Orange financial results #FY_2018 21 February 2019 Stéphane Richard Chairman and CEO Ramon Fernandez Deputy CEO, Finance, Performance and Europe
Disclaimer This presentation contains forward-looking statements about Orange. Although we believe these statements are based on reasonable assumptions, they are subject to numerous risks and uncertainties, including matters not yet known to us or not currently considered material by us, and there can be no assurance that anticipated events will occur or that the objectives set out will actually be achieved. Important factors that could cause actual results to differ from the results anticipated in the forward-looking statements include, among others: disclosure or inappropriate modification of the personal data of Orange’s customers, risks relating to the development of its banking activities and of mobile financial services, Orange’s exposure to geopolitical, macroeconomic, regulatory and corruption risks, the risk of not being able to maintain control over customer relations when facing competition with the OTT players, the success of Orange’s strategy of diversification to find new sources of growth, network or software failures as a result of cyber-attacks, various frauds that may target the Company or its customers, its dependence on a limited number of critical suppliers, damage caused to its installations and infrastructures due to natural disasters or intentional damage, risks relating to its brand strategy, its ability to retain the necessary skills due to numerous employee retirements and changes in its businesses, possible adverse health effects from exposure to electromagnetic fields from telecommunications equipment, various human factors related to psycho-social risks and to personal safety, fiscal and regulatory constraints and changes, the results of litigation regarding in particular regulations and competition, the terms of access to capital markets, interest rate or exchange rate fluctuations, Orange’s credit ratings, changes in assumptions underlying the carrying value of certain assets and resulting in their impairment, and credit risks and/or counterparty risks on financial transactions. More detailed information on the potential risks that could affect our financial results is included in the Registration Document filed on April 4, 2018 with the French Autorité des Marchés Financiers (AMF) and in the annual report on Form 20-F filed on April 4, 2018 with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. Other than as required by law, Orange does not undertake any obligation to update them in light of new information or future developments. 2 2
Section one FY 2018 highlights
2018 Key achievements Network Enriched services Average 33m Fixed Mobile VHBB connectable lines customer +32% +24% (+22% yoy) O/W 29m FTTH data speed #1 2.9m Best mobile network in France Content for 8 consecutive years Customers 4G 12 countries in MEA Mobile Finance 248k 39m Services Customers Customers 5G First field trials M&A 4
Solid commercial Convergence momentum driven 10.9m € 7.1 bn +6% +10% by Convergence, Leader yoy in Europe yoy customers revenue VHBB and 4G VHBB 1st in conquest 6.3m Leader in +33% share every quarter Europe in 2018*, in France yoy in FTTH customers and Spain VHBB > 100 Mbps Details on convergence on slide 27 4G 56m +22% Leader in customer base in 7 of our 8 European countries** yoy customers *Q4 ’18 based on internal estimates **Q3’18 GSMA 5
4G coverage Investment Population covered in % efforts Poland 99.8% maintained to Belgium 99.7% preserve France 98.6% Moldova 98.0% competitive edge Spain 96.9% in connectivity Romania 96.9% Slovakia 94.0% VHBB connectable homes* yoy Group Telecom +3.9% FY 2018 CAPEX Spain 13.8m +16% + € 275m € 7.4bn yoy France 11.8m +30% As % of rev. + 3.5% yoy Poland 3.4m 17.9% +36% + € 251m yoy +0.4pt yoy 6 * VHBB > 100 Mbps
2018 Revenue Adjusted EBITDA* Operating Cash Flow* € 41.4 bn € 13.0 bn € 5.6 bn guidance ePresse ePresse achieved Audio Book +2.7% Audio Book +1.7% +1.3% +1.2% +2.1% +0.5% +1.1% +1.0% +1.9% +1.7% 2017 2018 2017 2018 2017 2018 Revenue +1.4% yoy Q4 Adj. EBITDA +1.4% yoy Net debt / Dividend CAPEX Adj. EBITDA 2018** 7.4 (telecom) 1.93x € 0.70 € billion yoy : comparison with the same period of the previous year, on a comparable basis unless otherwise specified All Group level mentions include both telecom and banking activities. Conversely, all mentions excluding Orange bank are explicitly called “Telecom” * see slide 27 for EBITDA adjustments 2018 guidance achieved ** subject to shareholders’ approval; e x-date June 4th, record date June 5th, payment date June 6th for the € 0.40 2018 balance 7
Section two Financial results overview
Revenue kept Group revenue growth (yoy in %) +2.0% growing Total growth +1.6% +1.4% Growth excl. ePresse/audio books +1.4% +1.4% +1.2% +0.6% +0.2% Q1 18 Q2 18 Q3 18 Q4 18 FY18 revenue growth by activity FY18 revenue growth by segment Q4 2018 FY 2018 yoy yoy FY 2018 +5.1% +10.0% MEA Convergence +1.4% +1.3% revenue* +2.2% +7.2% + € 148m + € 544m Spain IT & IS Europe +1.7% Equipment +1.7% € 41.4bn excl. digital excl. digital reading offer reading offer +0.9% +1.3% France Mobile only +1.6% +1.1% + € 169m + € 445m -0.2% -1.5% Enterprise Wholesale Fixed only * Orange Bank Net Banking Income is not included in Group IC&SS -6.1% -3.2% (including narrowband) revenues but in “Other operating income”, that is below the revenue line and feeds directly into consolidated Adjusted EBITDA. 9
FY Adjusted EBITDA (Telecom) growth per segment yoy, in m € Telecom adj. +3.4 .4% ePresse 13,151 EBITDA growth Audio Book 48 -61 31 82 158 fuelled by 132 revenue and cost ePresse 197 Audio Book optimisation 12,721 12,993 47 12,674 FY 2017 France Spain MEA Europe Enterprise Others FY 2018 cb Adj. Ebitda margin evolution Q4 2018 FY 2018 Telecom +197 yoy yoy FY 2018 +2.6% +3.4% +0.9pt Adj.EBITDA* 31.8% + € 84m + € 429m +111 ePresse/Audio Book (Telecom) 31.2% 30.9% € 13.2bn As % of rev. As % of rev. 31.4% 31.8% +86 exclud. ePresse/Audio book +0.4pt yoy +0.6pt yoy FY 18 FY 16 FY 17 FY 18 * See slide 27 for EBITDA adjustments. 10
Our operational efficiency plan Explore 2020 exceeded our ambition reaching 3.5bn € Cumulated gross savings in € bn (opex + capex, telecom) Operating indicators evolution over 2015-2018 (non exhaustive) 3.5 € 3bn initial target 2.6 Call Rate Digital interactions Customer -35% +22pts to reach 78% OPEX relation 1.7 (Europe) 52% (Europe) 1.0 RAN & Infra sharing Field productivity CAPEX 22% +5pts +11% Network 2015 2016 2017 2018 to reach ~54% (France vs. 2017) Shops footprint Online sales in France By domain (opex + capex) By country (opex + capex) Distribution -20% +12pts and Sales IT Other countries (Europe) (at 26% in 2018) 8% 10% Others Enterprise 12% France 11% 37% Network # Application # Datacenter 46% -12% -7% Distribution IT MEA and Sales 13% (France) (worldwide) 16% Poland Spain Customer 14% 15% Management 18% 11
OpCF is growing Group CAPEX FY18 Capex to Sales (telecom, in %) even as FTTH 17.9% 17.5% 17.1% € 7.4 bn 16.1% FTTH CAPEX accelerates CAPEX +3.5% yoy 14.2% 14.3% 13.9% 14.1% excl. FTTH 2015 2016 2017 2018 Group OpCF Evolution Operating ROCE** evolution (telecom) EBITDA € 5.6 bn +0.6pt +0.3pt Value Creation +1.7% yoy ROCE OpCF* FY 16 FY 17 FY 18 *Adjusted EBITDA – CAPEX ** ROCE(n) = adj.EBIT (n) / Net Operating Assets (n-1) 12
Net income +5.8% grew +5.8% 2,158 32 128 2,040 321 -468 105 2017 2017 Reported Financial result D&A, income Impairment BT shares 2018 Net t inco come me EBITDA cb (excl. BT) tax paid & of goodwill Net income from m others & assets from consoli lidated ted consolidated Group Group 1 2 3 yoy 2018 +5.8% Net income + € 118m 1. Reported EBITDA improvement yoy € 2.2bn 2. Reversal effect of tax on dividends received in 2017 and higher D&A due to the increase of our investments in FTTH and 4G 3. Positive effect resulting from 2017 loss on BT shares * See details on slide 24 13
Net debt to Net debt* – telecom activities Net debt increase reflecting our investment strategy, including notably : Net Debt / Adjusted EBITDA Telecom Adjusted EBITDA the increase of capex ratio in line with € 25.4bn selective acquisitions in Enterprise € 23.8bn segment the medium term guidance 1.87x 1.93x 2017 2018 Maturity profile** as of 31 December 2018 - telecom activities in € bn, excluding 2019 issuance bank loans and others *** exchangeable bonds 15.6 15.6 Liquidity position (telecom activities) bonds € 14.0 bn 5.2 5.2 3.8 3.8 14.8 2.3 2.3 2.2 2.2 1.8 1.8 4.4 2.7 1.5 o/w € 7.8bn in cash 1.3 1.4 2019 2020 2021 2022 2023 >2024 * see details on slide 30; **before hedging ***includes finance lease liabilities and loans from development organizations and multilateral lending institutions 14
Section three Business review
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