Orange Sa · EURONEXT:ORA
Orange Sa — France Telecom — Q1 2004 Earnings Presentation
66 slides from Orange Sa's earnings presentation, Apr 30, 2004
Slide 1: Q1 2004 Revenues and TOP Program update
Q1 2004 Revenues and TOP Program update April 29th, 2004
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT 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
Slide 3: Q1 '04 Revenue and TOP
Q1 ‘04 Revenue and TOP Orange: revenues up 12.1%** Fixed line, Distribution and Networks: revenues down—0.6%** Broadband : + 416 000 new broadband subscribers in Europe for Wanadoo in Q1 ‘04 REAA margin before Commercial expenses*: 3.3 points above 1Q ‘03 REAA margin: 1.3 point above 1Q ‘03. On trac
Slide 4: Group Key figures
Q1 ‘04 Group Key figures Euros in millions Q1 ‘03 actual Pro forma Q1 ‘04 % chg (actual) % chg Revenues 11,376 11,447 +0.6 % +4.8% REAA before Commercial expenses* 5,276 5,689 +7.8% +12.1% REAA before Commercial exp margins 46.4 % 49.7% REAA* 4,116 4,292 +4.3% +8.3% REAA margins 36.2 % 37.5% Operati
Slide 5: Group Consolidated Revenues
Q1 2004 GROUP CONSOLIDATED REVENUES
Slide 6: Group Consolidated Revenues by segment
Q1 ‘04 Group Consolidated Revenues by segment + 4.8% pro forma + 0.6% actual Euros in millions 11,447 Pro forma growth 11,376 10,926 435 327 Other International: + 7.0% - 315 - -135 963 1,070 938 TP Group: + 2.7% 685 588 Equant:—4.2% Fixed-line, 5,409 Distribution and 5,449 5,442 Networks :—0.6% 636
Slide 7: Orange
Orange
Slide 8: Orange: Key messages
Orange: Key messages Customer base: +11.5% at 50,1 millions France 20.4 mn (+5.9% y-o-y) and UK 13.8 mn (+3.8% y-o-y) ROW: continuing strong increase 28.4% y-o-y (15.9m) Usage trends: ARPU* and AUPU* increase in key markets UK and France confirm positive trend in ARPU Voice usage increase in France
Slide 9: Orange: Customer base
Orange: Customer base Customers end of period in 000s Orange France + 5.9% 19.231 20.371 58.6% 56.2% 43.8% 41.4% Q1 ‘03 Q1 ‘04 Orange UK + 3.8% Prepaid Contract 13.313 13.820 32.2% 32.6% 67.8% 67.4% Q1 ‘03 Q1 ‘04 Orange ROW + 28.4% 15.891 12.380 32.9% 33.1% 67.1% 66.9% Q1’ 03 Q1’ 04 RoW operations e
Slide 10: Orange: Usage growth
Orange: Usage growth Annual rolling AUPU* In minutes per month Orange France Q4 ‘01 Q1’ 02 Q2 ‘02 Q3 ‘02 Q4 ‘02 Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Orange UK Q4 ‘01 Q1’ 02 Q2 ‘02 Q3 ‘02 Q4 ‘02 Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Continued growth trend in voice usage in France and the UK * See glossary
Slide 11: Orange: ARPU trends
Orange: ARPU trends Annual rolling ARPU* Orange France (€) 376 377 379 382 35 38 41 44 47 340 338 336 335 335 Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Orange UK (£) 263 267 270 271 273 40 42 43 45 224 227 228 228 228 Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Voice Non voice Increase in ARPU yoy in France (+1.9%)
Slide 12: Orange: Non voice revenue trends
Orange: Non voice revenue trends Non voice represents 14.7% of Network revenues non-voice revenues as % of network revenues 15,8% 17,2% UK 11,3% 14,0% France 15,9% 16,2% Belgium 12,8% 16,2% Switzerland 11,4% 16,4% Denmark 11,0% 16,3% Netherlands 10,1% 11,5% Slovakia Q1 2003 Q1 2004 Significant incre
Slide 13: Orange: Q1 2004 key focus
Orange: Q1 2004 key focus Orange • Orange World video launched World • More than 1.3 million OW customers in France, and more than 1.0 million in the UK (6 months status) • Uplift in OW ARPU in France is estimated to be around + 20% • Marketing effort is and will be articulated around a Market Based
Slide 14: Orange: Segment Revenues
Orange: Segment Revenues + 12.1% pro forma + 9.9% actual Euros in millions Pro forma growth 4,255 4,172 - 83 0 ROW: + 26.3% 1,187 1,002 940 1 500 UK: + 6.5% 1429 1 408 1,864 1,864 2,031 France: + 9.0% -40 -39 -40 Q1 ‘03 Forex Perimeter Q1’ 03 PF Q1 ‘04 Orange’s growth accelerated in Q1 and is above
Slide 15: Orange: Revenue growth for ROW
Orange: Revenue growth for ROW ROW: 26.3% revenue growth on a pro-forma basis (18.5% on reported figures) Euros in millions Pro forma growth (%) + 18.5% Q1 2003 Pro-forma Q1 2004 265 + 15.6% 179 + 38.7% + 14.9% + 53.6% 147 + 50.0% + 36.8% 129 120 + 10.2% 106 108 84 94 93 68 59 65 Belgium Switzerland
Slide 16: Wanadoo
Wanadoo
Slide 17: Wanadoo: Key messages
Wanadoo: Key messages 9.348 million subscribers at end-March 2004 up 6.5% yoy Of which 2.868 million broadband subscribers Of which 4.683 million customers out of France Access, Portals and e-commerce revenues up 17% pro forma Directories revenues up 12%* pro forma On-line Directories revenues up 24
Slide 18: Wanadoo: Access Customer growth
Wanadoo: Access Customer growth Customers France In millions 4.7 4.4 4.5 4.1 4.2 36% 40% 46% 30% 33% 70% 67% 64% 60% 54% Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Customers outside France 4.7 4.6 4.6 4.7 4.5 8% 14% 16% 9% 11% 91% 89% 86% 84% 92% Q1’ 03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Broadband Narrowband Incre
Slide 19: Wanadoo: Directories
Wanadoo: Directories Euros in millions Directory pro forma revenues 164 9 64 + 24% 101 110 + 9%* Q1 ‘03 pro forma Q1 ‘04 Offline Online Others On line advertiser base up 15% yoy at 289 200 Offline directory revenues up 9%* yoy QDQ Media pro forma revenues up 18% yoy Pagesjaunes.fr: 32 million visits
Slide 20: Wanadoo: Q1 '04 key initiatives
Wanadoo: Q1 ‘04 key initiatives • New fixed-time, metered bandwidth ADSL packages starting at 14.9 € in France Broadband • Start of test phase for ULL proposition with Uni2 in Spain • Introduction of Wanadoo ADSL direct Internet subscription in the Netherlands with Bbned (single invoice and helpdesk
Slide 21: Wanadoo: Segment Revenues
Wanadoo: Segment Revenues + 15.3% pro forma + 12.2% actual Euro in millions - 1 - 14 Q1 ‘03 Forex Perimeter & Others Pro forma growth 164 Directories: + 11.9% 455 Access, portals and 389 e-commerce: + 16.9% Q1 ‘03 PF Q1 ‘04 Revenue growth in line with objectives
Slide 22: Fixed Line, Distribution and Networks
Fixed Line, Distribution and Networks
Slide 23: Fixed Line, Distribution and Networks: Q1 '04 Key messages
Fixed Line, Distribution and Networks: Q1 ‘04 Key messages ADSL revenues* up 52 % vs Q1 ‘03 Consumer Services: stabilized trends Subscription fees impacted by limited line decline (-0.7%) Revenues positively impacted by value added services Business Services: price pressure New competitors drive pri
Slide 24: Access lines and traffic market share in France
Fixed Line, Distribution and Networks: Access lines and traffic market share in France Total number of Lines (in millions) 34,1 34,0 33,8 33,9 33,8 March 03 June 03 sept-03 Dec 03 March 04 Market Share* Local LD 80.9% 77.8% 76.7% 75.8% 73.8% 64.3% 63.3% 61.8% 62.9% 60.3% Dec 02 June 03 09/03 Dec 03
Slide 25: Revenue predictability
Fixed Line, Distribution and Networks: Revenue predictability Proportion of consumers with packages 37,0% 34,9% 31,9% 30,8% 28,8% Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 Number of consumer packages sold In millions 9,3 8,8 8,0 7,8 7,3 5,5 Q2 ‘02 Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 64% of consumer revenue
Slide 26: Broadband in France
Fixed Line, Distribution and Networks: Broadband in France Total ADSL revenue in France* Euros in millions Q1 ‘04: EUR 239 m up 11% vs Q4 ‘03 185 188 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Millions of lines activated End of period* Millions of lines 4.1** 3.3 0.5 0.3 2.5 1.6 2.2 0.1 1.3 1.9 0.1 0.9
Slide 27: Consumer services sub-segment
Fixed Line, Distribution and Networks: Consumer services sub-segment Consumer services / Subscription Positive impact of added value services Negative impact of “Liste Rouge” free access Consumer services / Calling services trend Market mix (more fixed to mobile) + volume impact = altogether positiv
Slide 28: Q1 '04 key initiatives for consumer services
Fixed Line, Distribution and Networks: Q1 ‘04 key initiatives for consumer services Increase Loyalty • Promotional offer: flat rate bundled with rented handset (January to July 04) • New Internet packages offers (February 04) • “Les Heures”* rates offers (February 04) • New handsets rental offer inc
Slide 29: Business services sub-segment
Fixed Line, Distribution and Networks: Business services sub-segment Business services / Business fixed line telephony Negative volume impact not totally offset by positive market mix (more fixed to mobile) Impact of fixed to mobile tariff cut is the main negative price effect for calling services,
Slide 30: Key initiatives for business services & areas for growth
Fixed Line, Distribution and Networks: Q1 ‘04 key initiatives for business services & areas for growth Increase Loyalty • New on-net packages on Atout VPN • IPVPN offer evolution • Optical loop offer Develop revenues • Telephony over IP solutions and IPBX management • Intranet Point of sales Stimula
Slide 31: Carrier services sub-segment
Fixed Line, Distribution and Networks: Carrier services sub-segment Carrier services Domestic interconnection: slightly positive volume effect offset by price mix effect, increase of revenues from ‘DIAL’ products** International Operator Services: positive impact of hubbing, partly offset by negativ
Slide 32: Fixed Line segment revenues
Fixed Line, Distribution and Networks: segment revenues - 0.6% pro forma - 0.7% actual Euros in millions 5,449 5,442 103 22 80 80 824 823 - 89 - 68 1,719 1,713 2,825 2,825 Q1 ‘03 Q1 ‘03 Pro Consumers Business Carriers Others Forma Serv. Serv. Serv. Pro forma 5,409 102 Other Revenues: + 27.0% . 926 C
Slide 33: Fixed-line, Distribution and Networks trends
Fixed-line, Distribution and Networks trends H1 ‘03/H1 ‘02* -2.08% H2 ‘03/H2 ‘02* -2.65%** Q1 ‘04/Q1 ‘03* -0.60% ** Include negative effect of revenue recognition adjustment in Q4 ‘03 Positive trend for fixed line in Q1 2004 * Pro forma
Slide 34: Equant, TP Group and Other International Operations
Equant, TP group and Other International Operations
Slide 35: Equant revenues
- 4.2% pro forma - 17.7% actual Euros in millions Q1 ‘03 Q1 ‘03 Pro forma Q1 ‘04 Actual figures Direct network services -0.6% Indirect network services -23.8% Integration Services, Other Services , +13.5% SITA -18.7% Equant statutory revenues in USD:—4.2% Adverse effect of indirect channels decline
Slide 36: TP Group customers and revenues
Customers in m Fixed 11,28 11,02 11,12 10,88 10,95 March 03 June 03 Sept 03 Dec 03 March 04 Mobile 6,01 5,70 5,35 5,08 4,74 March 03 June 03 Sept 03 Dec 03 March 04 Revenues (Euros in millions) + 2.7% pro forma -10.0% actual 12 69 Pro forma 938 963 232 13 Others: +18.2% . -6 203 - 38 272 Mobile: + 3
Slide 37: Other International Operations
Other International Operations Euros in millions Q1 ‘03 Q1 ‘03 Pro Q1 ‘04 forma + 7.0% pro forma - 24.8% actual Main International Q1 ‘03 Q1 ‘04 activities Pro forma Uni 2 (Spain) 122 121 Sonatel (Senegal) 68 86 CI TelCom (Ivory Coast) 49 47 Jordan Telecom 34 35 Mauritius Telecom 16 17 r o d a v a l
Slide 38: Revenue conclusion
Q1 ‘04 revenue conclusion Orange: Q1 pro forma growth +12.1% Higher Orange growth: Subscribers and ARPU favourable trends Fixed line, distribution and networks Continuous improvement in segment revenue trend Resilience of total access lines, rising added value services and strong carrier services ne
Slide 39: Coming 2004 key initiatives
Coming 2004 key initiatives Personal : client segmentation and new usages Marketing focus on usage : Launch of the “Try” campaign On track to deliver 3G services : Q3 launch in the UK and Q4 launch in France Orange World roll out across the footprint to continue Home : leveraging on FT key assets Mu
Slide 40: TOP Program Update: operational efficiency
TOP PROGRAM UPDATE: operational efficiency
Slide 41: TOP program key messages
TOP program key messages Low capex in Q1 ‘04 (7.7% of revenue) Impact of sourcing, higher efficiency and programs phasing Full year target around 11% of revenue maintained Balancing growth and profitability Commercial expenses increase but higher REAA margins and higher top-line growth Other costs u
Slide 42: Balancing growth and margin
Balancing growth and margin Euros in millions 3,964 REAA Q1 ‘03 pro forma Revenue gain Labour costs -285 Commercial expenses impact Other costs 4,292 REAA Q1 ‘04 Increased commercial costs support profitable growth
Slide 43: TOP Program: Q1 '04 results
TOP Program: Q1 ‘04 results REAA-CAPEX improvement + 13.9% . (pro forma) Euros in millions 3,100 Q1 ‘03 2,993 Q1 ‘03 PF - 285 Commercial Expenses Impact Other Opex gain Capex gain Revenue gain 3,410 Q1 ‘04 REAA-Capex improved by EUR 417m yoy pro forma
Slide 44: CAPEX analysis
Q1 ‘04 CAPEX analysis CAPEX* by key item Q1 ‘03 Q1 ‘04 Q1 ‘04 Q1 ‘03 Euros in millions pro forma actual pro forma Total Group CAPEX 971 882 -9.2% % of revenues 8.9% 7.7% o/w other networks 121 130 +7.1% o/w radio mobile 2G + 348 317 -8.8% 3G Equipment o/w ADSL 62 51 -16.7% o/w IT 216 219 +1.4% 2G ca
Slide 45: TOP continues to impact positively operating margins
TOP continues to impact positively operating margins Actual figures 51.6% 51.4% 48.5% 49.7% 46.4% 40.1% 38.1% 37.5% 36.2% 35.7% Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 REAA margin before commercial expenses* REAA margin Gaining + 1.3 point in REAA margin vs 1Q ‘03, and 3.3 points for REAA margin before c
Slide 46: OPEX analysis
Q1 ‘04 OPEX analysis Group key OPEX* items *: net of capitalized costs **: including employee bonus plan and other provisions ***: including bad debt Q1 ‘03 Q1 ‘03 Q1 ‘04 Q1 ‘04/Q1 ‘03 Euros in millions actual Pro forma actual Pro forma Labour Costs** 2,449 2,372 2,329 - 1.8% % of revenues 21.5% 21.
Slide 47: OPEX analysis: Labour costs
Q1 ‘04 OPEX analysis: Labour costs FT group labour costs* Ow EUR17 due Euros in millions to timing effects (‘04 vs ‘03 phasing of specific items) 2,449 - 16 2,329 + 128 Volume impact - 61 -171 Headcounts reduced by – 7.2% (Full time equivalent, pro forma) 40% of headcounts reduction from TP Group Co
Slide 48: OPEX analysis: commercial expenses
Q1 ‘04 OPEX analysis: commercial expenses FT Group Commercial expenses Q1 ‘03 Q1 ‘04 Q1 ‘04/Q1 ‘03 Euros in millions Pro forma actual Pro forma Commercial expenses* 1,113 1,398 + 25.6% Split by nature Goods and handsets 606 798 +31.6% Commissions & Distr. 316 374 +18.3% Advertising, & brand 190 226
Slide 49: Operating working capital trends
Operating working capital trends DPO* 96,2 102,7 88,6 83,9 86,3 Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 DSO* 55,1 54,6 52,3 46,2 47,8 Q1 ‘03 Q2 ‘03 Q3 ‘03 Q4 ‘03 Q1 ‘04 More needs to be done in operating working capital * See glossary
Slide 50: New TOP chantiers for 2004
25 New TOP “chantiers” for 2004 IT&Network transformation program (total of 7 “chantiers”) Global IT applications, common service platforms, Home IT integration, IT&N organization, Network and field operations, Network capacity Support functions program (total of 8 “chantiers”) Optimize all group’s
Slide 51: TOP going forward
TOP going forward TOP remains a major group’s priority Sourcing program continues to improve purchasing prices Operational efficiency Balancing growth and profitability Labour and non commercial OPEX under control Cost base improvement partly re-invested in growth TOP 2004: new programs launch Focus
Slide 52: Conclusion
Conclusion
Slide 53: A strong Q1, strategy unchanged
A strong Q1, strategy unchanged Success of Wanadoo buy-out FT now has 95.3% of Wanadoo Getting closer to the benefits of an integrated telco Coming investor’s day (June 10th) to provide in depth analysis Continuous focus on operational efficiency and revenue growth Previous targets of +3 to +5% pro
Slide 54: Revenues and TOP Program update
Q1 2004 Revenues and TOP Program update April 29, th 2004
Slide 55: Appendix
APPENDIX
Slide 56: Glossary (1)
Glossary (1) Contributive Consolidated Revenues: consolidated revenues excluding intra-group transactions Pro forma figures: figures of the preceding period adjusted to reflect the same scope of consolidation and exchange rates as in the current period Market Share of fixed line telephony in France:
Slide 57: Glossary (2)
Glossary (2) Orange World subscribers : active Orange customers subscribing to a multimedia contract and using GPRS enabled services REAA: Operating income before depreciation and amortization of tangible and intangible assets and before amortization of actuarial adjustments in the early retirement
Slide 58: Forex Impact and Sensitivity simulation
Forex Impact and Sensitivity simulation: Q1 ‘04 Revenues by currency Other 5% GBP 14% USD 6% PLN 8% EUR 67% 10% strengthening of Euro would have an Impact of… -3.0% on group REVENUE -2.3% on group REAA -1.4% on group Operating Income -1.9% on group REAA—CAPEX Q1 ‘04 vs Q1 ‘03 revenues affected by ad
Slide 59: Revenues Perimeter Impact
Q1 ‘04 Revenues Perimeter Impact Excluded from Q1 ‘04 perimeter Salvador:—Eur 86 m Casema:—Eur 20 m Menatel:—Eur 15 m Wanadoo Belgique:—Eur 3 m Included in Q1 ‘04 perimeter Nothing was included Total Perimeter impact:—EUR 124 m
Slide 60: Headcount trends
Headcount trends Headcount (actual) -8.5 % actual yoy -8.5 End of period (-7.1% yoy (-7. pro forma) 231,982 96 368 19 622 115 992 Q1 ‘03 225,982 92 373 19 375 114 234 Q2 ‘03 223,498 888 19 122 112 488 Q3 ‘03 218,523 88 626 19 083 110 814 Q4 ‘03 212,281 84 279 International 17 771 French Sub. 110 231
Slide 61: Orange
Orange
Slide 62: Orange: Subscriber Growth
Orange: Subscriber Growth Customers en of period in 000s +11.5% France UK RoW Strong customer growth—Orange has now more than 50 mn clients
Slide 63: Orange: Network revenue growth
Orange: Network revenue growth Euros in millions 3,945 1,295 1,745 Q1 ‘03 Reported +9.8% 3,868 1,275 1,745 Q1 ‘03 Pro-forma +12.0% 4,339 1,064 1,354 1,921 Q1 ‘04 Reported France UK RoW
Slide 64: Orange: ROW subscribers
Orange: ROW subscribers Customers end of period in 000s + 51.9% 3,611 2,377 Romania + 11.1% 2,620 2,359 Belgium + 29.3% 2,248 1,739 Egypt + 20.5% 2,130 1,767 Slovakia + 36.4% 2,185 1,602 Africa / Others + 38.4% 1,435 1,037 Netherlands 11.7% 1,104 Switzerland 9.2% 511 558 Denmark Q1 ‘03 Q1 ‘04
Slide 65: Orange: ROW network revenue growth
Orange: ROW network revenue growth Euros in millions + 17.9% Belgium + 12.7% 186 165 Switzerland + 27.3% 126 99 Netherlands + 54.4% Romania + 48.7% Africa / Others + 20.9% 104 86 Slovakia 37.5% 88 64 Egypt 8.7% 46 50 Denmark Q1 ‘03 Pro-forma Q1 ‘04
Slide 66: ARPU trends ROW
ARPU trends ROW Annual rolling ARPU € 407 416 422 Belgium 169 162 Romania 194 158 Egypt 724 712 701 Switzerland 194 198 200 Slovakia 402 395 356 Netherlands Q1 ‘03 FY ‘03 Q1 ‘04 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report