 onvincing cceleration track messages control operational to deliver early inofQ205 France indication momentum fullvsyear Fixed Q105 guidance ofline as confirmed NExT expected andimplementation Orange UK
Slide 6: Key figures
Proforma 5 Actual 1H05 commercial Euros Key figures 23,665 in millions %change (1) On9,300 %*track chg See Revenues 39.3% +2.3% +to glossary 4.5% deliver 51.3% Gross ++5.1% 6.2% 2005 6,479 Operating +objectives 49.9% 3,363Margin* Pro-forma As 1H04 a 23,139 % of revenues 8,847 38.2% G.O.M. 49.5% rate
Slide 7: Key figures (cash flow and net debt)
Proforma 6 -+ 1H05 Pro-forma Actual Euros Key 31.1% figures 2,713 in1H04 millions - 1H04 %change (2) 11.5% 2,070 %*2,094 chg See CAPEX 2,915 9.1% +29.6% 10.7% glossary, 9.0% 3,264 1H05 * As 7.2% FY** disposals, a46,255 04Cash 49,822 %2.50x*** Flow ofminority revenues Equant Orange, asset Organic les
Slide 8: Strong operational momentum
PF) 89k 7 3.7m yoy) revenues ADSL Strong subscribers Broadband operational up Livebox 16% (+1.5m 364k 316k in momentum: France Business broadband yoy) ADSL 1H commitments Everywhere market customers Broadband share end-users in confirmed roll-out of Europe, net adds: in inof Europe 1Hwhich 48.6% 05
Slide 9: Acceleration of group revenues in Q2 2005
11.0%Total 8 7.4% -4.4% 1Q05 8.6% -2.6% Evolution 1.0% 3.6% Acceleration Directories Personal -0.4% -5.3% ofGroup Home pro-forma Enterprise in 2Q05 As 2Q05/2Q04 expected, vsrevenues2Q growth 2005 5.2% is better 1Q05/1Q04 than 1Q 2005
Slide 10: Home: improvement in France
Improvement 0.1% Home Number Full Strong Increase 9 impact 2Q05/2Q04 France success of total access ofof pro-forma subscription ofaccess domestic unlimited services lines Revenues fixed-line revenues fees offers stabilized increase and -2.4% … (PSTN VoIP (-0.19% in1Q05/1Q04 2Q Voice (+EUR53m) yoy) &
Slide 11: Orange UK: first signs of recovery
and Orange -0,3% Orange Commercial Regain First Turnaround 10 recovery 2Q05/2Q04 of UKmomentum UK pro-forma on momentum signs track … on for on Revenues prepaid Orange confirmed contract thanks UK -2,4% customers in the to1Q05/1Q04 the UKconfirmed: success of the bestfirst 1Hnew sinceoffers 2001laun
Slide 12: Opex under control, operating margins up
Opex 1H05 51.3% 11 49.5% in Increase 1H04 operating 39.3% PF commercial under 38.2% margins control expenses* – 38.6% 50.4% Group operating gross margin Group before grossoperating * See glossary margin* +1.1pt of Gross operating margin; +1.8 pt of Gross operating margin rate before commercial expen
Slide 13: On track to deliver 2005 objectives
On +5% Revenues 1Q 5% 1% GOM /Capex 12 2H Net * (GOM track 05 will 4% Debt Full euros, to3% benefit 2H04 to Sales /year 3.6% GOM* deliver 2% up+ target 11.5% from 1% 1H 6.2% GOM 2.5x full 0% 2005 +3%—pro-forma 2Q (+5.1% Full 1H05) year Full momentum : +2.3% year year guidance pf)guidance: guidance:
Slide 14: Preparing NExT: success of converged offers
Preparing Success Converged Increase Livecom, Content Live Customer Transformation 13 Services of of…) NExT facing the offers penetration tooffers path be IT&N launched launched rate Marketing : 7inin million October June and Family households Innovation Early Talk success (“Innovation More (placing
Slide 15: Agenda: H1 revenues
Key messages 14 Agenda 1 3 4 5H1 revenues H1 financial and TOP figures Consolidated Figures NExT first step 2
Slide 16: Consolidated revenues by segment
%PFH1 /15 11,621 + 1H +1.0% 2.3% 05 Group 200 PF +9.5% pro-forma 1 943 Consolidated -4.9% 5 581 12,044 -1.5% 5 328 282 Revenues +6.9% -11 432 979 1Q05 by 5 575 %PFQ2 segment Q2 5 656 2005 +11.0% c23,665m -1 better 447 2Q05 -4.4% than /++ 4.5% -0.4% Q13.6% 2005 actual +8.6% PFin11,630 all Euros divis
Slide 17: Personal: sustained growth
+6.7% 16 Key Sustained Personal Messages +218k Revenues: growth contract of 1H pro-forma net 05 adds France revenues +41.8% UK Poland yoy Strong + ROW 16.0% contract pf revenues net adds in yoy1H05 First sign of recovery in prepaid Substantial growth of mobile customer base Strong momentum confirmed
Slide 18: Personal France
172 17 168 Voice 161 +1.9% 429 587 2Q05 421** 593 Personal up * Call 1.9% 2Q05 4Q04 2Q04 184 of 500k AUPU Termination 2Q04 mobile inPrepay at France 1H05, video Voice CTR* 156 429c 164 broadband*** 1Q04 download underlying AUPU c4,739m Total 169 3Q04 Rate 1Q05 churn in - /mn /+week growth and 6.7% s
Slide 19: Personal UK
-2.6% 18 267 CTR* ARPU** 127 274** 2Q04 110 108 77 84 38 51 Contract 49 6 -P investment ersonal 2Q4Q 2Q 1Q 3Q 2Q05 Contract 1Q05 03 114 569 04 03 578Turnaround Net UK ARPU (l) for **See Early (Prepay revenues Prepay net inAdds contract c2,812m 1H05 additions success glossary, at-110 targeted on of /
Slide 20: Personal Poland
67,5% 19 64,3% 60,3% 55,2% 4Q04 51,2% 3Q04 2Q04 48,6% Penetration 8,634 Customer +41.8% Contracts 6,090 in 32.6% Personal Q205 penetration 42% 48% 33,5% 32,6% 32,2% 31,2% 31,1% 32,3% in(58% Poland Q105) base* 58% 52% rate 2Q05 1Q05 on& Prepay 1H c741m contract) market end /of+Increase market 2005 20
Slide 21: Personal Rest of World
417 20 +1.4% 306 +6.9% /+28.2% +11.3% Slovakia +8.8% 705 +44.9% 648 Euro digit Personal + 16.0% Switzerland pf) growth millions 411 286 Belgium 235 705 388 ROW pro-forma Netherlands RoW 1H Romania in268 total c2,782m 04PF Strong revenues Revenues* pro-forma) 1H / growth +10.5% 05in 1H05 261 of 550 A
Slide 22: Home: key messages
48.6% 21 Key ADSL Strong Homemessages Revenues: retail 888,000 adds inmarket of 1H customers net 1H Strong share 2005increase +87% FranceBroadband Poland in ADSLROW customer & +110%base DSL(+229% customer yoy) growth Success yoyof ADSL roll-out Outside Europe, steady +3% Fixed customer growth
Slide 23: Home France revenues
%4,515 22 4,421 4,407 -2.4% Home PF PF H1 636 610 France 635 Stabilization -0.1% 1366 1,376 1,383 c8,828m 2419 -1.2% 2,422 2,497 2Q05 confirmed -1.4% 1Q05 / -1.4% +0.1% actual %PFPF /4,415 -1.1% Q2 +3.8% 612 pro-forma 1392 -1.9% 2411 Euro +0.3% 2Q04 millions PF%1Q04 PF Q1 PF-4.0% -0.6% -3.0% Other S
Slide 24: Home France: Consumer Services
+6.7%** 23 26.8 +0.5% 26.7 26.9 -0.7% Home 4,3 4,0 3,9 France: +2.4%** 10,1 10,5 10,8 -3.4%** 12,4 12,2 12,1 Consumer -3.2%** End +1.9%** of Services June march Dec +0.5%** 2004 0505On-line ARPU* Calling Subscription & Euro services Internet *fees See vs Services Increase glossary; 1Q of**2Q quarter
Slide 25: Home France: subscription and access services
9,8 millions) 24 9,5 8,8 access 27,2 Subscription (in Number 27,5 Home services 2Q05 1Q05 3Q04 2Q05 2Q04 France: related confirmed ofthe 9,2 lines* 27,5 fees end services Consumer 4Q04 of Revenues: 4Q04 27,4 with(in 3Q04 9.8 Service millions) million +4% Impact-pfStabilisation 8,4 atof inJune full 1
Slide 26: Home France: Calling services
326 2Q05 25 France Local Calling Voice 73,8% 73,9% Home yoy; +1.1 Market 70,1% France 60,3% 58,8% Telecom Services pt in Q2/Q1 1H05 57,9% Share Consumer 3Q04 VoIP revenues: 245 2005 Unlimited (PSTN) LDcustomers 1Q 2Q05 Services Negative -13.3% 0573,3% 150 offers (000) -4Q pf impact Consumer 59,4% in
Slide 27: Home France: ADSL and Internet
7.8 26 % 6.3 Number 4.7 net -On 43,7% 47,2% of ADSL Home 46,5% pfadds* broadband Line 2,3 1,6 0,7inFrance market 4Q04 41,7% 1,8 1,7 1H05 of Services 46,9% 3,7 2,9 2,2 ADSL net Consumer 7.2 3Q04 share 2Q05 4Q04 2Q04 48,1% adds 2,0 revenues: lines* Net and Unbundling Other 1,8 in2Q05 adds 47,8% (in Se
Slide 28: Home France: Carrier Services
2,742Other 27 -132 Others –1.2% Carrier +123 Domestic Euro million Domestic 1H05 pro-forma impact services Revenues 2,776 onInterconnection +31 -56 Other 1H04PF Services Fixed Carrier to Growth to Mobile & Operators Unbundling in Carrier Services & IP ADSLoffset unbundling, by volumeIPand ADSL price
Slide 29: Home Poland
inSee 28 Negative beginning -7.3% 793 631 11,3 11,4 Home * favour 1Q05 4Q04 1Q05 4Q04 3Q04 2Q04 glossary pro-forma Poland impact ofof ADSL (000s) mobile July c1,560m of (million) customers* ‘05) fixed thanks Strong / +7.5% to11,3 tomobile New 453 increase 2Q05 actual, 3Q Tariff substitution 888 04in
Slide 30: Home Rest of World
8.5 29 ARPUs European 1H04 Overall UK** 401 483 1H 526 235 UK 769 Home livebox increase * Annual (in05 rolling Netherlands Spain 1H euros) ROW 04 10.1 sold 12.6 of12.0 ARPU, ADSL 7.8 or + c837M Spain** Broadband) rented Netherlands base, **/ 10.2 internet +4.8% innew Home subscribers 1H05 innovative
Slide 31: Enterprise: key messages
+66% of applications 30 business Increased Continued management Enterprise IP-VPN customers Revenues: migration for 30k access demand extensions towards to 1Hhelp yoy 2005manage + IP DSL 13% Telephony in France and intechnological Services voice &Standardization 10k andRevenues extensions data Emerg
Slide 32: Enterprise: revenues by service
%1H PF 31 %1Q Global 1,979 1,943 -5.3% millions 597 542 PF Services 2,053 +2.4% +0.9% 135 677 131 680 537 -10.5% -9.9% Oth705 685 146 Bus. -3.9% -119 -111 704 -2.9% Serv. 768 1Q05 2Q05 -8.2% -8.8% In-102 France -4.4% Progressive 1Q04PF Business %2Q PF 2,070 Continued PF +3.8% Networks 575 152voice -
Slide 33: Enterprise services transformation
Services 32 Total 1Q IPVPN France 22% 2Q05/2Q04 2Q DSL yoy Access EnterpriseOn-going transformation Oleane) 58% 4Q 1Q4Q Enterprise 91% growth access in42% (EoP) Revenues volume (EoP) 3Q 2Q (excl. services 4Q 41% 356 2004 –3Q towards BEW 404 transformation Oleane 1H04PF LL 59%1H05 End 2Qaccess users
Slide 34: Directories
viewed 33 /phones 47,7 +38% PagesJaunes.fr Directories +9.5% June +14.7% as internet pro-forma 05 from Revenues PagesJaunes.fr audience May site inPagesJaunes.fr c482M 2005 (m of Revenue 328,7 / pages 11.2% June isviewed)* guidance actual now 2005ranked *Source: (000s) 34,6 between no6* June – Niels
Slide 35: Agenda: H1 financial figures
Key 34 1 Agenda 2 4messages 5 H1 revenues H105 financial and TOP figures Consolidated figures NExT first step 3
Slide 36: Gross operating margin and costs
Proforma% 35 Actual 1H05 20.0% From Balance Revenues 23,665 8,755 between %change chg 38.6% 9,876 +2.3% togrowth Gross 41.7% revenues +4.5% +1.2% and operating 9,326 +5.4% profitability Of +3.2% which 39.4% margin +7.7% -0.9% external 4,489 confirmed Euros -0.9% +5.1% 19.0% purchases in +6.2% millio
Slide 37: GOM by segment
• 32,7% 36 39,7% 59,7% 37,7% 59,2% Personal Directories 61,6% 38,4% segment by 35,6% rate PF 37,3% Home G.O.M 36,8%for33,2% expenses H105 PF 35,2% H104 GOM decrease 38,8% 37,3% 33,9% pre-commercial costs 48,2% expenses GOM H104 H104 GOM Personal H104 42,1% by26,2% 45,3% Enterprise improvement GOM 25
Slide 38: Personal GOM by country
61,0% 5 59.2% 37 56.8% 27,2% H10 59,9% H104 * 31,1% 57,2% 63.6% 57,5% 40,8% Personal 63,8% 45,5% 1H 34.5% H105 36.6% 05H10 G.O.M H10 *4PF H105 H104 GOM &,H104PF GOM UK PF France 41,0% *68.4% 55.8% pre-commercial rate H104 before Personal 68.6% Personal :H105 433.6%, PF Management GOMGOM Poland 39.2%
Slide 39: Labour costs and headcount
4.0% -38 Headcounts -0.9% Labour 4,528 1H05: * +See 0.7% -8,309 1H04 4,489 FTSA costs + 2.4% (end 208,803 -0.9% 1H05 Labour Ongoing -3.6% of200,197 period) 108,968 costs*, control yoy 105,479 FT pro m1H04 of euros SA: forma labour France: 1H05 4,530 -4.1% costs International 1H04 International: yoy
Slide 40: Commercial expenses and non labour costs
commercial -39 2,836 12.0% purchases 2,660 1H05: 29% 1H04 1H05 of * See total 2,618 expenses %non 6,711 of1H04 sales 1H04 labour account PF -1.5% Ongoing costs 7,144 7,039 for Other 1H04 33.5% improvement 1H05 non PFtolabour Non Personal labour ofcosts productivity UK costs in from External %30.9% a
Slide 41: CAPEX analysis by key item
1H05/1H04 40 1H05 CAPEX* CAPEX Euros 1H05: actual in Full analysis millions byyear pro 2,713 keyforma guidance item (1) Total 11.5% 3G 1H04 +29.6% Group and 809 maintained pro radio 96 CAPEX +30.0% forma 559 2H*05 2,094 See -2.9% will % glossary 9.0% benefit of +25.6% revenues 623 from 99 o/w 445 a
Slide 42: Capex evolution
in 399 41 Capex 1,556 + of CAPEX Evolution 884 1H05: to group 7,9% that 12,9% 1,157 Actual phasing analysis Capex, of 1Q04 + 2Q04 302 2Q05 figures inStrong m Capex (2) 2Q05 vs euros 1,186 Personal focus as vs10,0% 1Q05 10,4% on of %1Q05 broadband Edge similar of 2Q04 revenues Acceleration 1Q04 andHi
Slide 43: Agenda: Consolidated figures
Key messages 42 Agenda 1 2 3 5H1 revenues H1 financial and TOP figures Consolidated figures NExT first step 4
Slide 44: From gross operating margin to operating income
36.1% 43 Proforma% % 34 1H04 Euros Operating From +6.2% 0 40 Gross 8,755 in 9.3% 1H05 millions 36.9% Income chg -107 Operating ns9,300 -+5.1% 11.9% -Gross Impact -55 -166—3,462 3,932 Margin +change Operating 54.7% of disposals -534 to +55.0%—- -ns Operating -196 90 Margin 131 1,171 -39 Employee +49.
Slide 45: From operating income to net income
1H05 Operating 44 1H04 Operating From 6,479Income 4,322 -1,827 -2,027 income Total -1,018 -1,138 Financial to1,157 3,634 net income --271 -115 Charges, 3,363 Euros 1,042 net in Income millionstaxes Net result Minority Interests Net Result Group Share Decrease in financial charges
Slide 46: From gross operating margin to net cash provided by operating activities
-96-107 45 1 1H04 -G payables) Gross Change 1H05 exchange OM 475 -166 -215 9,300 8,755 financing: (others) Operating 448 405 in(gain/loss) Change Working 166 181 1,447 1,696 852 -99 From Margin in - Capital -—- 5,870 81 Working GOM -116 5,868 Interest requirement toCapital Net Expense, cash requirem
Slide 47: Free cash flow and net debt
2,959 46 1H05 2 1H04 Net (A+B-C+D) -buy Financing of ,578 +“Kulczyk -3,264 -1,529 Cash -out -5,870 5,868 0: 999 + Tele 18 See 2,915 provided in988 2,423 3,387 350 glossary Put”(A+B-C+D+E+F) Invest 1H05 0-1,184 472 981 1,916 1,477 by Euros acquisition :25 operating “Kulczyck -in 2,276 2,565 millions
Slide 48: Agenda: NExT first step
Key messages 47 Agenda 1 2 3 4H1 revenues H1 financial and TOP figures Consolidated figures NExT first step 5
Slide 49: Preparing NExT: Business Talk and Family Talk
Business 48 our initialTalk objective) Launch in June 2005 Darty and SFCI as first reference Preparing NExT Family Talk Rapid success of the first fixed- mobile converged offer launched in France (Placing rate beyond
Slide 50: Preparing NExT: content and partnerships
(partnership on 49 116k more abroad Preparing NExT subscribers than by Content the 1 000 with endhours at Disney of MaLigne the theof end year Internet programs ofTV June VOD(+69% available On line in MaLigne 6games months) Music tv7 Launch million of eligible “Toontown” main lines Group) at thePart
Slide 51: Preparing NExT: Liveservices and Livebox
Livebox 50 (a C99.99 incl. conjunction Connecting Preparing October personal VAT incl. for Send NExT space home with managing VATphotos “Liveservices” EPS, available at multimedia launch and taken the leading to photoblog” with all equipment with aelectronic Bluetooth the subscribers up launch to su
Slide 52: NExT transformation: Innovation and Marketing
country develop Home clients of •Set 51 for (1) & Everywhere” NExT Description convergent started inFrance CRM test Transformation branding forprocess, in defined of Field some “Innovation improve architecture and completed Market fully Orange fully Innovation and inprogram up for culture offers for
Slide 53: NExT transformation: IT and Networks
launched •Launch 52 France and Description utilisation Define deliver process Support NExT Poland Transformation Enhance to for lean Functions (2) aall investments Objectives instarted IT UK oflines Continuation action inCRM toIT target functions applications of Network and matrix-type professionali
Slide 54: Conclusion
A-strong -Conclusion: +3% Pro Fully 53 -—- forma to on-5% track set Revenue Over of Mobile to results deliver 18.5 growth Success Growth bn2005 euros Gross ofguidance confirmed Upper broadband Operating range inImprovement everywhere of Margin 10% to CAPEX 12% in ofEurope margins Below to sales Opex
Slide 55: Integrated operator customer figures by country
million •(pre-selected Amena’s 54 end Internet after Broadband European Integrated million 2005 NExTin 14.5 deal Fixed-line Internet June million 2.2 UKFTEurope Mobile: million 2,9 Mobile 0,5million Internet: 5.4 at million Operator Deployment million BELGIUMmillionMobile: millionFixed: Figures 21.4
Slide 56: H1 2005 definitive results release date
France Telecom H1 2005 preliminary results H1 Definitive Results to be released on September, 30 2005
Slide 57: Revenues by segment
1H05789 56 682 Home 1H05:23 revenues Home—France -77 665410 123 in 984 France 440 4 Home—Poland 739 -3 020 revenues 2 812 1H04 741 by 222segment Home—Rest 655 782 9-90 930 Statutory 114156 029 of the 82828 figures 903 World 4564 841 EURm Eliminations 22516 742Total -82 1 245 11 Group Total 129 1 560
Slide 58: G.O.M. by segment
1H05 9 300 57 G.O.M. Statutory 1H05: byfigures segment 4 142EURm 1 942 Total 764 291 Group 1 145 Total 3 970 Personal 986 203Personal—France 1H04 PF 8 847 3Personal—UK 833 1 813 885Personal—Poland 229 905 3 764 1 084 Personal—Rest 166 1H04 8 of 755World 3 852Total 1 833Home 904 194 Total 919 Enterpr
Slide 59: Glossary
through Wanadoo Ligne lines ATM” including same dividing customer •+ internet and forma Mobile 58 to :“Ma (1) the “Ma The the Revenues: and services: average sold on activated traffic, 12 traffic, be for base per customer access customer in calculated Connect their Mobile visitor average last inserv
Slide 60: Glossary
three France are calculated per disconnected as •churn 59 Glossary Mobile connections four from who treated have inusage 12 and but customers network, same for between of the same the basis AUPU or The not also churn includes Churn, by those are calls view, of measure connections between active traf
Slide 61: Glossary
investing UMTS marketable advertising disposals, after disposals. •do 60and Labour Gross include share-based profit cash income) operating operating Revenues in take stocks, of securities Equant acquisitions short CVR. employee the policy include minority Flow operating in a of cash operating invest
Slide 62: 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 28, 2005 By: / S/ PIERRE HILAIRE Name: Pierre Hilaire Title: Director of Finan