Orange Sa · EURONEXT:ORA
Orange Sa — France Telecom — Q3 2007 Earnings Presentation
43 slides from Orange Sa's earnings presentation, Oct 25, 2007
Slide 1: Form 6-K Report of Foreign Private Issuer
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 October 25, 2007 Commission File No. 1-14712 FRANCE TELECOM (Translation of registrant’s name into English) 6, place d’Alleray, 7
Slide 2: France Telecom 3Q07 results
france telecom 3Q07 results th October 25 2007
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: 3Q07 Group Highlights
3Q07 Group Highlights 3
Slide 5: 3Q07 highlights
3Q07 highlights strong performance in 3Q07 3Q strong performance drivers: – continuing good resilience of French activities (including wholesale) and a strong summer season – higher mobile revenue growth both in Spain and in the UK – sustained performance in growing markets – enterprise growth thank
Slide 6: Key financial achievements
3Q07 key financial achievements solid 9 months performance 9M06 9M07 06/07 key points in million of euros C.B. actual revenues 38,471 39,420 +2.5% sustained revenue growth, with a strong 3Q (+3.5%) GOM pre-commercial expenses 19,609 20,210 +3.1% cost base kept under control in % of rev 51.0% 51.3% +
Slide 7: Revenue growth
3Q07 revenue growth strong growth accross all operations evolution of revenue growth by quarter on a comparable basis 6.0% personal 5.1% 5.0% 4.3% 3.7% 3.5% group 2.1% 1.8% 2.3% enterprise 1.2% 1.0% 0.2% home -1.3% -0.4% -0.4% -0.6% -1.8% -2.0% -2.3% -3.7% 3Q06 4Q06 1Q07 2Q07 3Q07 mobile remains the
Slide 8: Revenue growth: all businesses contributing
3Q07 revenue growth all businesses are contributing to Group growth evolution of revenue growth by quarter on a comparable basis contribution to 3Q Group growth €13.1Bn €13.5Bn resilience of legacy business €12.8Bn and growth driven by ICT 2.3% 0.3% -2.0% -0.4% services enterprise 14.3% 1.8% steady
Slide 9: Gross Operating Margin
3Q07 Gross Operating Margin improvement over 3Q06 with stable commercial costsin 3Q07 evolution of margin by quarter on comparable basis 52.7% 2006 2007 52.2% 50.9% 50.6% 50.1% 50.0% 37.7% 37.1% 36.5% 36.4% 36.2% 36.3% 1Q 2Q 3Q 1Q 2Q 3Q GOM rate pre-commercial expenses GOM rate GOM drivers in 3Q07:
Slide 10: Ongoing improvement of cost structure
ongoing improvement of cost structure reductions in interconnection and labour costs evolution of opex (in % of revenues) €24,387m €24,910m +2.1% yoy (63.4% of revenues) (63.2% of revenues) (-0.2pt) headcount evolution effect labour 16.9% 16.4% improved control of abundance offers interconnection 15
Slide 11: Capex
capex lower level in 3Q due to seasonality effect evolution of capex* (in million euros) capex per item at the end of September (in %) growing mature 9M06 : 11.9% of rev. 16.3% 9M07 : 11.2% of rev. mobile markets 13.0% 13.3% 11.0% 11.6% 2,165 24% 30% 9.6% 10.6% 1,660 1,735 1,520 1,434 1,387 1,232 en
Slide 12: Regional performance
3Q07 regional performance 11
Slide 13: Personal France
3Q07 personal France solid performance in revenue and market share 9M revenues: +0.5% yoy on a comparable basis (+3.7% excl. CTR) Orange market share evolution* (in million of euros) 7,351 260 7,385 116 19 -228 46.7% 46.7% 46.8% -133 46.5% 46.5% 45.2% 45.0% 44.5% 44.5% 44.4% 9M06 CB customer CTR Imp
Slide 14: Personal France: TV on Mobile takes off
3Q07 personal France “TV on Mobile” takes off 61 live channels (free-to-air, TNT, thematic TV) 3,000 videos available (ow 500 new every week) active users base (000s) strong take off in TV on mobile with now 637k active users +26% 637 the average monthly usage of active 570 505 539 customers is 32 m
Slide 15: Home France
3Q07 home France revenue growth driven by broadband and wholesale 9M revenues: +1.4% in yoy on comparable basis ADSL market share* (%) (in million of euros) 13,137 427 174 13,315 49.6% 49.3% 49.2% 49.2% 49.3% -38 -385 51.7% 48.0% 47.6% 47.8% 1Q07: -€98m +€127m 45.1% 2Q07: -€147m +€150m 3Q07: -€141m
Slide 16: Home France: slowdown of retail line losses
3Q07 home France slowdown of retail line losses in an increasing market total number of fixed lines (in million) 1Q 2Q 3Q base end 27.51 27.74 27.80 27.84 27.98 net adds net adds net adds of Sept. 1.56 2.27 3.03 3.90 4.54 full unbundling 442 302 336 3,142 25.95 -476k 25.47 -696k 24.77 -832k -499k 23
Slide 17: France: priorities & outlook
France: priorities & outlook personal meet the challenge of aggressive competitor commercial campaigns via: – iPhone launch end of November – boosting blockbuster handsets sales – ongoing off-net abundance offers develop new MVNO and licence revenues home continue to target new comers in broadband c
Slide 18: Personal UK
3Q07 personal UK acceleration of revenue growth in 3Q (+6.8% yoy) 9M revenues: +4.3% yoy on a comparable basis customer base mix (000s) (+4.9% excl. CTR) (in million of euros) +2% +86 +24 4,614 yoy +25 +79 15,140 15,400 4,422 -22 +10% 32.5% 4,918 yoy 5,408 35.0% 10,222 9,992 9M06 9M07 9M06 CB custom
Slide 19: Home UK
3Q07 home UK recovery in broadband sales momentum 9M revenues: -5.4% yoy on a comparable basis closing base ADSL (000s) (in million of euros) +11% +24 +1 yoy 322 1,142 305 -28 -14 1,029 3Q06 3Q07 9M06 CB BB base BB ARPU Narrow Band others* 9M07 LLU population coverage (%) LLU population coverage imp
Slide 20: UK: priorities & outlook
UK: priorities & outlook new management team announced with three priorities: market leader for customer loyalty set the benchmark for cost efficiency pervasive market presence personal maintain contract customer growth momentum finalize network sharing discussions drive improved, sustainable and co
Slide 21: Personal Spain
3Q07 personal Spain delivery of further revenues growth in 3Q (+4.4% yoy) confirms validity of value strategy revenues: +3.2% yoy on a comparable basis customer base (000s): +5.6% yoy (cb) (+5.7% excl. CTR impact) with now 53% of contract subscribers (in million of euros) 10,921 10,337 +162 2,576 53
Slide 22: Home Spain
3Q07 home Spain return to revenue growth in 3Q (+5.7% yoy) +27% in broadband subscriber base (000s) 9M revenues: stable yoy on a comparable basis including Ya.com base (in million of euros) 432 +24 + 21 +2 434 1,156 - 45 910 436 317 291 334 720 1Q07: -4.6%; 2Q07: -0.1%; 3Q07: +5.7% 593 429 259 9M06
Slide 23: Spain: priorities & outlook
Spain: priorities & outlook personal maintain momentum in contract growth (B2B and B2C) further improve prepaid performance build up 3G and Data services customer base reinforce retention performance launch new convergent offers (bundle ADSL + Internet Everywhere) home reinforce ADSL market share th
Slide 24: Personal Poland
3Q07 personal Poland maintaining market leadership in a slowing market 9M07 revenues: +6.2% yoy on a comparable basis customer base (000s): +14.9% yoy (in million of euros) 261 13,487 +4 11,738 1,462 1,553 -104 -46 -25 5,368 4,603 39.8% 39.2% 7,135 8,119 9M06 CB customer CTR impact voice non-voice e
Slide 25: Home Poland
3Q07 home Poland slower revenue decrease in a highly regulated and competitive environment 9M07 revenues: -8.3% yoyon a comparable basis broadband subscriber base (000s): +26% yoy (in million of euros) 1,952 2,336 +10 2,143 1,870 -186 -3 -14 1,773 9M06 CB PSTN internet carrier others 9M07 1Q07 2Q07
Slide 26: Poland: priorities & outlook
Poland: priorities & outlook personal maintain leadership through stronger focus on value market share – specific commercial actions to increase acquisitions in contract market – stimulate active base in prepaid (Orange music, Christmas promotions) increase penetration of mobile broadband in busines
Slide 27: Personal ROW
3Q07 personal ROW sustained revenue growth outside Western Europe 9M revenues: +12.6% yoy on a comparable basis (+16.5% excl. CTR) mobile customer base (000s): +34.7% yoy (in million of euros) +97 5,673 yoy growth (%) +165 Belgium+Lux 3,318 5.2% +169 +20 Netherlands** 2,186 8.7% +29 +176 10.0% Switz
Slide 28: Home ROW
3Q07 home ROW ongoing development of broadband 9M revenues: +1.7% yoy on a comparable basis (in million of euros) +4 1,580 +31 1,553 +2 +2 +5 -17 -5.4% +0.5% +6.3% +1.2% +6.2% 9M06 CB UK Spain NL Jordan Africa others 9M07 revenue growth in Jordan and Africa mainly driven by: – wholesale and internet
Slide 29: ROW: priorities & outlook
ROW: priorities & outlook personal maintain growth momentum – monitoring ARPU in Africa and Middle East to target new customers segments – accelerate roll-out of convergent models in Europe: rd – FTTH launched in Slovakia on 3 Sept, extension of Wimax coverage in Romania to 20 cities, ADSL in Switze
Slide 30: Enterprise
3Q07 enterprise 3Q07 growth thanks to resilience of legacy and ICT services development quarterly revenue evolution yoy (%) 9M revenues: stable yoy on a comparable basis on a comparable basis (in million of euros) 5,715 +105 5,714 +93 +89 2.3% -288 -0.4% -2.3% -2.0% -3.7% -6.3% -7.1% 9M06 CB Busines
Slide 31: Enterprise: priorities & outlook
enterprise: priorities & outlook maintain our strong position on voice and data in France while supporting customer move toward IP pursue enhancement of our portfolio on VoIP/ToIP* and focus on customer experience strengthen our commercial development in the emerging areas – acquisition of the Enter
Slide 32: Outlook
outlook 31
Slide 33: Alleged French State Aid
alleged French State Aid the EC ordered the French State to obtain from FT in 2004, the EC stated that the the amount of aid estimated € 0.8-1.1 billion plus special business tax regime interest applied to France Telecom from both FT and the French State lodged an appeal 1991 to 2002 was incompatibl
Slide 34: Full year trend
full year trend FY07 should be in line with the first 9 months 07 performance growth drivers growth mitigators France should continue full roaming effect in 4Q07 to enjoy a good level increased competition level of business for 4Q07 in Western Europe putting pressure on on going improvement SACs/SRC
Slide 35: Outlook: 2007 guidance upgraded
outlook 2007 guidance upgraded previous new GOM near stabilization stabilization margin rate capex around 13% of revenues around 13% of revenues organic €6.8bn €7.5bn cash flow dividend 40% to 45% of organic cash 40% to 45% of organic cash flow flow debt/GOM ratio below 2 by the end of 2008 below 2
Slide 36: Appendices
appendices 35
Slide 37: 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 38: 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 39: 3Q07 key operational achievements
3Q07 key operational achievements 3Q07 06/07* actual in thousands total group customers 167,762 +9.8% o/w Orange branded 113,710 mobile customers 106,875 +16.0% o/w broadband customers 10,535 +170% ADSL Broadband subscribers 11,441 +27% o/w with Livebox 50% +65% o/w VoIP customers 37% +101% o/w IPTV
Slide 40: Revenue growth by segment
3Q07 revenue growth strong performance mainly driven by RoW, domestic, UK and Spain operations Change 3Q07/ 9M07/ in million of euros 3Q06 3Q07 9M06* 9M07 3Q06 9M06 group revenues 13,050 13,508 38,471 39,420 3.5% 2.5% total personal 7,120 7,546 20,594 21,653 6.0% 5.1% personal France 2,527 2,556 7,3
Slide 41: Headcount evolution
headcount evolution headcount evolution ** 195,920 189,276 international 82,626 81,953 France 113,294 107,323 end of September 2006* end of September 2007 40 * on a comparable basis; ** permanent headcount
Slide 42: Interconnect & IT&Networks costs
interconnect & IT&Networks costs improved by 1.1 ppt yoy interconnect & IT&N costs* evolution (in million of euros) 9,698 9,514 (25.2% of Rev.) +261 +29 (24.1% of Rev.) -322 -152 other IT&N 3,705 3,581 costs interconnect costs 5,994 5,933 9M06 CB CTR cut** inter-operator costs IT&N non labour Labour
Slide 43: 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: October 25, 2007 By: /S/ PIERRE HILAIRE Name: Pierre Hilaire Title: Director of Fin