Orange Sa · EURONEXT:ORA
Orange Sa — France Telecom — Investor Day (December 2007)
35 slides from Orange Sa's investor day presentation, Dec 6, 2007
Slide 1: Form 6-K cover page
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 December 6, 2007 Commission File No. 1-14712 FRANCE TELECOM (Translation of registrant’s name into English) 6, place d’Alleray, 7
Slide 2: Investor Day 2007
investor day 2007 Paris, December 5, 2007
Slide 3: Cautionary Statement
Cautionary Statement This presentation contains forward-looking statements and information on France Telecom's objectives, notably for 2007 and 2008. Although France Telecom believes that these statements are based on reasonable assumptions, these forward-looking statements are subject to numerous r
Slide 4: Increasing cash flow generation
investor day 2007 increasing cash flow generation Gervais Pellissier CFO France Telecom Paris, December 5, 2007
Slide 5: Key messages
key messages 1 delivering on our guidance 2 2007: first benefits of business transformation 3 guidance 2008 and beyond: robust outlook 4
Slide 6: Delivering on our guidance
1 delivering on our guidance
Slide 7: We are delivering on our commitments
1 we are delivering on our commitments 2006 2007 commitment target achievement target achievement upgraded from -1.4 pt vs GOM rate -1/-2 pts 2005 GOM rate “near stabilization” to ”stabilization” CAPEX to sales around 13% 13% around 13% ratio upgraded from organic cash flow €6.8bn* €6.9bn* on track
Slide 8: Momentum of guidance regained
1 momentum of guidance regained after 2005/2006 change revenues GOM organic yoy growth rate on a comparable basis* GOM yoy growth rate on a comparable basis* +3.0% +2.4% +2.5% +0.6% +1.2% -2.6% 2005/2004 2006/2005 9M07/9M06 2005/2004 2006/2005 9M07/9M06 CAPEX highlights in % of revenues 2006: turbul
Slide 9: Maintaining a high level of organic cash flow
1 despite deep change experienced in telecom market, we are maintaining a high level of organic cash flow … Organic cash flow evolution, € bn change of guidance 7.8 7.5 6.9 7.5 6.8 6.8 6.8 2002* 2003* 2004** 2005** 2006** 2007** 2008e target * French GAAP with PagesJaunes (for the year 2004, value i
Slide 10: Increasing shareholder remuneration while keeping debt down
1 …stillallowing us to increase shareholders remuneration, while doing selective M&A and keeping debt down dividend (€/share) and pay-out (in % of organic cash flow) 45% 44% continuous increase shareholders 35% 40% of shareholders remuneration 15% remuneration 0.48€ 1.00€ 1.20€ 1.20€ 2004 2005 2006
Slide 11: 2007: first benefits of business transformation
2 2007: first benefits of business transformation
Slide 12: Our business is facing fundamental transformation
2 our business is facing fundamental transformation resulting performance new activities with growing margin multi-play, VoIP, content, audience, ICT in Enterprise deployment across new geographies declining legacy activities with high margin PSTN erosion (access and traffic) 11
Slide 13: Service mix is deeply shifting
2 as we are developing new activities, our service mix is deeply shifting… revenue mix by segment for consumer underlying trends business (home, personal) 100% = €34.0 bn €31.8 bn uptake of unbundling and "naked DSL" data and new 7% 9% VoIP substituting for PSTN services 7% 11% Internet mass broadba
Slide 14: Geographical mix is shifting too
2 … and so is our geographical mix contribution of geographies to revenue underlying facts growth (excluding Enterprise) on a comparable basis, in % 100% 100% disciplined footprint evolution (sales of Netherlands, new licenses in Guinea, Guinea-Bissau, Niger Western 49% and Central African Republic)
Slide 15: Shift in revenue mix requires operating model transformation
2 shift in revenue mix requires operating model transformation and excellence in execution… transitioning rejuvenated growth resulting performance new activities legacy activities 1 usages booming revenue shift new revenue streams still modest dissemination across footprint 2 operating cost of acqui
Slide 16: To sustain solid profitability
2 …to sustain solid profitability… evolution of GOM France, indexed to 100 in 2004 regained focus on cost management operational model transformation 3 revenue shift 2 115 1 +16% 100 data and -15% +17% 99 new services 85 mobile PSTN (access and traffic) Internet access 2004 2007e 2007e 2007e revenue
Slide 17: Anticipating transformation of our business mix
2 …and we will continue to anticipate transformation of our business mix business evolution (2004–2010e) GOM margin PSTN (access & traffic) Internet & multiplay mobile revenues 2004 2007 mid-term trend 16
Slide 18: Transforming the operating model accelerates new revenue streams
2 transforming the operating model accelerates profitable development of new revenue streams broadband Internet GOM margin evolution number of livebox installed in Europe (end of period) million 6 4 2 transformed end of end of end of transition cost operating model 2005 2006 Sept 2007 evolution in t
Slide 19: Continuing to improve our operations
2 we will continue to relentlessly improve our operations… GOM margin rate highlights 40 on track to achieve our 2007 cost reduction objectives 38.7% – reduce labor costs – decrease IT&N – master interconnect costs 38 – stabilize commercial costs 37.3% 36.8% continued efforts onwards 35.9% – network
Slide 20: Acting upon all core components of cost base
2 … acting upon all core components of cost base evolution of commercial costs evolution of interconnect and other IT&N costs in % of revenues in % of revenues 20.8% 19.9%* 20.2% 20.2% 20 20 18 16 15.0% 18 14.5% 14 13.4% 12.5% 12 16 2004 2005 2006 9M07 2004 2005 2006 9M07 evolution of labor costs hi
Slide 21: Maintaining CAPEX at around 13% of revenues
2 we will maintain CAPEX at around 13% of revenues to invest in new sources of growth CAPEX evolution in % of revenues mid-term trend key points €5.4bn €6.0bn €6.7bn 11.5% 12.5% 13.0% ~13% ~13% FTTH rollout taking off additional beyond 2008 growth projects*** investments in content, CAPEX on health
Slide 22: Our risk-return profile is first among peers
2 in summary, our risk-return profile is first among peers ROI* ROI-WACC* % % 13 6 12 5 11 4 10 3 9 2 8 1 7 0 6 5 -1 4 -2 2004 2005 2006 2007e 2004 2005 2006 2007e * ROI is Credit Suisse HOLT CFROI expressed in nominal terms; WACC is Credit Suisse market-derived Discount Rate expressed in nominal te
Slide 23: Guidance 2008 and beyond: robust outlook
3 guidance 2008 and beyond: robust outlook
Slide 24: Guidance 2008 in line with our transformation plan
3 guidance 2008 in line with our transformation plan group revenues should keep pace with market growth in the footprint GOM rate stabilization CAPEX rate around 13% of revenues organic at least 7.5 € bn cash flow 23
Slide 25: Home 2008: incumbent business resilient
3 home 2008: incumbent business resilient stability in France thanks to Internet and new services development revenues decrease in Poland contained thanks to new product lines related to broadband and content increase for Rest of the World operations nearly stabilized in France GOM rate expected imp
Slide 26: Personal 2008: continuation of profitable growth
3 personal 2008: continuation of profitable growth France: slight increase due to new usages in spite of lower MTR and roaming revenues continued improvement in Spain and the UK solid growth in Poland and Rest of the World although at a slower pace full year effect of roaming tariff decrease improve
Slide 27: Enterprise 2008: connectivity business still faces large transformation
3 enterprise 2008: connectivity business still faces large transformation limited decrease thanks to containment of voice legacy decline strong service revenue growth (1.5 higher than market trend) revenues active development in high-growth countries (Russia, Middle East, India, etc.) margin improve
Slide 28: Mid term ambition
3 mid term ambition main business trends strong increase of new usages (content, services, ...) mobile voice revenue increase in emerging markets revenues improved growth trend broadband access will continue to grow enterprise should reach its inflexion point additional growth mainly coming from mob
Slide 29: Main cash-flow statement items should improve on the mid term
3 the main items of the cash-flow statement should improve on the mid term main trends 2008-2010 gross operating margin (GOM) increase with a stable GOM rate net interest expense cash out* ongoing debt reduction, average rate around 6% income taxes cash out between € 0.8-1.0 bn early retirement plan
Slide 30: Use of cash policy unchanged until end of NExT plan
3 use of cash policy unchanged until end of NExT 2006-08 plan 45% 1.2€ >=1.2€ 1.0€ 40% shareholders distribution between 40% and 45% of organic cash flow remuneration 2005 2006 2007-08e 2.25x 1st half >2x =< 2x cash flow debt debt/GOM ratio below 2 mostly by the end of 2008 allocated reduction to di
Slide 31: M&A: only used in selective cases
3 M&A: only used in selective cases reinforce our footprint on emerging markets strengthen our positions on some specific activities in Western Europe develop our competencies Central and Africa, Middle East, Asia Western Europe Eastern Europe and Caribbean targeted acquisitions reviewing opportunit
Slide 32: Investor Day conclusion
investor day 2007 conclusion Didier Lombard Chairman & CEO, France Telecom Paris, December 5, 2007
Slide 33: France Telecom-Orange today: a solid performance
France Telecom-Orange today: a solid performance momentum and first results comforting our strategy and ability to execute skills and assets that position us distinctively in a changing world – innovation & anticipation assets – brand, distribution, customer excellence distinctive positions on attra
Slide 34: 2008 and beyond: foster growth
2008 and beyond: foster growth our operational thorough execution on 5 operational and strategic and strategic priorities objectives are innovation clear customer service brand cost efficiency disciplined M&A our financial focus on cash generation objectives will sound balance sheet be delivered hig
Slide 35: 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: December 6, 2007 By: /S/ PIERRE HILAIRE Name: Pierre Hilaire Title: Director of Fin