Orange US$ bonds issuance roadshow materials Orange S.A. has filed - - PowerPoint PPT Presentation

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Orange US$ bonds issuance

roadshow materials

Orange S.A. has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling J.P. Morgan Securities LLC, toll free at 1-212-834-4533; Deutsche Bank Securities Inc, toll free at 1-800-503- 4611; RBS Securities Inc, toll free at 1-866-884-2071; Merrill Lynch, Pierce, Fenner & Smith Incorporated, toll free at 1-800-294-1322; Mitsubishi UFJ Securities (USA), Inc, toll free at 1-877-649-6848.

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agenda

• 1. Orange at a glance
• 2. commercial agility and delivering on cost efficiency
• 4. managing a sound balance sheet
• 5. appendix

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Forward looking Statements This presentation contains forward-looking statements. This information is sometimes given in the future or conditional tenses, or referring to future time periods, or using words such as “ongoing”, “delivering”, “expectations”, “confirmed”, “increasing”, “improvement”, “ramping up”, “leading”, “accelerating”, “preserve”, “guidance” and “continued”. Although we believe these forward-looking 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 by us to be material, and there can be no guarantee that anticipated events will occur or that the objectives set out will actually be achieved. Important factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements include our ability to withstand intense competition within our sector and to adapt to the ongoing transformation of the telecommunications industry, in particular in France with the arrival on the market of a fourth mobile operator; fluctuations in general economic activity levels and in the level of activity in each of the markets in which we operate; the political situation in the countries where we invest; the emergence of new powerful players, such as content and service suppliers or search engines; our ability to obtain a return on our investments in our networks; fiscal and regulatory constraints and changes; conditions for accessing the capital markets, in particular risks related to financial market liquidity; exchange rate or interest rates fluctuations; asset impairments; and results of current or future litigation. More detailed information on the potential risks that could affect our financial results can be found in our Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on April 12, 2013. See also below for more information regarding our registration statement on file. Orange does not undertake any obligation to update any forward-looking statements or other information contained in this presentation. Other Information This presentation is confidential and is being provided to you solely for your information and may not be reproduced, transmitted, sent or distributed to any other person or published, in whole or in part, by any medium or in any form for any purpose. Failure to comply with such limitations may result in a violation of applicable law or regulations. The opinions presented herein are based on general information gathered at the time of writing and are subject to change without notice. For the purposes of this presentation, Orange has also relied on information obtained from sources believed to be reliable but Orange does not guarantee the accuracy or completeness of such information. The information in this presentation is subject to verification, completion and change. In giving this presentation, neither Orange nor its respective advisers and/or agents undertake any obligation to provide the recipient with access to any additional information or to update this presentation or any additional information or to correct any inaccuracies in any such information which may become apparent. Registration Statement on File Orange S.A. has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling J.P. Morgan Securities LLC, toll free at 1-212-834-4533; Deutsche Bank Securities Inc, toll free at 1-800-503- 4611; RBS Securities Inc, toll free at 1-866-884-2071; Merrill Lynch, Pierce, Fenner & Smith Incorporated, toll free at 1-800-294-1322; Mitsubishi UFJ Securities (USA), Inc, toll free at 1-877-649-6848.

Important Information

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agenda

• 1. Orange at a glance
• 2. commercial agility and delivering on cost efficiency
• 4. managing a sound balance sheet
• 5. appendix

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Orange has a diversified portfolio of activities and a footprint with complementary dynamics

€13.8 billion

restated EBITDA*

€5.8 billion

CAPEX*

FY 2012

* Non-GAAP figure. See Glossary of Non-GAAP financial measures.

With revenues amounting to €43.5bn in 2012, Orange is today one of the top ten worldwide telecom

• perators

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2010

Orange UK and T-Mobile merge and become Everything Everywhere (later rebranded as EE)

Orange has expanded globally and built a leading position over a balanced footprint

1997

first opening-up of the company's

• capital. IPO of 25% of the company

the Group invests in Egyptian

• perator Mobinil

1998 1999

sale of additional stake by the French State and capital increase. State holding ~62%

2000

acquisition of the mobile telephone

• perator Orange, a brand created

in 1994 creation of Equant, in which France Telecom holds 54.2%

2001 2004

the French government is no longer the majority shareholder of France Telecom

2002

completion of the acquisition of 49% of Telekomunikacja Polska S.A.

2005

capital increase to acquire 80% of Spanish mobile operator Amena. French State stake at 33%

2013

the whole Group becomes Orange

1991

Creation of France Telecom S.A. as a public sector operator on January 1, 1991

2011

disposal of Orange Switzerland – expansion in AMEA Region (Morocco, Congo,…)

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governance framework

Stéphane Richar Stéphane Richard, Chair

, Chairman an and CEO and CEO

Gervais Pellissier Gervais Pellissier, CEO deleg

, CEO delegate and CFO and CFO

Board of Directors

15 board members 3 board committees

7 3 3 1

Independent members Employees representatives Representatives of French State and affiliates Representative of the employee shareholders Audit committee Governance & CSR committee Strategy committee

Executive committee

12 executive members 7

main governance committees shareholding structure as of Dec 31, 2013

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agenda

• 1. Orange at a glance
• 2. commercial agility and delivering on cost efficiency
• 4. managing a sound balance sheet
• 5. appendix

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commercial agility: accelerating commercial momentum

2.1

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acceleration of commercial momentum in our major geographies*

• France

– best mobile contract net adds in France over the last 3 years (+414k and +298k excl. M2M)

• contract quarterly churn rate down -2.3pt yoy

– fiber take-off confirmed in France supporting a 27% share

• f broadband net adds
• Spain

– record mobile contract net adds since Q4 10 (+179k

• r +71% yoy) driven by new portfolio of offers

– best ever broadband net adds (+83k) driven by convergence

• Poland

– strong mobile net adds in Poland (+179k) – both Nju and Open customer bases > 200k

• RoW

– +47k contract customers in Romania thanks to smartphone push – +452k mobile customers in Q3 in Egypt

• UK

– +493k 4G customers in Q3, leading to ~1.2m end of September

• 1. confirmed success of convergent offers
• 2. efficiency of our commercial segmentation between SIMO and subsidies

 +7% +7% increas increase in in Gr Group p mobile bile contr contract ct base base (excl. M2M) year-on-year (excl. M2M) year-on-year

total Poland Spain France

515 515 303 303

• 3
• 32

245 245 156 156 31 31

• 3
• 396

Q3 13 Q2 13 Q1 13 Q4 12 Q3 12 Q2 12 Q1 12

contract net adds (excl. M2M)

(in thousands) Q4 12 Q1 12 1.7 1.7 2.5 2.5 4.3 4.3 Q3 12 3.4 3.4 Q2 12 2.1 2.1 Q2 13 Q3 13 3.8 3.8 2.9 2.9 Q1 13

Poland Spain France

convergent broadband base

(in millions)

* Information presented as of end of September 2013.

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11 ‐86 170 298 ‐432 ‐33 153 Q1 Q2 Q3 Contract net adds 2013 (k) Contract net adds 2012

strong 2013 commercial momentum in France with 4G take off confirmed

more than 1 million 4G customers at the end of 2013

sustained improvement of broadband conquest share PSTN lines loss decelerating, accelerating FTTH net adds mobile contract net adds excl. M2M evolution of 4G supports*

4G coverage in % of pop.

208 182 Q3 13

• 154
• 154
• 145
• 225

34 Q3 12

• 173
• 173
• 150
• 251

21

PSTN&ADSL PSTN only naked DSL & other FTTH broadband net adds M/S broadband M/S

Q3 13 ~27% ~27% 40.8% 40.8% Q2 13 27.9% 27.9% 40.9% 40.9% Q1 13 15.8% 15.8% 41.0% 41.0% Q4 12 20.3% 20.3% 41.3% 41.3%

63 32 50 32

Q1’13 Q2’13 Q3’13 Q4’13 Q4’12

* source ANFR

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• ngoing cost reduction with increased

contribution from indirect costs

2.2

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content ntent costs

• sts

& other

• ther

commer commercial ial cost

• sts*

inter interconnect

• nnection cost

ion costs labo labor

FY12

~€11bn

FY12

~€19bn ge gene neral e ral expenses penses

Costs reduction and CAPEX** improvements across operational efficiency

Indir Indirect Costs** Costs** Dir Direct ct Costs** Costs**

*excluding advertising & promotions ** Non-GAAP figure. See Glossary of Non-GAAP financial measures.

real est eal estate

• p
• perati

erating ta g taxes & xes & levies es ne network r twork related c ted costs sts advert vertising & ising & promo

• motion

ion

• ther
• ther

Senior Part Time smart dimensioning of commercial offers

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delivering on cost efficiency

2013 initial goal of €600m cost base decrease already achieved in Q3  Cost reduction target for 2013 increased to ~€900m yoy change in Group Opex*

in €m

Q1 13 H1 13

• 197
• 182
• 312
• 421
• 129
• 617

617

• 441

441

• 219

219

dir direct costs costs in indir direct costs ect costs

• 37

9m 13

total Opex* down €176m in Q3, compensating >40% of revenue erosion despite maintaining commercial investments

• /w c.€120m in France with substantially lower savings from interconnection than in H1

indirect costs down -€68m in Q3, o/w labor costs down €42m driven by -5.1k average FTE’s yoy in Q3 as a result, the share of decrease in revenues that is offset by opex reduction is consistently improving, thereby improving trend in EBITDA margin recovery

Opex Opex *

* Non-GAAP figure. See Glossary of Non-GAAP financial measures.

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headcount evolution already leading to cost reduction

cumulated change in Group* headcount since end of 2012 Q1 13 H1 13

• 0.3k
• 0.8k

+0.1k

• 1.0k
• 2.7k
• 1.8k
• 0.9k

0.0k

• 1.8k
• 2.7k
• 4.7k
• 0.2k

9m 13

Others France Poland

* figures by geographies ** as of today and under current legal framework

88% 84% Jun-13 Jun-12 92% Dec-13 90% Jun-11 Jun-10 79%

• ngoing improvement in French employee

satisfaction

Group headcount decreased by -2.8% over 9 months Estimate** of a number of employees reaching retirement age of ~30,000 by 2020 This figure is a significant portion of our workforce of 165,779 employees as of Q3 2013

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investing in growth and value

2.3

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investing investing in value in value

where network differen where network differentiation

• n matters

matters

networks strategy aiming at strengthening commercial performance while improving cost-efficiency

incr increasing easing networ network agility agility

where where network differen network differentiation

• n is les

is less crit critica ical Fran France ce

• 2.6m

2.6m FTTH TTH homes mes con

• nne

nectable le en end of 2013 2013

VHBB Mobile UK UK

• First

rst to launc aunch 4G in Europe

• pe end

nd of

• f 2012

2012

• 2 millio

lion 4G custom tomer ers

• 4G population

lation coverage verage over 60% 60% en end 2013 2013

Mobile Spain Spain

• 800k

800k FTTH TTH homes mes connec

• nnectable by end of Q1 14

Mobile VHBB Netwo Network RAN RAN Sharing Sharing

• exp

expected bene benefit fits of

• f mob

mobile sit sites shar s sharing ing

–

better coverage at lower cost

–

savings on operating costs

TowerC TowerCo

• Cameroon, Ivory Coast... and new opportunities under study
• France

coverage of rural areas (2G & 3G) with SFR and Bouygues Telecom

• Poland

JV with T-Mobile

• Spain

network sharing deal with Vodafone

• Romania

network sharing deal with Vodafone

• 4G population

lation coverage verage c.50% end of 2013

• Opt

Optimal mal portfolio tfolio of

• f frequ

equencies ncies: to manage data consumption and coverage

* Group (excl. minority interests and EE)

Targets Examples

• 24%

24% of

• f popula

population cov covered in 4G end of 2013

sustained investment in VHBB (FTTH/VDSL and 4G) to consolidate network leadership while improving cost efficiency

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solid balance sheet

2.4

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Orange has the necessary levers to preserve a strong balance sheet

careful and selective M&A policy, focus on existing footprint including potential disposals

decreasing pressure

• f regulation
• ngoing reduction

in direct and indirect costs

supporting EBITDA generation balanced dividend policy majority of spectrum needed for 4G offers acquired by end of 2013

marketing segmentation & quadruple play

hybrid bond issuance

preserving str eserving strength o ngth of Gr Group

• up’s balance sheet

s balance sheet

acceleration of commercial momentum

1 2 3 4 5 6 7 8

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agenda

• 1. Orange at a glance
• 2. commercial agility and delivering on cost efficiency
• 4. managing a sound balance sheet
• 5. appendix

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continued deleveraging and extension of average maturity

• f Orange Group’s net debt

14,6 61,0 63,4 68,0 44,2 49,8 47,8 42,0 38,0 35,9 32,5 31,8 30,9 30,5 29,6 6,8 2,0 4,6 4,0 6,0 5,6 6,4 6,7 7,1 7,5 7,3 8,5 9,0 9,0 9,0 1 2 3 4 5 6 7 8 9 10 10 20 30 40 50 60 70 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 H1 2013

€bn year-end net debt net debt average maturity

years years

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bond diversification and smooth repayment profile

51% 22% 16% 3% 8%

debt by curr. (before swaps) - Dec. 2012

EUR USD GBP CHF

• thers

70% 12% 11% 1% 6%

debt by curr. (before swaps) - Dec. 2008

EUR USD GBP CHF

• thers

500 1 000 1 500 2 000 2 500 3 000 3 500 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2028 2029 2031 2032 2033 2034 2038 2042 2050 €m EGP JPY HKD CHF CAD GBP USD EUR

well spread bond debt maturities for Orange SA rebalancing of Orange Group debt outside euro zone

no dependence on bank debt conservative financing management supported by strong liquidity position of €15.6bn end of 2012 (€7.2bn available credit facilities and €8.4bn available cash and cash equivalents)

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Orange rating vs peers as of 28 January 2014

BBB-

Moody’s Moody’s rating rating S&P rating S&P rating

A3 Baa1 Baa2 Ba1 Baa3 Orange DT VOD TeliaSonera Telenor TEF KPN

• T. Austria
• T. Italia

A- BBB+ BBB BB+

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Appendix

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appendix A: glossary

VHB VHBB Very High Broadband FTTH FTTH connection by optical fiber directly to the subscriber’s home ensuring very high-speed transmissions compatible with triple play packages. VDS VDSL Very high bit-rate DSL: network technology involving the creation of new network nodes, which are not the distribution frames for existing telephone lines, closer to end customers. These nodes, which are linked by optical fiber to the distribution frames, host the DSLAM and can receive VDSL modems. The final section going from these network nodes to subscribers is still made up of copper wires. SIM SIMO SIM Only M2M M2M Mach Machine to e to Mach Machine: exchange of information between machines that is established between the central control system (server) and any type of equipment, through one or several communication networks. PS PSTN TN Pu Public blic Sw Switched Te itched Tele lephone N phone Network twork: voice transport network consisting of handsets, subscriber lines, circuits and switches. It is also used to access some data services. DSL DSL Digita Digital Su l Subscriber L bscriber Line: technologies enabling the use of copper cables connecting subscribers of Public Switched Telephone Networks so as to enable broadband transfers of digital packets. ADS ADSL Asymmet Asymmetrical Digital Subscr ical Digital Subscriber iber Line Line: broadband data transmission technology on the traditional telephone network. It enables broadband data transmission (first and foremost Internet access) via paired copper cable (the most common type of telephone line found in buildings). FTE FTE Full Time Equivalent

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appendix B: Non-Gaap measures (1/2)*

restated restated EBITDA i) operating income before depreciation and amortization, before re-measurement resulting from business combinations, before reclassification of cumulative translation adjustment from liquidated entities, and before share of profits (losses) of associates, ii) less non-recurring items CA CAPEX capital expenditures on tangible and intangible assets excluding telecommunication licenses and excluding investments financed through finance leases Direct Costs Direct Costs Includes: interconnection costs, commercial expenses and content costs Indir Indirect Costs ct Costs Includes: labor expenses, other network and IT expenses, property & general expenses. Ope Opex Defined as revenues minus restated EBITDA.

* For more information about Non-Gaap measures and the calculation of certain Gaap equivalents, please refer to our report on Form 6-K filed with the SEC on January 30, 2014, containing, among other information, our condensed consolidated interim financial statements and operating and financial review for the period ended June 30, 2013 and further information about recent developments in our business.

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appendix B: Non-Gaap measures (2/2)

FY2012 Q1'2103 Q2'2013 Q3'2013 in €m Actuals var yoy Actuals var yoy Actuals var yoy Actuals var yoy Revenues 43,515

• 1,188

10,280

• 441

10,323

• 526

10,162

• 428

Interconnection costs

• 3,991

+355

• 879

+145

• 916

+118

• 843

+98 Commercial expenses

• 5,487

+106

• 1,293

+29

• 1,260
• 12
• 1,277

+5 Content costs

• 423

+22

• 102

+12

• 86

+37

• 94

+6 Other

• 1,014
• 14
• 255
• 4
• 263
• 12
• 270
• 1

Direct Costs

• 10,916

+469

• 2,529

+182

• 2,525

+131

• 2,483

+108 Labor costs

• 9,070
• 309
• 2,316
• 14
• 2,255

+48

• 2,072

+42 Other ITN6 costs

• 691
• 6
• 158
• 4
• 164
• 9
• 154

+10 Other ITN costs

• 2,922
• 158
• 707
• 7
• 712
• 697
• 3

General expenses

• 1,576

+60

• 364

+4

• 386

+11

• 321

+37 Property expenses

• 1,626
• 83
• 397
• 7
• 405

+0

• 390

+8 Operational taxes and spectrum expenses

• 1,761

+14

• 433

+6

• 411

+23

• 443
• 28

Advertising costs

• 1,047
• 25
• 213

+26

• 255

+16

• 198

+21 Other

• 121

+131

• 40

+34 83 +3

• 38
• 20

Indirect Costs

• 18,814
• 376
• 4,627

+37

• 4,505

+92

• 4,313

+68 Restated EBITDA 13,785

• 1,095

3,124

• 222

3,293

• 304

3,366

• 252

yoy change in Group Opex

• 93
• 219
• 222
• 176

yoy change in Group Opex (cumulated)

• 219
• 441
• 617

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appendix C: important information

Orange S.A. has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling J.P. Morgan Securities LLC, toll free at 1-212-834-4533; Deutsche Bank Securities Inc, toll free at 1-800-503- 4611; RBS Securities Inc, toll free at 1-866-884-2071; Merrill Lynch, Pierce, Fenner & Smith Incorporated, toll free at 1-800-294-1322; Mitsubishi UFJ Securities (USA), Inc, toll free at 1-877-649-6848.