Monday, May 30, 2011

France Telecom-Orange Outlines 2015 "Conquest" Plan

France Telecom-Orange's strategic and financial ambitions for the 2011-2015 period will be characterized by an initial "adaptation" phase (2011-13) of network investments followed by a "conquest" phase (2014-15) during which its goal will be the return to sustained growth of both revenues and operating cash flow. The company's CAPEX plans are forecast to be EUR 18.5 billion in the first phase compared to EUR 10.8 billion in the second phase. This translates to a CAPEX/Sales ratio of approximately 13.4% in the initial phase compared to 11.0% in the second phase.

As part of its Conquests 2015 Investor's Day, executives at France Telecom-Orange outlined the following objectives:

1. During the adaptation phase (2011-2013), the company aims to progressively accelerate revenue growth
over the period (CAGR of +0.6%) with EBITDA stabilized in 2013 above the 2011 level. The Group's goal is to achieve a cumulative EBITDA of around 45 billion euros in the 2011-2013 period.

This goal notably accounts for the implementation of a new performance plan and the
benefits expected from the ramp-up of the procurement joint venture with Deutsche Telekom.
Overall, the Group forecasts gross savings of at least 3 billion euros by 2015 (including over 2
billion euros by the end of 2013) versus the cost base in 2010.

From 2011-2013, the Group forecasts cumulative CAPEX of around 18.5 billion euros,
including 1 billion euros for fiber deployment in France. This represents an average rate of
CAPEX to revenues of 12.6% over the period (excluding FTTH in France). The rate of
investment is expected to peak in 2012 (~14%) as the deployment of fiber accelerates and
the Group fulfills its network coverage and capacity objectives.

Taking these items into consideration, the Group announces cumulative operating cash flow
guidance (EBITDA – CAPEX) of around 27 billion euros over the 2011-2013 period, excluding
exceptional items.

2. During the 2014-2015 "conquest phase", the group expects revenue growth rate of +2.7% (2013-2015 CAGR), with
a return to growth in France and in the Enterprise segment, and a continued solid contribution from Europe and AMEA; EBITDA, with 3.4% growth (2013-2015 CAGR).

CAPEX, with the return to a normalized investment level of 10% over the period, equal to
approximately 9.8 billion euros (excluding FTTH in France, which represents an additional
point, for a total CAPEX rate of 11% equal to 10.8 billion euros); and operating cash flow, with a CAGR of +9% over the 2013-3015 period.

"Our Conquests 2015 business plan now moves into an adaptation phase that is
preparing the ground for a subsequent, even more decisive conquest phase. In the pursuit of our
ambitions, we will be able to capitalize on a number of positive factors between now and 2015.
These include the economic outlook in the countries in which we operate, an increasingly favorable
regulatory environment, the quality of our networks, strategic new growth opportunities that we have
identified, as well as our new strategy for building partnerships with other players in the digital
ecosystem. I am certain, as always, that the competence and commitment of our 170,000
employees will enable us to meet these objectives," stated St├ęphane Richard, Chairman and CEO of France Telecom-Orange.

Some additional data points:

  • France Telecom-Orange now has 169,000 employees worldwide, of which 39% frontline staff

  • 210 million customers

  • operating in 35 countries

  • 7,000 Orange branded stores

  • 300 TB of mobile traffic per day

  • 98% 3G+ coverage of France's population by end of 2011

  • FT-Orange targets at least €3bn in gross savings by 2015 vs. 2010 cost