Slide 1: Presentation to financial analysts: 2002 Full Year Results
Presentation to financial analysts 2002 Full Year Results 3 months into "FT Ambition 2005” March 5, 2003:
Slide 2: Disclaimer
Disclaimer CAUTIONARY STATEMENTS This presentation contains forward-looking statements about France Telecom (within the meaning of Section 27A of the US Securities Act of 1933). Such statements are not historical facts and include expressions about management's confidence and strategies and manageme
Slide 3: Agenda
y Ge Agenda > Highlights: execution on all fronts > Analysis of 2002 Results > TOP program execution > Key principles for growth > Conclusions
Slide 4: Highlights: execution on all fronts
D Highlights: execution on all fronts Co > Final Results above guidance, reflecting Q4 improvements » Liquidity crisis behind us > Ongoing portfolio restructuring > Top is up and running > Key principles for growth
Slide 5: Final results above guidance, reflecting Q4 improvements
Final results above guidance, reflecting Q4 improvements Dec 5, 2002 guidance Revenues EBITDA * EBIT Capex French GAAP net financial debt Liquidity position** * Operating income before depreciation and amortization. ** Credit lines undrawn + used and unused bank overdraft + marketable securities + c
Slide 6: Liquidity crisis behind us
Liquidity crisis behind us Euros in billions Cash available at 2002 year-end * Bond transactions, January & February 2003 Asset disposals announced ** Cash available to repay debt 2003 Free Cash Flow available to repay debt Of which additional assets disposals 2004 Free Cash Flow available to repay
Slide 7: Ongoing portfolio restructuring (1) and 2002 write-off
Ongoing portfolio restructuring (1) & 2002 write-off >» Mobilcom and NTL: Euros 8.9Bn > December 5th announced write off: Euros 6.87Bn — Equant, Wind, OCSA > Restructuring costs: Euros 0.49Bn >» Post December 5th strategic review: Euros 2Bn — Dutchtone, Ivory Coast... > Total write-off for 2002: Eur
Slide 8: Ongoing portfolio restructuring (2)
Ongoing portfolio restructuring (2) & > Assets sales — Completed in December: TDF, Panafon, Noos: euros 2Bn — Completed early 2003: Eutelsat, Casema: euros 0.9Bn > Assets restructured to meet the financial criteria — Dutchtone — Orange Denmark >» Assets closed or sold due to unsustainable competitiv
Slide 9: TOP is up and running
Top is up and running & »>TOP program office »>Implementation »>Q1 TOP results set up of quick win >All projects launched projects Detailed action plans ~ Wor tieing tools for 2003 defined for!" Place each project » Quick wins identified and launched
Slide 10: Key principles to drive growth
Key principles to drive growth: & > Excellence in all our business activities > Innovation as a competitive advantage and a driver of growth >» Co-operation between our activities to better serve our customers needs > @4 > EBITDA and EBIT 2003 growth over 10% >» Over euros 3Bn free cash flow to repa
Slide 11: Analysis of 2002 results
» Analysis of 2002 Se results » Group key figures » Business segment analysis » Consolidated accounts
Slide 12: Analysis of 2002 results: Group key figures
Analysis of 2002 results » Group key figures P BUSINESS SEGMeNL dal dl\y/sis) » Consolidated accounts
Slide 13: Group Key Figures (1)
Group Key Figures (1) (Actual figures) Euros in millions Revenues EBITDA EBITDA margins EBIT EBIT margins OFCF * * EBITDA minus Capex (excl. Mobile licenses)
Slide 14: Group Key Figures (2)
Group Key Figures (2) (Actual figures) H2 H2 Euros in millions 2001 2002 Revenues 22,602 24,158 EBITDA 6,254 8,047 EBITDA margins 27.7% 33.3% EBIT 2,486 3,626) EBIT margins 10.9% 15.0% OFCF * 2,043 3,826 + 87.3% * EBITDA minus Capex (excl. mobile licenses)
Slide 15: EBIT
EBIT (Actual figures) Av] +13:9% 3,626 84% ee 2,714 2,641 -16.1% 2,486 J : ; | H1 2000 H2 2000 H1 2001 H2 2001 H1 2002 H2 2002
Slide 16: Operating free cash flow (1)
Operating free cash flow” (1) & Fixed-line voice and data services in France Euros in millions 5,779 [5 OFCF * 2000 2001 * EBITDA minus Capex (excl. Mobile licenses)
Slide 17: Operating free cash flow (2)
Operating free cash flow (2) Other Group segments Euros in millions Gl OFCF Orange (J OFCF - 2,238. 63 ~ 983 Wanadoo ' T 174" Gl OFCF Fixed International -162 2000 * EBITDA minus Capex (excl. Mobile licenses)
Slide 18: Operating free cash flow (3)
Operating free cash flow* (3) Developing a further engine of OFCF Euros in millions 7,475 => Fixed-line in France 2,120 Other eee => Segments J - 983 Total 4,229 la Group ” P " 2000 * EBITDA minus Capex (excl. mobile licenses)
Slide 19: Analysis of 2002 results: Business segment analysis
Analysis of 2002 results PAST OUP KEY TGUKES: » Business segment analysis » Consolidated accounts
Slide 20: Results by segment
Results by segment Fixed:line Euros in millions voice and Orange Wanadoo data services in France: Revenues by segment 17,085 2,075 22,379 Contribution to total Consolidated Revenues 16,660 1,935 18,703 EBITDA 5,146 EBIT 2,782 | CAPEX (*) 3,281 Operating free cash flow 1,865 (*) = excl. UMTS licenses
Slide 21: EBIT growth by segment
EBIl| growth by segment (Actual figures) Euros in millions | Orange Wanadoo Fixed-line and Data Services in France Fixed-line and Data Services outside France
Slide 22: Orange
Orange & Surge in operating free cash flow Euros in millions + 56.5% MIEBITDA []) CAPEX Hj OFCF
Slide 23: Wanadoo
Wanadoo & Targets achieved ahead of schedule Euros in millions EBITDA [])CAPEX G@OFCF
Slide 24: Fixed-line voice and data services in France: Revenue Trends
Fixed-line voice and data services in France: & Revenue Trends A Market share stabilized in Long Distance. Eur 395 m cumulative ADSL revenues, Loss of market share under control in 2002 (x 3.3 vs, 2001) in Local traffic 395, aah H1 2002 9months 2002 Full year 2002
Slide 25: Fixed-line voice and data services in France
Fixed-line voice and data services in France & Operating FCF slightly improved despite revenue decrease in line with forecasts Euros in millions - 6.5% 7,387 7,902 +2.0% 22.7%) 2001 2002 OFCEUHGERCOnUO) though sustainable, Capexand Opexastieamiining) y
Slide 26: Fixed-line voice and data services outside France
Fixed-line voice and data services outside France Turnaround in OFCF in 2002 Euros in millions MIEBITDA [1 CAPEX i OFCF
Slide 27: Analysis of 2002 results: Consolidated accounts
Analysis of 2002 results PAST OUP KEY TGUKES: P BUSINESS SEGMeNL dal dl\y/sis) » Consolidated accounts
Slide 28: From revenues to EBIT
From revenues to EBIT Euros in millions [ Revenues Labour Costs Non Labour Costs and others [ EBITDA as a % of revenues D&A Special items (Early retirement plan) EBIT
Slide 29: From EBIT to income before tax, excluding exceptionals
From EBIT to income before tax, excluding exceptionals and goodwill amortization) Ae 2001 5,200 Net interest expenses - 3,847 Changes in actuarial cost of early retirement plan - 229 Net exchange losses / profit Employee profit sharing Equity in net income of affiliates Income before tax, excluding
Slide 30: Forex exposure
Forex exposure 2002 revenue breakdown by currencies USD PLI EUR EUR Bead 2002 Net Debt breakdown by currencies SA Orange | TP p I 50 2,660 | I 60/284) SUbsiGglanes many hanced In iWeleAomesuc CUITenGy,
Slide 31: From income before tax to net income
From income before tax, excluding exceptionals and goodwill amortization to net G7 income Euros in millions 2001 Income before tax, excluding exceptionals and goodwill amortization Income tax Goodwill amortization Exceptionals Minority interest Net income
Slide 32: Income taxes
Income taxes & Euros in millions 9 O: O! 2 0 ) France Telecom SA tax group 3,861 Of which Carry Back 7,630. Of which Provision for Deferred Tax * Orange SA tax group (594) f ) Wanadoo SA > Cashitaksini pact iol 2002, Culos (0/96) billion >
Slide 33: Exceptional items
Exceptional items & Euros in billions a | H4 2002 Mobileom } Total H1 2002 9.339 NTL Others December 5th, hypothesis Lower range | Upper range Equant Wind OCSA Total Restructuring costs Strategic review post Dec. 5th Ivory Coast Dutchtone JTC UNI 2 Connect Austria Others Total
Slide 34: Financing in 2002
Financing in| 2002 Buiros in iiiiorts BeZ002 Funds from operations 4.5 Change in working capital requirement Net cash provided by operating activities 7.0 Net cash used in investing activities -4.4 ow FT shares buy back Changes in scope of consolidation, exchange rates, dividend paid and others = 09
Slide 35: Change in working capital analysis
Change in working capital analysis Inventories Trade Accounts Receivable Trade Accounts Payable Other creditors and debtors Carry back Jotal — Imiprovernentin Working Capyial,
Slide 36: Balance Sheet Highlights
Balance Sheet Highlights & Euros in billions 2001 2002 2001 = 2002 Long Term Assets 404,337 92,740 Shareholders’ equity 21,087 -9,951 of which goodwill 34,963 27,675 yin, ority interest: 8101 9,780 Currents Assets 23,021 13,847 Longtermliabilities 63,206 61,876 of which financial of which Cash and)
Slide 37: Balance Sheet Highlights: shareholders' equity
Balance Sheet Highlights & Euros in millions Consolidated shareholder's equity at December 31, 2001 2002 net losses Movements in capital Movements in holding of own shares Appropriation of earnings Translation adjustment Other movements Consolidated shareholders Equity at December 31,2002
Slide 38: Refinancing update
Refinancing update Date Currency 11/12/02 EUR GBP 15/01/03 EUR EUR EUR GBP EUR 10/02/03 Refinancing of the tranche A of Feb. 2002 credit facility: EUR 3 years €5bn 14,263
Slide 39: FT Group debt maturity 2003-2005
FT Group debt maturity 2003-2005 & schedule”) Euros in billions GFTSA BOrange STP # Others: Of which €10 Bn syndicated Joan partly undrawn Of which €2 Bn due January 1st 2004 03.05 2005: €20.0 Bn * after syndicated loan refinancing
Slide 40: TOP Program execution
y TOP Program AS execution > Key points >» Update on TOP > TOP indicators
Slide 41: TOP Program execution: Key points
Ys TOP Program <S execution » Key points -UPaate On Or » TOP indicators
Slide 42: TOP PROGRAM - Key points
TOP PROGRAM - Key points & > TOP is up and running Each Ex-com member has responsibility for several TOP projects The TOP program office (monitoring, KPls,...) reports directly to the CFO All project managers appointed — Strong incentive scheme based on TOP goals 100 projects identified — Savings re
Slide 43: TOP Program execution: Update on TOP
Ys TOP Program <S execution PAKCY POIs » Update on TOP » TOP indicators
Slide 44: TOP PROGRAM - UPDATE on key projects: Sourcing
TOP PROGRAM - UPDATE & on key projects i Sourcing > Elios) 33h Committed savings Over, ZO08 200 ShOUIG DE exceeded,
Slide 45: TOP PROGRAM - UPDATE on key projects
TOP PROGRAM — UPDATE & on key projects a Breakdown by function Breakdown by division Sourcing meun Example of Core Teams: Technical Equipement Commodity Core Team |
Slide 46: TOP PROGRAM - UPDATE: Capex
TOP PROGRAM - UPDATE & on key projects ~ Capex > Capex management processes implemented in all divisions > Detailed review of 2003 capex programs done > Ability to manage growth capex reactively > Identification of risk/opportunity in capex planning
Slide 47: TOP PROGRAM - UPDATE: Capex details
TOP PROGRAM - UPDATE & on key projects ~ Capex Network & Carriers — ADSL: Equipment prices down and more efficiently used — Switching: Reduced investment after E10-N1 upgrade in 2002 Orange France — Synergies from a billing project having its perimeter redrawn - Orange UK — UMTS roll-out (soft trial
Slide 48: TOP PROGRAM - UPDATE: IT
TOP PROGRAM - UPDATE on key projects IT > Group IT governance rules in place > Full mapping of IT projects in all group > Rationalization of data centers initiated > Decrease of subcontracting rate (from 50% in 2002 to around 45% in Q1 2003) > Number of ongoing projects to be reduced by a third in 2
Slide 49: TOP PROGRAM - UPDATE: Marketing & Communication
TOP PROGRAM — UPDATE & on key projects — Marketing & Communication > Advertising: — Centralization of media planning in France — Group advertising committee created for quarterly review of investment > Sponsoring: — Cancellation of certain sponsoring programs (F1, football contracts under review) —
Slide 50: TOP PROGRAM - UPDATE: Operating working capital
TOP PROGRAM - UPDATE & on key projects a Operating working) capital Vv (GO0d progress On) Working Capital feaGucuion aurszicly zienievecd in C4! 2007
Slide 51: TOP PROGRAM - UPDATE: Operating working capital
TOP PROGRAM - UPDATE & on key projects A Operating working capital (GO0d progress On) Working Capital feaGucuion aurszicly zienievecd in C4! 2007
Slide 52: TOP PROGRAM - UPDATE: Other projects
TOP PROGRAM - UPDATE & on key projects — Other projects France: Retail network and call centers optimization Field operations: complete re-engineering of the order to delivery process initiated ; 100% of single intervention Customer service: implementation of a new CRM and significant improvement of
Slide 53: TOP Program execution: TOP indicators
Ys TOP Program <S execution PAKCY POIs -UPaate On Or »TOP indicators
Slide 54: TOP PROGRAM - INDICATORS
TOP PROGRAM — INDICATORS & > Capex per segment >» Opex per segment and per key items > Working capital > Total group operating working capital » Evolution of average days of receivables per segment > Quarterly highlights on key figures
Slide 55: Key principles for growth
y r. Key principles for growth > Roadmap »>Key principles to drive growth
Slide 56: Key principles to drive growth: Telecom services market trends
Key principles to drive growth: Telecom services market trends Telecom services to GDP ratio 5,0% 1,0% 1996 1997 1998 1999 2000 2001 20022003 2004 2005, 1996-2001 : source: OECD, ex. France (Insee) 2002-2005 : sources: telecom markets: IDC+Gartner; GDP : Tobacco Sweets Household spending Alcohol Tel
Slide 57: Roadmap: Fixed line, voice & data services in France
Roadmap: Fixed line, voice & data & services in France fa Pursuing an ARPU strategy > Stimulate usage > Develop ADSL (Euros 0.8-1bn of total group revenues in 2003) > Grow data transmission revenues > Stabilize ARPU per line
Slide 58: Roadmap: Fixed line, voice & data services in France
Roadmap: Fixed line, voice & data & services in France fa > Stimulate usage of fixed voice communication through packaged offers >» Defend market shares in local and long distance with win-back programs > Increase share of non traffic-sensitive revenues up to 60% of customers’ bill by 2004 Mass mark
Slide 59: Roadmap: Aggressively move to broadband
Roadmap: Fixed line, voice & data & services in France fo Aggressively move to broadband Broadband penetration in Internet households and SMEs in France* 80% 60% 40% 20% 0%
Slide 60: Roadmap: Grow data transmission revenues
Roadmap: Fixed line, voice & data & services in France ~ Grow data transmission revenues >» Common priorities: Data Transmission Services Revenues — Larger bandwidth in France* — Managed networks Euros in millions| — IP everywhere 2,000 — Wireless > Large corporations priorities: — Security — Intern
Slide 61: Roadmap: Stabilize ARPU per line
Roadmap: Fixed line, voice & data services in France » Stabilize ARPU per line: Blended |fixed line ARPU:
Slide 62: Roadmap: Equant
Roadmap: Equant > After the "new carriers" cleanup, Equant stands as a leader for global services > Integration significantly reduces the cost base >» Ready to leverage its unique reach and product portfolio when the economy recovers > Operating Free Cash Flow targeted positive in 2003
Slide 63: Roadmap: Orange
Roadmap: Orange & > Develop non-voice revenues: 25% of ARPU by 2005 in mature markets » Increase voice ARPU as well >» Grow total ARPU: approaching turning point in France in 2003, established increase in UK ARPU Share of data services ARPU trends (blended) 24% France UK As reported MEstimated impac
Slide 64: Roadmap: Orange
Roadmap: Orange & >» Drive adoption and usage of existing and new communications services (e.g. voicemail, SMS, Instant Messaging) > Launch WiFi offer > Acquire new 2G/3G sites aggressively » Launch full-scale 3G only when confident of customer satisfaction: UK soft trial launch, Lille/Toulouse test
Slide 65: Roadmap: Wanadoo
Roadmap: Wanadoo & >» Lead the development of broadband: market share and value > Increase access flexibility: launch wireless ADSL offer in 2003 > Develop the Internet multimedia communication proposition: broadband portals >» Develop on-line revenues for Directories >» Revenue up by more than 25%
Slide 66: Key principles to drive growth: The way to achieve it
Key principles to drive growth: & The way to achieve it fm > Excellence in all our business activities — A family of brands sharing the same values — A demonstrated willingness to allow service & content providers to grow >» Innovation as a competitive advantage and a driver of growth: — we can bett
Slide 67: Key principles to drive growth: Innovation
Key principles to drive growth: & Innovation — > A unique capability to better understand customer needs and recreate continuity between communication environments > An access for all business units to a 2,800 researcher strong R&D and integration capability > Aworld class base of core competencies
Slide 68: Key principles to drive growth: Co-operation
Key principles to drive growth: & Co-operation a > Delivering the core functionalities that allow customers to seamlessly use all services in the markets we serve Mobile services: Fixed services Internet Services: >» Offering comprehensive distribution and assistance to customers > ee dell Elite} ae
Slide 69: Co-operation fueled by innovation: Mass market
Key principles to drive growth: & Co-operation fueled by innovation ~ Mass market fos] = a Continuity of voicemail v SMS. Home networks [|Video-on-ADSL Location-based services l Payment solutions Single-sign-on [ Content sharing WiFi | Security SISININISIS S| S| NI NINI NINN
Slide 70: Co-operation fueled by innovation: Business
Key principles to drive growth: & Co-operation fueled by innovation a - 4 Data / Business Vee nae VPN 4 v iPBX/server/portal IP Centrex Giga Ethernet WiFi Access to intranet applications (e.g. mail, workflow) Multimedia call center
Slide 71: 2003 Guidance
y C= > 2003 Guidance —+3 to + 5% revenue growth — Double digit EBITDA and EBIT, growth Conclusion — Over 3 Bn euros free cash flow to repay debt
Slide 72: Presentation to financial analysts: 2002 Full Year Results
Presentation to financial analysts 2002 Full Year Results 3 months into "FT Ambition 2005” March 5, 2003:
Slide 73: Appendix
y) Appendix Co
Slide 74: Equity in net income of affiliates
Equity in net income of affiliates & Euros in millions TP. SA (consolidated|from April 1st) Eutelsat BITCO / TA Orange Company Wind MobilCom Telecom Argentina Others
Slide 75: Goodwill amortization
Goodwill amortization
Slide 76: Minority interests
Minority interests Euros in millions Orange Wanadoo Equant TPgroup Others
Slide 77: TOP PROGRAM - INDICATORS: 2002 Capex breakdown by segment
TOP PROGRAM — INDICATOR: & ft 2002 Capex (excluding licenses) breakdown by segment Euros in millions FY 2002 | Capex Orange 3,281 | Wanadoo 108 ed mee Voice & Data 2 services in France Services out: Cron) —~ Capex Sales fatio forecast at. alound137aii) 2008,
Slide 78: TOP PROGRAM - INDICATORS: 2002 Opex breakdown per key items
TOP PROGRAM - INDICATORS 2002 Group's Opex breakdown per key items - Euros in millions Labour costs [ Non Labour costs o/w equipment purchases. olw payments to carrier o/w consulting, fees and non IT subcontracting olw advertising & communication
Slide 79: TOP PROGRAM - INDICATORS: 2002 Opex breakdown by segment
TOP PROGRAM — INDICATORS 2002 Group’s Opex breakdown by segment Euros in millions | Orange Wanadoo Fixed line, Voice & Data: Services in France Fixed line, Voice & Data Services outside France
Slide 80: 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: March 6, 2003 By: /s/ Pierre Hilaire Name: Pierre Hilaire Title: Senior Vice Presid