Orange Sa · EURONEXT:ORA
Orange Sa — France Telecom-Orange — Q3 2012 Earnings Presentation
55 slides from Orange Sa's earnings presentation, Oct 25, 2012
Slide 1: France Telecom Orange 3Q12 results & outlook
France Telecom Orange 3Q12 results & outlook Stéphane Richard, Chairman & CEO Gervais Pellissier, Deputy CEO & CFO October 25th, 2012
Slide 2: Cautionary statement
cautionary statement This presentation contains forward-looking statements about France Telecom-Orange. Although we believe they are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties, including matters not yet known to us or not current
Slide 3: Agenda
agenda 1 introduction 2 3Q 2012 financials & operating performance 3 outlook 4 countries outlook 5 Group use of cash policy 3
Slide 4: Introduction
1 introduction Stéphane Richard Chairman & CEO
Slide 5: Commitments: 2011 achieved & 2012 confirmed
commitments : 2011 achieved & 2012 confirmed Operating Cash Flow 2011 €9bn Operating Cash Flow 2012 confirmed close to €8bn 5
Slide 6: Commitments 2011 achieved & 2012 confirmed: top line preservation
commitments: 2011 achieved & 2012 confirmed, thanks to top line cost investment new territories preservation management for growth mobile customer base resilience back to mobile customer growth since end 2Q 12 in France roaming agreement with 4th entrant over 1bn€ revenue over 3 years improved reten
Slide 7: Commitments 2011 achieved & 2012 confirmed: cost management
commitments: 2011 achieved & 2012 confirmed, thanks to top line cost investment new territories preservation management for growth reduced and better targeted commercial costs €148m of savings over 9 months 2012 Chrysalid plan achievement slightly Chrysalid: €780m cumulated savings above expectation
Slide 8: Commitments 2011 achieved & 2012 confirmed: investment
commitments: 2011 achieved & 2012 confirmed, thanks to top line cost investment new territories preservation management for growth best French mobile network in 2011 and ability to absorb ARCEP ranking as no.1 network 4th entrant traffic global spectrum costs ~2 bn€ successful 4G spectrum auctions c
Slide 9: Commitments 2011 achieved & 2012 confirmed: new territories for growth
commitments: 2011 achieved & 2012 confirmed, thanks to top line cost investment new territories preservation management for growth from mature to growing telco markets exit from Switzerland at 6.5x EV/EBITDA multiple 94% ownership in Egypt new territories for growth acquisition in Democratic Republi
Slide 10: 3Q 2012 financials & operating performance
2 3Q 2012 financials & operating performance Gervais Pellissier Deputy CEO & CFO
Slide 11: 3Q12 performance in line with yearly guidance
3Q12 performance in line with yearly guidance well oriented commercial indicators in France and in other geographies – mobile market share stabilised at 37.4% in France, with confirmed positive momentum on contract consumer net adds (positive monthly figures since June) – customer base still up in S
Slide 12: Key financials
key financials 3Q12 achievements 3Q11 3Q12 var. 9M11 9M12 Var comp comp in €m cb actual basis cb actual basis key points 3Q regulation impact: -€270m revenue 11,150 10,755 -3.5% 33,425 32,598 -2.5% 3Q excl. regulation: -1.1% yoy restated 3Q regulation impact: EBITDA* 3,932 3,645 -7.3% 11,441 10,649
Slide 13: Strong credit profile maintained in a tense debt market
strong credit profile maintained in a tense debt market balance balance sheet sheet as as of of continue to enjoy best-in sector financing conditions… 30 30 Sept.2012 Sept.2012 % Telekom Austria 8 € 7.8 bn 6 Telenor Telecom Italia of cash Telefonica KPN 4 Telia Sonera 2 years France Telecom-Orange E
Slide 14: Group top line erosion despite sustained growth in emerging markets
group top line erosion despite sustained growth in emerging markets 3Q12 % yoy cb 3Q growth excl. reg in €m actual % yoy cb excl.reg 4.6% Group revenue 10,755 -3.5% -1.1% France 5,280 -5.4% -2.4% 2.2% 1.3% Spain 1,027 -1.0% +2.2% Poland 840 -5.5% -3.4% ROW 2,047 +0.6% +3.0% -1.1% Africa & Middle-Eas
Slide 15: Sharp control of direct & indirect costs protecting EBITDA
sharp control of direct & indirect costs protecting EBITDA 3Q12 restated EBITDA* in €m -7.3% 3,932 +75 +97 +3 3,645 -67 -395 -€298m o/w -€30m for EC o/w - €123m decision on civil regulatory effects servants 3Q11cb revenue interco costs commercial & labour opex*** IT&N, property, 3Q12 content costs**
Slide 16: 3Q12 France financials
3Q12 France financials stable trend in revenue evolution excl. regulation 3Q12 revenue* : -5.4% 3Q insight (-2.4%* excl. regulatory impacts) var var mobile service revenue down -7.5%*: in €m 3Q12 in cb 9m12 in cb – increasing regulation weight due to data roaming tariff cut – excluding regulation :
Slide 17: 3Q12 France personal KPIs
3Q12 France personal KPIs strong commercial momentum and good control over repricing effect stabilization of retail market share 3Q insight recovery of the mobile customer base growth 46.5% 46.9%* 45.6% 45.8% – continued positive contract net adds (+320k in 45.0% 44.8% 3Q o/w 153k excl. M2M) – stron
Slide 18: 3Q12 France home KPIs
3Q12 France home KPIs encouraging PSTN trends and solid broadband acquisitions in a highly competitive market BB ARPU driven by better access mix & content PSTN line losses slowing down variance in thousands of lines ADSL market & conquest shares 275 ADSL market share ADSL net adds market share 229
Slide 19: Outlook
3 outlook Stéphane Richard Chairman & CEO
Slide 20: Digital usages are accelerating: customers demand more connectivity and data
digital usages are accelerating: customers demand more connectivity and consume more data massive adoption of connected devices explosion in data demand smartphones as % of worldwide mobile data 63% +100% consumer contract traffic increase from commercial acts in France (1) Q2 2011 to Q2 2012 (4) of
Slide 21: Challenging environment over 2012-13 with tougher macro-economy
however, a challenging environment over 2012-13 with a tougher than expected macro-economy… GDP growth forecast – European Union 2.2% 2.2% 2.2% 2.1% 2.1% 1.7% 1.5% 1.9% 1.7% 1.6% -2.3 pts 0.5% -0.2% 2010 2011 2012 2013 2014 2015 World Economic Outlook – October 2010 World Economic Outlook – October
Slide 22: A more adverse regulation
…a more adverse regulation ... regulation impact on Group ~1,000 925 902 revenue 748 impact (m€) EBITDA 392 ~350 impact (m€) 270 227 2009 2010 2011 2012e 2013e 2014e 22
Slide 23: Tougher competition especially in France
… and a tougher competition especially in France, contributing to a lower telco market value than expected impact of 4th entrant in France French mobile & fixed market French mobile & fixed consumer market -€2.8bn in 2015 vs. 2010 -€5.5bn in 2015 vs. 2010 € bn € bn 42.0 34 41.5 41.0 32 40.5 -2.8bn 4
Slide 24: French prices are the lowest compared to largest European countries
on mobile and fixed, French prices are the lowest compared to largest European countries and the USA price of a comparable mobile offer* price of a comparable fixed offer** in €/month in €/month 78 77 67 56 50 48 42 40 43 38 32 20 *voice unlimited (min.500minutes), SMS, MMS, unlimited (min.1000SMS),
Slide 25: Data monetisation as a lever to regain value
data monetisation as a lever to regain value mobile traffic monetisation +30% increase in number of customers with a data plan in France since January (reaching 7M in Sept ≥ 80% 2012) of Origami sales were offers >49€ speed in Q3 2012 monetisation 80% of Sosh 25€ customers preferred H+ to a price re
Slide 26: New territories for growth: portfolio management and innovation
new territories for growth: portfolio management and innovation innovations will support growth geographic mix drives growth Cloud : 500m€ target revenues by 2015 Group revenue mix forthcoming launch of personal cloud in France investment in a dedicated cloud services 10% 10% company 9% 12% 49% 47%
Slide 27: Sustained level of investment
sustained level of investment optimizing legacy to promote VHBB accelerating maintaining our leadership on accelerating FTTH deployment VHBB 4G investment in line with commitments deployment France # LTE sites: 396 2,990 for future x2 spectrum growth capex 151 287 891 59 2011 2012 2013 2010 2011 201
Slide 28: In France, moving from cost containment to cost reduction
in France, moving from cost containment to cost reduction with ambitions of €800m net savings for 2014 direct ~40% interconnection costs savings in interconnection costs sharp management of SARC FY11 SARC costs costs ~60% savings from new content €~4bn content costs & other strategy stabilization of
Slide 29: 2013 Operating Cash Flow above €7bn; 2014 above 2013
2013 Operating Cash Flow above €7bn 2014 Operating Cash Flow above 2013 variation variation 13 vs 12 14 vs 13 higher similar cost management: savings savings from cost management to cost reduction slight increase stabilization in labour OPEX in labour OPEX top line preservation: declining improved i
Slide 30: Countries outlook
4 countries outlook Gervais Pellissier Deputy CEO & CFO
Slide 31: 2013 actions to prepare EBITDA stabilization from 2014
top line cost management investment investment new territories for growth 2013 actions to prepare EBITDA stabilization from 2014 Orange actions for improved revenue trend in 2014 ~€800m cost reduction in 2014 vs. 2011 LTE pricing policy : in line with our VHBB strong focus on cost control over the p
Slide 32: Chrysalid delivering faster and more
top line costefficiency management investment new territories for growth Chrysalid delivering faster and more expected above €1.1bn 2012 cumulated since 2011 fully in line with ambition ramping up our initial achievements for 2015 performance drivers ~€3bn France customer experience improvement new
Slide 33: Orange Spain outlook
top growth line costefficiency management investment new territories for growth Orange Spain maintaining ambition for growth in value share and profitability, outperforming the market be the reference alternative operator continue efficiency improvements maintain current commercial momentum continue
Slide 34: Poland, cost optimization and market leadership in convergence
top growth line costefficiency management investment new territories for growth Poland, cost optimization and market leadership in convergence new portfolio of offers to sustain top line keep momentum on cost structure adjustment win-back plan on B2B commercial cost optimization – price alignment an
Slide 35: Rest of Europe: data and convergent offers fuelling growth
top growth line costefficiency management investment new territories for growth rest of Europe: data and convergent offers fuelling growth with further efficiency improvements continuous focus on costs enabling back to growth thanks to data revenues improved EBITDA ratio lighter negative impact of r
Slide 36: Emerging countries, highest area of growth over next 3 years
top growth line costefficiency management investment new territories for growth emerging countries, highest area of growth over the next 3 years Orange revenues expected to grow faster than the market continued focus on efficiency promising country mix customer loyalty – cluster approach improvement
Slide 37: Enterprise: transformation of revenue mix confirmed
top growth line costefficiency management investment new territories for growth Enterprise: transformation of revenue mix confirmed growth drivers and mix evolution enable to expect top line improvement from 2014 growth drivers: revenue trends “€1bn revenues with emerging markets by 2015 ” > 33% con
Slide 38: Group use of cash policy
5 Group use of cash policy Stéphane Richard Chairman & CEO
Slide 39: Use of cash policy reflecting cash generation momentum
use of cash policy reflecting cash generation momentum keep a strong balance sheet and secure close to 2x net debt / EBITDA by year-end 2014 access to debt market sustainable and yield oriented dividend dividend of at least €0.80* for 2012 & for 2013 policy adapted to cash generation profile careful
Slide 40: Appendix
6 appendix
Slide 41: We maintain strong market positions
despite these challenges, we maintain strong market positions 1 1 2 1 1 1 1 3 3 3 2 2 2 2 1 2 1 1 22 1 2 1 1 5 3 4 Vanuatu 2 1 1 #1 N° 1 or N° 2 in 15 out of 18 countries of AMEA, in 7 out of 9 countries in Europe 41
Slide 42: Details on revenue
details on revenue % excl. % excl. in €m 3Q11 CB 3Q12 %* Regul* 9M11 CB 9M12 %* Regul* Group revenue 11,150 10,755 -3.5% -1.1% 33,425 32,598 -2.5% -0.5% France 5,583 5,280 -5.4% -2.4% 16,915 16,106 -4.8% -2.1% personal 2,695 2,634 -2.3% +3.8% 8,141 8,019 -1.5% +3.9% home 3,198 3,067 -4.1% -3.1% 9,68
Slide 43: Sharp control over direct & indirect costs protecting EBITDA
sharp control over direct & indirect costs protecting EBITDA 3Q12 & 9M12 restated EBITDA* in €m -7.3% -6.9% 3,932 11.441 +97 +75 +3 3,645 +122 +203 10.649 -67 -225 -395 -826 -66 -€298m o/w - €123m o/w -€30m for EC -€623m o/w - €232m o/w -€90m for EC regulatory effects decision on civil servants regu
Slide 44: EBITDA restatements
EBITDA restatements in €m 3Q11cb 3Q12 9m11cb 9m12 EBITDA restated 3,932 3,645 11,441 10,649 litigation - -3 - +41 major litigations litigation EU TPSA - - -115 - labour related free share plan -23 -13 -23 -39 part-time senior plan -19 -11 -32 -190 other Orange Switzerland disposal - - - +92 OTMT ind
Slide 45: Q3 results by countries
5.1 Q3 results by countries (excl. France)
Slide 46: 3Q12 Spain
3Q12 Spain strong commercial performance containing top line decline in 3Q 3Q12 revenue* insight (+2.2% excl. regulatory impacts) 3Q mobile revenues +0.8% excluding regulation var var driven by steady contract base growth and data in €m 3Q12 9M12 in cb in cb boost: – strong portability balance (+88k
Slide 47: 3Q12 Poland
3Q12 Poland adjusting to a rapidly deteriorating and disrupted operating environment insight 3Q12 revenue* 3Q mobile revenues under pressure (-0.7% excl. (-3.4% excl. regulatory impacts) reg) var var ̶ launch of unlimited offers by all players, in €m 3Q12 in cb 9M12 in cb deteriorating B2B mobile ma
Slide 48: 3Q12 Rest of the World
3Q12 Rest of the World emerging markets are continuing to fuel growth while the situation is improving in Europe 3Q12 revenue* : +0.6% strong growth in revenues in most of our Africa (+3.0%* excl. regulatory impacts) & Middle East countries var var in €m 3Q12 in cb 9M12 in cb Niger +33% Central Afri
Slide 49: 3Q12 enterprise financials
3Q12 enterprise financials slight improvement in trends excluding equipment resale, weakening market momentum overall 3Q12 enterprise revenue* : -2.9% insight (-1.3% excl. equipment resale) legacy networks: adverse but improved trend var var supported by Voice, with higher traffic than in 2Q12. in €
Slide 50: France outlook
5.2 France outlook
Slide 51: Mobile customer base
top line cost management investment new territories for growth improved revenue trend in France from 2014 Orange France ambitions for 2013-2014 growing contract customer base from June 2012 reprice spreading within a growing customer base mobile repricing ending early 2014 – most of the customer bas
Slide 52: CAPEX focus to maintain network leadership
top iine cost management investment portfolio management CAPEX focus to maintain network leadership 2010-2015 FTTH investment plan of ~€2bn reiterated >x4 fibre deployment has started in 229 cities, including 112 in very dense areas Palaiseau 100% Fibre: “know how” to manage a full fibre- 151 networ
Slide 53: Emphasize our differentiation, being leader on customer experience
emphasize our differentiation, being leader on customer experience, segmentation and innovation leader in customer experience: internet and mobile are leader on segmentation to respond to diversifying essential for a majority of French people customer needs (grouping, sim only) best network: leader
Slide 54: EE results
5.3 EE results
Slide 55: EE: strong postpaid net adds and sustained low postpaid churn
EE: strong postpaid net adds and sustained low postpaid churn Mobile service revenue +3.1% ex Strong postpaid net adds regulation, £m -3.0% +3.1% -91 +81 -36 1,542 1,451 1,496 Q3/11 regulation Q3/11 postpaid prepaid Q3/12 ex regulation Insights Sustained low postpaid churn# –Underlying service reven
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