1 France Telecom investor day, June 10th 2004: Building the integrated broadband communication services Group
2 FT Personal Strategy
3 FT / Orange Personal Strategy leveraging international assets portfolio strength track record portfolio development customer focused growth market based segmentation new services innovation top line growth distribution channels common infrastructure One Orange within One FT operational excellence Orange commitment to delivering a world class customer experience
4 FT / Orange Personal Strategy leveraging international assets portfolio strength track record portfolio development customer focused growth needs based segmentation new services innovation top line growth distribution channels common infrastructure One Orange within One FT operational excellence Orange commitment to delivering a world class customer experience
5 Fundamentals of Customer Needs Based Segmentation! Developing greater customer intimacy Implementing needs-based customer segmentation Investing in skills, capabilities and systems Disciplined and segmented market research, CRM! Differentiation based on customer segmentation All the elements of the value proposition End-to to-end touch points of the customer journey! Innovation to meet customer needs! Organisation reflecting customer segmentation strategy Differentiate the customer experience to stimulate usage and increase loyalty
6 Fundamentals of Customer Needs Based Segmentation AWARENESS ACQUISITION GROWTH RETENTION RETAIL NETWORK BILLING & PAYMENTS BRAND AWARENESS WEB HANDSET CARE CALL CENTRES SERVICES PRO-ACTIVE COMMS Differentiation across all stages of the customer journey
7 - Insert video Customer segmentation -
Differentiation - Signature Devices Extension of Signature Series in 2004! Active involvement in specification and design of phones! Full multimedia capability Integrated camera Color screen MMS! Distinctive, user friendly Orange interface One touch access to all key services through common icons! Over 20 Signature devices by year end! Tailored devices for each customer segment 8 Signature devices are easy to use, relevant to the needs of our customers and deliver the best possible customer experience
9 Differentiation - Signature Devices Orange UK Signature Device Evolution 80 70 60 50 40 30 20 10 0 Jul- 03 Monthly Signature device additions ('000's) % of new customer contracts Aug- 03 Sep- 03 Oct- 03 Nov- 03 Dec- 03 Jan- 04 Feb- 04 Mar- 04 30% 25% 20% 15% 10% 5% 0%! Increasing share of new customer contracts 28% UK (Mar 2004) 15% France (Mar 2004)! Higher ARPU generation than average contract customer France: 40% higher UK: 25% higher! Continuing co-operation operation with handset vendors Increasing penetration of Signature devices driving usage and ARPU
10 Differentiation - Orange World Multimedia Services! Segmented portal experience! Personalisation Your Page is a key feature 23% of Orange France customers personalised their home page 3.5 times more visits to Orange World! Simple/transparent pricing of data bundles Orange France: 6/ 10 option Orange UK: 4/ 6 option! Commercial success to Q1 2004: 1.3 million customers in France 1.0 million customers in the UK! Roll-out across the footprint over 2004/2005 Orange World multimedia services contribute to data ARPU growth
Differentiation - Orange World Multimedia Services! Distinctive icon One click access to Orange World! Dynamic homepage Constantly updated, content-rich Not a static icon menu Add to your page easy personalisation feature! Open Browsing Surf internet without restrictions Innovative Text to a Friend service Not a walled garden 11 Orange World multimedia services clearly differentiated from competitors offerings
Increased Usage of New Services Monthly MMS Usage (M) 8 Orange France MMS evolution % base enabled 20% 7 6 5 4 MMS Usage MMS enabled 15% 10% 3 2 5% 1 0 Q1 '03 Q2 '03 Q3 '03 Q4 '03 Q1 '04 0% 12 Development of user communities drives usage of new services and ARPU growth
13 Innovation - M2M Connect Platform! Orange first to launch end-to to-end solution working with its partners! Web-based based pan-european M2M Connect platform! Simple and intuitive with single customer interface! Focused end-to to-end solutions to the vending machine industry M2M Connect platform delivers a tailored, end-to-end solution
14 Innovation - FT Transversal Dynamic Address Book 1. Choose communication service 2. Select address IM PTT email 1. Check status of contacts (presence, location, availability) 2. Select communication service Voice Contacts SMS Chat Video MMS Simplifying and enriching the customer experience
15 Innovation - Needs Based Marketing! Innovative marketing campaigns clearly targeted to: increase ARPU of our existing customers remove barriers to adoption of new services! Dedicated in-store Orange Coaches! Highly successful Learn campaign Orange recognised by customers as the only operator in the UK who o will, teach you how to use your mobile phone (58% agree vs. 26% nearest competitor tor - Millward Brown research)! Try campaign drives customer adoption of new services 801k new Try Connections! Segmented advertising campaigns A results focused approach to marketing
- Insert video Advertising Orange France
Improved Usage Trends Annual Rolling ARPU! ARPU growth in France and UK for more than 4 quarters 263 273 375 382 39 44 35 47 340 335 224 229 Q1 03 Q1 04 Q1 03 Q1 04 France ( ) UK ( )! Voice ARPU rising in the UK and stable in France despite price pressures, reflecting increase in usage! Growth trend in voice usage in the UK (+3.2% y-o-y) y y) and France (+11% y-o-y) y y) Non-voice revenues as a % of Total Network Revenues 17.2% 15.8% 16.4% 16.3% 15.9% 16.2% 16.2% 12.8% 11.4% 11.0% Q1 2003 Q1 2004 14.0% 11.3% 11.5% 10.1% UK Denmark Netherlands Belgium Switzerland France Slovakia 17 Focus on quality customers is delivering higher usage. Non-voice will be a key driver to top-line growth
18 Innovation - Mobile Broadband Evolution! EDGE and 3G will allow a qualitative leap in customer perception of multimedia services! EDGE is a marginal investment on our existing 2G networks allowing national coverage! 3G will provide greater capacity and a richer multimedia experience! 3G will be introduced progressively! Dual mode EDGE/3G handsets will be prevalent long term EDGE and 3G are complementary technologies allowing introduction of mobile broadband services without rupture in the business model
19 Innovation - Mobile Broadband Evolution 3G UK Commercial launch in ten major cities, major rail lines and airports, France Commercial 3G launch in ten major cities Belgium Switzerland Denmark Slovakia Netherlands 2004 2005 2006 EDGE Romania, Slovakia Belgium France UK 3G Roll-Out! 56% 3G population coverage at launch! 64% 3G population coverage by end 2004 France 3G Roll-Out! 33% 3G population coverage at launch! 20 major cities covered at 3G launch 3G launch: UK and France H2 2004
20 Innovation - Interoperable Videotelephony! Genuinely new service for customers enabled by 3G! Community building is the key success factor Orange/France Telecom strongly placed to bring together communities of users 3G Videotelephony interoperability with MaLigne and Wanadoo Faster uptake of videotelephony! Videotelephony will represent a richer P2P alternative Voice functionality to evolve in a videotelephony environment Orange and France telecom offering innovative, interoperable services from launch
21 Top-Line Growth is our Key Focus! Market based segmentation! Customer differentiation! Signature devices! OrangeWorld services! Innovation with FT! Needs based marketing! 3G service innovation! Leverage FT group Accelerating Top-Line Growth
22 FT / Orange Personal Strategy leveraging international assets portfolio strength track record portfolio development customer focused growth market based segmentation new services innovation top line growth distribution One Orange channels within One FT common infrastructure operational excellence Orange commitment to delivering a world class customer experience
23 Focusing on Operational Excellence! Aggressive focus on productivity and cost reduction is new for mobile operators Orange ahead of the game after successful implementation of TOP program from Q4 2002 Continued rationalisation of OPEX to increase investment in marketing! Leveraging common infrastructure across the FT / Orange group Build once, deploy everywhere Rationalise multiple platforms/functions where it makes sense Single platforms provide basis for integrated services Faster time to market and greater top line growth Continued delivery of TOP objectives
24 One Orange within One FT! Achievement of TOP objectives during 2003 Improved CAPEX management process CAPEX benchmarking - Over 900m CAPEX saving in 2003 vs. initial budget Roaming capture rate increased 11% y-o-y y y and International traffic carriage by FT Networks & Carriers increased by 8% Group marketing campaigns generated 107m saving! Continuing to deliver operational excellence in 2004 & 2005 Further CAPEX savings 10% expected saving on IT spend in 2005 and 20% expected saving on service platform spend Internalisation of OPEX spend within FT group Reinvestment of savings from rationalisation and centralisation in top line initiatives and customer investment
25 FT / Orange Personal Strategy leveraging international assets portfolio strength track record portfolio development customer focused growth market based segmentation new services innovation top line growth distribution channels common infrastructure One Orange within One FT operational excellence Orange commitment to delivering a world class customer experience
26 FT / Orange Balanced Growth Portfolio Wireless Penetration Remaining (%) 100% Madagascar Egypt Cameroon Cote D'Ivoire 75% Botswana Customer growth driven markets Poland 50% Slovakia France 25% Belgium Netherlands Switzerland UK Denmark 0% Romania ARPU / usage growth driven markets 0% 10% 20% 30% 40% 50% 60% 70% Orange operations y-o-y revenue growth (%) Orange portfolio shows balance between customer driven and usage driven markets, delivering long term top-line growth
27 FT/Orange Portfolio 2003 Market Position Market Share Position Revenue and EBITDA (2003-2002) 2002) Pro forma Pro forma 2003 Revenue EBITDA EBITDA growth growth margin France 49% 1 4% 21% 43% UK 26% 1 7% 20% 34% Belgium 33% 2 16% 37% 37% Romania 47% 2 42% 55% 51% Switzerland 18% 3 16% 277% 26% Slovakia 56% 1 21% 26% 43% Denmark 12% 3 7% 300% 19% Netherlands 9% 5 16% - 8% Poland 33% 2 29% - - Egypt 53% 1 30% 25% 52% Africa/Other 34% 46% 43%! All of our operations are achieving #1 or #2 positions except Denmark and the Netherlands (Switzerland #2 by value)! Rebranding in the Netherlands led to impressive customer growth! As of Q1 2004, all operations contribute positive Op. FCF Source: Mobiles Communication / global mobile as of Dec.. 31th, 2003 FT/Orange has developed a strong international portfolio
28 Track Record in International Growth! Double digit customer and revenue growth in all key RoW operations! Western European operations still enjoy double digit customer and revenue growth! Romania is now Orange #3 market in terms of customers 52% 54% 50% Customer Growth Revenue Growth (Pro-forma) 36% 38% 39% 37% 29% 21% 19% 11% 12% 16% 15% Romania Africa/Other Netherlands Egypt Belgium Switzerland Slovakia Note: Q1 2004 year-on-year. International should represent Orange's second highest revenue contribution within the next 2-3 years
29 Footprint Portfolio Development! Consolidate / rationalise on existing footprint! Assess selected growth opportunities New licences Acquisitions Focus on existing regional clusters! Ensure coherence with France Telecom group footprint Opportunistic approach to footprint expansion driven by need to create demonstrable shareholder value
Conclusion leveraging international assets portfolio strength track record portfolio development customer focused growth market based segmentation new services innovation top line growth distribution channels common infrastructure One Orange within One FT operational excellence 30 Delivering on Commitments and Fixed/Mobile Convergence Accelerating Profitable Growth Leadership through Innovation and Integration with FT