Orange Sa · EURONEXT:ORA
Orange Sa — France Telecom — Investor Day (December 2006)
23 slides from Orange Sa's investor day presentation, Dec 15, 2006
Slide 1: Business model transformation and financial stakes
Business model transformation and financial stakes Gervais Pellissier Senior Executive Vice President Chief Financial Officer
Slide 2: 3rd quarter results confirm full year objectives
€ 7 bn: confirmed* +1,2% organic growth Revenues GOM rate : 36,8% -1,7 pp vs 9M05 G.O.M rate 11,9% of sales Capex organic cash flow full year guidance confirmed full year guidance confirmed 9M 2006 2006 objective * Adjusted from Pages Jaunes disposed at the end of 2006, pro forma organic cash flow i
Slide 3: Telco market change and business model transformation
2005- acceleration of PSTN revenue erosion mobile growth slow down in matures areas internet strong development 3 play offers become a standard 2002- strong market growth due to mobile continuous equipment rather stable PSTN lines revenues internet mass-market take-off 2007- PSTN erosion is slowing
Slide 4: NExT has anticipated these changes
NExT has anticipated these changes « 1st phase (June 2005) : the vision build an integrated customer experience develop contents & services build a global player for enterprises differentiate through customer care & professional services » 2nd phase (February 2006) : organize and optimize setting-up
Slide 5: The group is at the edge of its businesses transformation
the group is at the edge of its businesses transformation trends for FT businesses intemet services growth imply to change most of our processes | new services + content take-off PSTN business slower decline competition more intensive _ continuous strong growth | deployment of convergence in some ta
Slide 6: Network related services
network related services + - 2007-2008 should slightly increase emerging countries enterprise mature markets mature markets emerging countries growth content & new services FT growth engine
Slide 7: Group opex & capex: major transformation of cost structure needed
9M05 18% commercial expenses 23% labor costs 21% interconnection 20% IT&N, general expenses and other 16% capex 6,5 b 6,0 b 5,7 b 5,0 b 4,5 b 9M06 6,4 b 6,0 b 6,4 b 5,5 b 4,6 b 9M05-9M06 +0,5 b +0,7 b -0,1 b 9M group opex & capex € 28,9b (without Pages Jaunes) 9M 2005* group opex & capex : € 27,7b (
Slide 8: Reasons for costs increase in 2006 and containment in 2007-2008
3 reasons for costs 3 reasons for costs increase in 2006 containment in 2007-2008 interconnection costs stable despite design-to-cost to optimize price decline because of offers structure operators fees (abundance, bundles, etc.) new businesses mass market (field costs, offer rationalization, additi
Slide 9: Measures impact on cost containment for 2007
* comparable perimeter 2007 trend in % of sales commercial expenses labor costs interconnection other IT&N, general expenses, and other capex measures impact on cost containment for 2007
Slide 10: Group capex evolution
group capex evolution + 45 m emerging countries 9M05 9M06 € 4,5 bn € 4,6 bn mobile 3G +SSP + 180 m home broadband +SSP (193) m traditional activities 83% are IT&N capex + 40 m optimizing capex is key to free additional resources and do more with same amount
Slide 11: 2007 objectives
€ 6,8 bn confirmed* nearly stabilize Gross Operating Margin rate thanks to cost containment G.O.M rate capex organic cash flow * without Pages Jaunes sold at the end of 2006 2007 objectives capex rate maintained
Slide 12: France Telecom Investor Day conclusion
France Telecom Investor Day conclusion Didier Lombard CEO & Chairman
Slide 13: Executing NExT
executing NExT convergence strategy to succeed in the new telco eco-system optimizing costs developing new business models balancing market shares & profitability
Slide 14: Executing NExT
executing NExT convergence strategy to succeed in the new telco eco-system optimizing costs developing new business models balancing market shares & profitability
Slide 15: What we have learned from today's presentations: cost reduction
what we have learned from today’s presentations a strong commitment to cost reduction in 2007/2008 17,000 net headcount reduction worldwide (2006- 2008) further labor costs decrease IT and networks integration 500-800 million euros savings expected by the end of 2008 commercial expenses stabilizatio
Slide 16: What we have learned from today's presentations
what we have learned from today’s presentations France UK Spain Orange Business Services Emerging markets balance growth & profitability focus on services take full advantage of convergence take the lead in IP transformation
Slide 17: 2007 objectives
2007 objectives nearly stabilize Gross Operating Margin rate G.O.M rate thanks to cost containment > capex rate maintained 2007 Organic Cash Fl * without Pages Jaunes sold at the end of 2006 6
Slide 18: NExT: use of cash policy
NExT use of cash policy is unchanged debt reduction target increase in shareholders remuneration external growth debt / EBITDA ratio below 2 by the end of 2008 selective and cautious strategy for acquisition policy France Telecom will continue to examine opportunities in fast growing countries distr
Slide 19: Investments for fuelling future profitable growth
5 to 10% of total revenues through converged services by the end of 2008 convergence everywhere 400 million euros direct revenue as earlier as content everywhere new services FTTH cc.500 million euros revenues targeted by 2010 Phase 2 launched in 2007/2008 Phase 3 in 2009 investments for fuelling fu
Slide 20: FTTH now entering phase 2
FTTH now entering phase 2: pre deployment in 2007 and 2008 CAPEX for FTTH is consistent with our 2007-2008 Group guidance of 10-11% IT&N CAPEX to sales ratio Offer FTTH in 10 additional major and medium cities Starting with Lille, Lyon, Marseille, Poitiers, Toulouse on top of the Ile de France area
Slide 21: Conditions are now met for phase 2
conditions are now met for phase 2 ducts indoor wiring access to content “ we are working to create a propitious environment for very high-speed network development by encouraging infrastructure sharing and particularly the reuse, whenever possible, of existing ducts in the local loop . ” (Paul Cham
Slide 22: FTTH will then enter Phase 3: mass market roll out
FTTH will then enter Phase 3 : mass market roll out Phase 1 Pilot Phase 2 Pre-rollout Phase 3 Mass market-rollout after 2006 pilot successful completion, pre-rollout will start in 2007-2008, to be followed by mass market coverage 1,000 2,000 3,000 4,000 5,000 6,000 1,000 2,000 3,000 subscribers cost
Slide 23: France Telecom's approach to transformation
France Telecom’s approach to transformation share our vision with all stakeholders be pragmatic leverage technology changes anticipate usage & customer needs