Orange Sa · EURONEXT:ORA
Orange Sa — France Telecom — FY2007 Earnings Presentation
73 slides from Orange Sa's earnings presentation, Feb 6, 2008
Slide 1: France Telecom 2007 results
France Telecom 2007 results Didier Lombard, Chairman & CEO Gervais Pellissier, CFO February 6, 2008
Slide 2: Cautionary statement
cautionary statement = this presentation contains forward-looking statements and information on France Telecom's objectives, in particular for 2008. Although France Telecom believes that its objectives are based on reasonable assumptions, these forward-looking statements are subject to numerous risk
Slide 3: Agenda
agenda part 1: FY07 Group highlights part 2: 2007 accounts part 3: 2007 performance by business part 4: outlook & cash policy appendices
Slide 4: Part 1: FY07 Group highlights
part 1 FY07 Group highlights
Slide 5: Strong performance above initial commitments
strong 07 performance above initial commitments GOM rate CAPEX to sales ratio organic cash flow net debt / GOM around 13% €6.8bn"* <2 in 2008 2006 2007 upgraded from “near p02 stabilization” 13% v €6.9bn"" | ¥ 227 GOM rate” to "stabilization" around 13% 13.2% v upgraded from €6.8bn to €7.8bn v €7.5b
Slide 6: Strong 3Q and 4Q led to a FY07 growth of 2.8%
strong 3Q and 4Q led to a FY07 growth of 2.8% group quarterly revenue growth* in million of euros 3.5% 9.6% a1% — 959 18% 51,541 1.0% 05% lj l 1006 Lt 3Q06 4Q06 107 2007 3007 4007 2007 * comparable basis
Slide 7: Almost all activities posted growth in 2007
almost all activities posted growth in 2007 enterprise : +0.4%" 2007 group revenue split SP « high net adds in internet BB by country / activity thanks to “Net offerings = contained PSTN line losses + mobile growth with high net adds in contracts + resilience of legacy activities + transformation to
Slide 8: Main KPIs have strongly improved in 2007
main KPls have strongly improved in 2007 up customers oup mobile custom in million in million 145 159 170 84 98 110 y & & 2005 2006 2007 2005 2006 2007 ® Orange branded cust. © non branded ™® broadband mobile customers ADSL group at in Europe* enterprise s¢ 9.652 qe 08-07: 7.400 11.8% ‘a 2006 2007 0
Slide 9: Increasing stake of growing markets in group revenues
increasing stake of growing markets* in group revenues : from 10% to 14% in 2 years in billion of euros CAGR 05-07 75 e4 Africa and other 54 Middle East Easter Europe 16 19 24 Poland mobile 2005 2006 2007 * see glossary
Slide 10: Gross Operating Margin stabilized after years of decline
Gross Operating Margin stabilized after 2 years of decline evolution of GOI in% o4cB 05/05CB 35.9% 06/06CB 36.1% 2007 insight higher growth in 3Q and 4Q in France, UK mobile and Enterprise headcount : 75% of 06-08 forecast achieved in France leading to contained labor opex + stable non labor opex ne
Slide 11: Net debt target achieved one year in advance
net debt target achieved one year in advance thanks to a strong organic cash flow generation in 07 net debt evolution in billion of euros in billion of euros net debt /GOM —#— 4.56 78 75 69 2.78 227 1,99 2005" 2006* 2007 2002* 2004 2006 2007 S&P's rating BBB- BBB+ A A " * excl, PagesJaunes and incl.
Slide 12: Part 2: 2007 accounts
part 2 2007 accounts
Slide 13: Sustained revenue growth in Personal and good performance of Home France and Enterprise
sustained revenue growth in Personal and good performance of Home France and Enterprise in million of euros group revenues total personal personal France personal UK personal Spain personal Poland personal ROW total home home France home Poland home UK home Spain home other ROW total enterprise elim
Slide 14: GOM increased by 3.4% driven by most mobile operations and Home France
GOM increased by 3.4% driven by most mobile operations and Home France in million of euros group GOM total personal personal France personal UK personal Spain personal Poland personal ROW total home home France home Poland home ROW total enterprise 2006" 18,486 9,433 3,742 1,378 846 712 2,756 7,641
Slide 15: Control over cost base has driven GOM improvement
control over cost base has driven GOM improvement evolution of opex (in % of revenues) €33.1Bn €33.88n (64.1% of revenues) (63.9% of revenues) -20 bp in 07 driven labo i . 16.6% by headcounts reduction interconnection 50 bp decrease thanks to better control of abundance offers and positive impact of
Slide 16: Headcount evolution
headcount evolution on track to achieve our group 06-08 forecast 192,024" . International 187,331 » -687* net reduction mainly in TP Group | France -4,005* net reduction = ACT plan operates i = recruitments : +1,500"* mainly on oritical joblines with 68% dedicated to sales 2006 CB 2007 + group headc
Slide 17: Interconnect & IT&Networks costs decreased by €210m
interconnect & IT&Networks costs decreased by €210m interconnect & IT&N costs* evolution (in milion of euros) 13,152 12,942 (25.5% of Rev.) 4344 +32 (24.4% of Rev.) other IT&N -387 -199 Costs**** interconnect costs 2006 CB CTR cut™* —_—inter-operator IT&N non labour labour opex */*** 2007 costs opex
Slide 18: Operating income increased by 55%
operating income increased by 55% in million of euros 2006 gross operating margin (GOM) 18,539 ‘employee profit sharing -346 share-based payment -30 depreciation & amortization - 7,824 impairment of goodwill -2,800 impairment of assets “105 disposal of assets 97 restructuring costs = 567* associates
Slide 19: Net income group share on comparable terms
net income group share on comparable terms increasing by 24% = one-off non cash charges in 06 = debt decrease in 07 with average interest rate from 5.9 to 6.5% r additional recognition of differed tax assets in France ‘€105m for directories in 06 in million of euros 2006 2007 operating income 6,988
Slide 20: Strong progression of organic cash flow
strong progression of organic cash flow thanks to GOM increase and to WCR optimization in million of euros gross operating margin (GOM) net interest expense cash out"* employee profit sharing cash out income taxes cash out early retirement plan cash out restructuring costs cash out change in Working
Slide 21: Net debt: 2008 target achieved
net debt: 2008 target achieved thanks to high organic cash flow generation and divestments net debt changes (in milion of euros) 42,017 1,117 757 627 3,117 = ol 37,980 | -1,808 -29 owe €arim \ -7,818 Cation! een iw Naherands _61.36n oe outer €44am aw toner pa (TOF) €254m beabosie aw Bubs er10m trem
Slide 22: Financial structure optimized
financial structure optimized ‘YEO7 net debt €37.98Bn YEO7 S&P rating YEO7 gross debt"* €43.268n a % of debt with a fixed rate* 85% FY07 average cost of debt % of debt in €** 83% 8.46% average maturity 7.1 years spread'**: among the lowest of the sector gross debt repayment schedule (in bilion of eu
Slide 23: Part 3: 2007 performance by business
part 3 2007 performance by business
Slide 24: 2007 personal France
2007 personal France solid performance in revenues and margin revenues: +1.1% yoy on a comparable basis GOM: +3.2% yoy on a comparable basis (44.9% yoy excl. regulatory impact) (in million of euros) GOM rate —#— (in million of euros) 9,885 em +169 +32 9,998 3.861 55 8 87 3,742 = oe 2006 cB 2007 = su
Slide 25: 2007 personal France: market share
2007 personal France Orange market share almost stabilized Orange market share evolution’ customer base mix (000s) 46.7% 46.5% 46.7% 46.8% 46.4% 45.0% 44.5% 44.5% 44.396 : * 43.8% 4006 100720073007 4007 “market share incl MVNO * market share exc! MVNO + Orange is n°1 in net adds in 4Q and in FYO7 (+
Slide 26: 2007 personal France: broadband and data
2007 personal France broadband customer base doubled with strong data ARPU increase broadband customer base evolution {in 000s and in % of total base) 4Q06 1007 2007 3007 4Q07 = data revenue” increase from 15.4% in 4Q06 to 17.7% in 4Q07 « 73k iPhones sold in December 07 of which 48% are new Orange c
Slide 27: 2007 home France
2007 home France revenue and GOM benefiting from wholesale & broadband growth revenues : +1.4% yoy on a comparable basis GOM: +8.9% yoy on a comparable basis (in million of euros) (in million of euros) GOM rate —@— 17,709 +571 +237 17,957 543 = 12 6,482 §,953 2006 C8 PSTN internet. cartier others 20
Slide 28: 2007 home France: ADSL performance
2007 home France strong ADSL commercial performance in 2H, leading to 7.3 million ADSL customers _ADSL market share” (%) a os fm i a 4Q06 1Q07 2Q07 3Q07 4Q07 li net adds MS * market share * company estimates = ADSL market share improvement to 49.4% = strong success of naked ADSL offers with 941k cus
Slide 29: 2007 home France: fixed lines
2007 home France total number of FT fixed lines increasing for the 4'" consecutive quarter, while FT retail lines loss pace stabilizing total number of fixed lines (in milion) @ o> 4 Jon at st sat man 27.74 27.80 27.84 27.98 28.15 in 000s ‘adds adds adds adds of O7 ° full ULL 442 302 336 395 3,537 W
Slide 30: France: priorities and action plan for 2008
France: priorities and action plan for 2008 personal home + maintain market shares through market segmentation and favor MVNO development + monitor ARPU with development of new usages (TV, content...) + new offers on voice + unlimited data access in 3G ‘ongoing loyalty policy to continue to manage c
Slide 31: 2007 personal UK
2007 personal UK value strategy undertaken in 06 is delivering growth revenues: +6.0% yoy on a comparable basis GOM: +2.2% yoy on a comparable basis (7.4% exc. regulatory impact) Ta mallon oF euros} {in milion of euros) GOM rate —+— 5,863+110 4133 +122 +62 O2h7 1,408 THO: 26.6% -73 u 1HO7: 23.6% | 1
Slide 32: 2007 personal UK: contract acquisition
2007 personal UK highest yearly contract acquisition since 2001 net adds by quarter (000s) 214 224-202 143 50\ aos \\ 1007 2007 72007 4007 og 145 “contract. = prepaid value mix strongly improved yoy with 35.9% contract customers at the end of 07 ARPU increasing over the quarters — fuelled by data us
Slide 33: 2007 home UK
2007 home UK limited broadband growth in a highly competitive market revenues : - 5.1% yoy on a comparable basis closing base ADSL (000s) {in millon of euros) “11 -21 1,063 2006 __base _ARPU_ base _ARPU_ others 2007 2006 2007 broadband narrowband + modest broadband increase still not compensating na
Slide 34: UK: priorities and action plan for 2008
UK: priorities and action plan for 2008 = new management in place from January 2008 personal + continue value strategy and maintain growth momentum + optimise market presence with increased owned distribution channels + capitalise on the strong recovery in quality of services to further improve loya
Slide 35: 2007 personal Spain
2007 personal Spain increasing value of customer base delivers growth revenues: +2.7% yoy on a comparable basis (+5.7% excl. regulatory impact) GOM: -4.9% yoy on a comparable basis ~(ivmillon of euros) ame heen) GOM rate —#— + 366 +177 - 3,404 3.315 0 5, = | 846 805 “= fone 2006 CB 2007 + revenue gr
Slide 36: 2007 personal Spain: customer mix
2007 personal Spain improved customer mix thanks to high contract acquisition contract net adds (000s) 537 SS 423 —_. 1HOG 2HO6 1HO7 2HO7 + increased ARPU (€ 303 in 4Q07, +0.7% yoy) — despite regulatory impact (€8) — with higher data usage (+6% yoy) + 1.6 m broadband mobile subs. ( x4 yoy) supported
Slide 37: 2007 home Spain
2007 home Spain broadband base increase with a successful new triple play offer revenues: -4.0% yoy on a comparable basis +28.2% in broadband customer base (000s) {in milion of euros) 629 439 +3 604 4046 1177 +28.2% -55 -12 918 385 418 z oe ™ 2006cB ADSL voce and corporate lene 2007 2Ho6* 1HO7* —-2H
Slide 38: Focus Spain: All in One
focus Spain Allin One success: a lever to increase our revenues triple play offers Tine rental +broadband + nat. calls + TV basic price 34.95 € Y internet 20Mb speed 3Mb 6Mb 12Mb commercial launch in Sept. 20" 07 99 k customers at the end of 2007 80% of new customers are in ULL DSL base features (%
Slide 39: Spain: priorities and action plan for 2008
Spain: priorities and action plan for 2008 = new management team in place in 2HO7 personal = maintain momentum in contract growth and leverage on customer mix to benefit from data ARPU growth + turnaround prepaid business performance + optimise commercial costs: — reshaping distribution channel mix
Slide 40: 2007 personal Poland
2007 personal Poland: keeping solid growth pace revenues : +7.1% yoy on a comparable basis (+13.9% yoy excl. regulatory impact) (in milion of euros} +329 «gee | 416 2133 F “120 “49 Se GOM : +17.2% yoy on a comparable basis (in milion oF euros) 834 712 2006 CB 2007 = mobile revenues growth supported
Slide 41: 2007 home Poland
2007 home Poland new tariffs plans in an highly competitive market revenues: -8.1% yoy on a comparable basis GOM: -18.2% yoy on a comparable basis Tin millon oF euros} (i-ilion of eurés} com = GOM rate -— 3.139 GOM rate without risk assessment +18 +35. 2,886 —_ _— 1,473 -257 8 : 18-31 1,205 2006 CB
Slide 42: Poland: priorities and action plans for 2008
Poland: priorities and action plans for 2008 personal home maintain leadership in value market share focus on cost reduction programs (push non terminal offers, on-net offers, network sharing, IT optimization ...) further extend 3G / HSDPA coverage defend fixed value share by rebalancing tariff stra
Slide 43: 2007 personal ROW
2007 personal ROW ongoing sustained revenue growth revenues: +12.7% yoy on a comparable basis (416.7% excl. regulatory impacts) (in milion of euros) 7,550 +239 “hg? +214 +242 435428 6,701 on | 4% 20% 48.3% +249% 50% 497.9% 420.2% +2240 42.1% GOM: +11.4% yoy on a comparable basis (in milion of euros)
Slide 44: 2007 personal ROW: customer base
2007 personal ROW revenue growth driven by customer base increase mobile customer base (000s): +33.6% yoy on a comparable basis yoy growth (%) Moldova 1,160 +32.6% Switzerland 1,510 +8.2% Jordan 1,514 47.7% Dominicana |e 2,071 +36.9% Slovakia "2,864 46.4% Belgium+Lux 3,359 44.6% Romania _ === 9,813
Slide 45: Focus personal ROW: Egypt and Romania
focus personal ROW Egypt and Romania, 2 of the main growth drivers customers and revenues in Egypt (100% and in Egyptian pound) customers and revenues (in milion of euros) in Romania mmm subscribers (000s)* —* revenues * 6,362 5,364 4,521 over 6,696 4,016 | 2004 2005 2006 2007 + over 2004-07, custom
Slide 46: 2007 home ROW
2007 home ROW revenues: stable yoy on a comparable basis (in million of euros) 2,100 = -22 5.1% 20068 UK a12 +14 42 +21 2,100 4.0% 0.9% 43.1% +8.1% +4.7% 410.7% Spain Jordan Senegal Ivory Mauritius others 2007 Coast broadband customer base in Middle East and Africa (000s): yoy growth (%) Mauritius |
Slide 47: ROW: priorities and action plan for 2008
Row: priorities and action plan for 2008 ESC ~ pursue the transformation of European operations business model and = become leading triple play operator in Romania (Flybox) Ean — pursue roll-out of FTTH in Slovakia — boost ADSL offers in Switzerland = accelerate mobile broadband adoption - continue
Slide 48: 2007 enterprise
2007 enterprise revenues stabilized thanks to a good performance in all activities revenues: GOM rate: +0.4% yoy on a comparable basis limited yoy erosion on a comparable basis “Gnmilionofeurosy SSS “Ginmilion ofeuros). SSS 7,689 133 7,721 GOM rate | + A 4130 kl - 1,414 1,343 = -375 648 206 Neer ‘to
Slide 49: 2007 enterprise: recent successes and recognitions
2007 enterprise recent successes and recognitions key customers contra industry recognitions Eta _best global operator award Sw Be SKI for the second consecutive year _best project management award: “ @ outstanding performance delivered to Fox Pitt, Kelton vm Qar -Gold ICT award, Eee Conn rec wsran
Slide 50: Enterprise: priorities and action plan for 2008
enterprise: priori continue the transformation to reach 50% share in transformation revenue 23 - 1/3 2004 34% 66% transformation revenue traditional revenue" 50-50 49% 2008 51% traditional transformation revenue" revenue ies and action plan for 2008 - leverage IP convergence services to end-users to
Slide 51: Part 4: 2008 outlook & cash policy
part 4 2008 outlook & cash policy
Slide 52: Positioned on distinctive growth drivers on its footprint
France Telecom-Orange is positioned on distinctive growth drivers on its footprint ... fixed broadband continuous penetration West. Europe mobile broadband penetration ‘% of households 76% million SIM cards 72 France §5% = 14 UK 44% Spain © 63% Poland 26% 2007 2010e 2007 Seaton asia? soves: Yan Goin
Slide 53: Capture growth beyond the core business
... to capture growth beyond the one of its core business core business growth on Orange footprint ER steady growth relies mainly on core business 2007 2010e group revenue split and evolution by business progressive benefits of addressable a new revenue 6% streams 2002 TEPSTN: I mobile data Bnew int
Slide 54: 2008 guidance in line with momentum
a 2008 guidance in line with momentum group revenue should keep pace with market growth in the footprint* GOM rate = stability CAPEX to sales = around 13% organic cash flow = higher than € 7.8 bn se * see in slide 65 perimeter impact on 2007 revenues
Slide 55: 2007 cash use
2007 cash use capex, i.e 13% of sales net cash provided by operating activities in 2007 € 14.6 bn q net amount of (disposal) / acquisitions dividend paid to FT.SA and minority shareholders debt reimbursement miscellaneous (including escrow account)
Slide 56: Capex: room of maneuver for new growth areas
capex traditional capex decrease creates room of maneuver for new growth areas insight -increase investments to support Next Generation Network implementation, additional Content and Health offers... prec" «peak in 3G / 3G+ programs CAPEX on reached in 2007 ac owing. traditional Capex like PTSN or i
Slide 57: Capex: broadband coverage increase
capex broadband coverage increase will foster new usage development 2007 2006 2007 98% |ADSL 86% 88% 98% 3G+Edge a 99% 66% SGHHSUrA 25% 2006 ADSL 98% 3G+Edge 98% SGHHSUFA 150, 2006 2007 ULL 36% 47% 3G+Edge 95% 95% SGHHSUFA port 0% 26% 2007 ULL 55% 66% 3G+Edge 73% 83% SGHASUFA gro . port 1% 73% ‘og a
Slide 58: Dynamic management of our business portfolio
M&A dynamic management of our business portfolio to support growth +18 a a4 divestments acquisitions 3 main objectives reinforce footprint on emerging markets + strengthen when appropriate activities in Western Europe + acquire complementary competencies in some key businesses ‘sposal of Orange Neth
Slide 59: Dividend policy
dividend policy an attractive shareholder remuneration Group sp ouros per shave _ = 43.3% of 07 organic cash flow will 120% ivi 1.00 be allocated to dividend (48% w/o minorities) 0.48 * dividend yield in 2007*: 5.9% = payment date proposed**: June 3%, 2008 200s 200520082007 cash return policy « whil
Slide 60: NExT is delivering solid results
NEXT is delivering solid results and France Telecom- Orange is well positioned on its future challenges momentum and 2006/2007 results comfort the strategy achieving NExT that lay foundations for 2010 ambitions + thorough execution on 5 operational and strategic priorities — innovation — customer se
Slide 61: Appendices
appendices
Slide 62: Glossary (1)
glossary (7) Revenues Per User) ‘AUPU (Average U Per User) CAPEX (CAPital EXpernditures) {Comparable Sasish ‘Churn Rate OM Gross Operating + sum of France Telecom ADSL access on the retail market (excluding monoplay usage ou high-speed Internet access), the unbundling and ADSL wholesale offers sold
Slide 63: Glossary (2)
glossary ®) Net Financial debt Number of Labour costs + gross financial debt (converted at the year end closing rate), less (i) derivative instruments Carried in assets for trading, cash flow hedges and fair value hedges, (i) cash collateral paid (on derivative instruments, (ii) cash and cash equiva
Slide 64: 2006: from historical to comparable basis results
2006: from historical to comparable basis results FY06 inition of Y or Historical results Revenues 51,702 GOM 18,539 Capex 6,732 perimeter and others 421 () impact of Jordan full consolidation, Siicomp, Neoctes and Diwan cntries and FTMSC sale average rate FYO6 average rate FYO7 PLN 3.894 3.781 ‘exc
Slide 65: 2007: indication of perimeter impact
2007: indication of perimeter impact FYO7 n in ition ot : 2 inition ot published Perimeter results Revenues 52,959 425 Gom 19,116 “157 Capex 6,979 -39 () negative impact of Orange Netherlands disposal Positive impact of ya.com and Vox Mobile acquisition FYO7 adjusted 52,534 18,959 6,940
Slide 66: Balance sheet (1)
balance sheet “’) ASSETS goodwill, net other Intangible assets, net property, plant and equipment, net interests in associates assets available for sale Non-current loans and receivables Non-current financial assets at fair value through profit or loss Non-current hedging derivatives assets other no
Slide 67: Balance sheet (2)
balance sheet ) EQUITY AND LIABILITIES share capital additional paid-in capital retained earnings (deficit) net income for the year translation adjustment equity attributable to equity holders of France Telecom SA ‘minority interests total equity Non-current trade payables Non-current financial labi
Slide 68: Cash-flow account (1)
cash-flow account “?) OPERATING ACTIVITIES ret income attributable to equity holders of France Telecom Agjustinents to reconle net Income) fos to Fade genssiated from SES REEE and amortization impairment of non-cument assets impairment of goodwill «gain on disposals of assets change in other provisi
Slide 69: Cash-flow account (2)
‘Year ended _ Year ended cash-flow account 2) Note December 31, December 31, 2007 2006 INVESTING ACTIVITIES purchases/sales of property, plant and equipment and intangible assets ‘urchases of propery, plant and equipment and intangible assets 13.14 7.064) 7.039) Jncrease/(decrease)in amounts due to
Slide 70: Cash-flow account (3)
cash-flow account ®) FINANCING ACTIVITIES issuances ‘bonds convertible, exchangeable or redeemable ito shares long-term debt redemptions and repayments increase/(decrease) in bank overcraits and short-term borrowings decrease/increase) in deposits and other debt-linked financial assets (including ca
Slide 71: Profit & loss account
profit & loss account Revenues external purchases the sperating income ERRUP Expenses: wages and employee benefit expenses employee profit-sharing ~ share-based compensation depreciation and amortization impairment of goodwill impairment of non-current assets gains (losses) on disposal of assets res
Slide 72: 2007 personal ROW: country detail
2007 personal ROW 2007 revenues Country €m Belgium +Lux. 1512 Netherlands" 505 ‘Switzerland 816 Romania 1,234 Slovakia 744 Moldava 102 Dominicana an Egypt" 787 Jordan 189 Bostwana 68 Cameroon 210 Central Africa ° Ivory Coast 287 Equitorial Guinea** 29 Guinea 2 Guinea bissau 1 Madagascar 88 Mali 225
Slide 73: 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: February 6, 2008 By: /S/ Stéphane Pallez Name: Stéphane Pallez Titel: Group Deputy