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ETNO
European Telecommunications Network Operators' Association

2012

| Orange

The third-quarter performance enables France Telecom-Orange to confirm its 2012 operating cash flow target of close to 8 billion euros

Outlook for 2013-2014: the Group expects 2013 operating cash flow of more than 7 billion euros which will return to growth in 2014

outlook for 2013 and 2014

  • As in 2012, the Group will face a more difficult environment in 2013 than initially expected, with a deteriorating macro-economic outlook, strong competition in the French mobile market and continued regulatory pressure.
  • Given these unfavourable conditions, France Telecom-Orange will continue its strategy of adapting and of maintaining its market positions, but expects additional pressure in 2013 on its operating cash flow , which will nonetheless remain above 7 billion euros.
  • The Group foresees a reversal of this trend in 2014, supported by significant operational improvements, particularly in France, but also due to savings resulting from the Chrysalid programme, as well as the stabilisation of labour costs and an easing of regulatory pressure.
  • In 2014, the Group expects a return to growth in operating cash flow compared to 2013.
  • In order to preserve its financial strength and capacity to invest, while maintaining an attractive return for its shareholders, the Group aims to return to a net debt/EBITDA ratio of close to 2 at the end of 2014 and has decided to adapt its dividend policy. Accordingly, France Telecom-Orange will propose  a dividend for both 2012 and 2013 of at least 0.80 euro  per share

results for the third quarter 2012

  • After a stable first half, consolidated revenues decreased -1.1% in the third quarter (on a comparable basis and excluding the impact of regulatory measures) as prices for mobile services in France and other European countries declined; the erosion of consolidated revenue was limited to -0.5% in the first nine months of 2012.
  • France Telecom-Orange had 227.2 million customers at 30 September 2012, an increase of +3.1% year on year. There was very significant improvement in the third quarter with +3.0 million net additions. In France, the mobile market share was stable at 37.4%: the third quarter confirmed the improvement that began in June with +317,000 new customers, after a decline of -155,000 in the second quarter and -615,000 in the first quarter.
  • Third-quarter restated EBITDA  was 3.645 billion euros. The margin decline was limited to -1.4 percentage points, reflecting a reduction in commercial expenses and the continuation of the Chrysalid cost savings plan. Restated EBITDA was 10.649 billion euros for the first nine months of 2012 with a margin decline of -1.6 points, the same as in the first half (on a comparable basis).
  • CAPEX was 3.700 billion euros in the first nine months of 2012; giving a ratio of CAPEX to revenues of 11.4%.
  • Operating cash flow (restated EBITDA minus CAPEX) during the first nine months of 2012 was 6.949 billion euros, in line with the operating cash flow target of close to 8 billion euros in 2012.

Commenting on the results for the first nine months of 2012 and the outlook for 2013 and 2014, Stephane Richard, Chairman and CEO of France Telecom-Orange, said: 
“The Group delivered solid results for the third quarter enabling us to confirm our operational cash flow target for 2012. This was due to a decidedly improved commercial performance in France compared to the first half, as well as the contribution from Spain and countries in Africa and the Middle East which continue to drive the Group’s growth. 
In 2013, operating cash flow will face additional downward pressure due to the significant pricing impact of a fourth player entering the French mobile market, and a macroeconomic and regulatory environment that will continue to be challenging. Measures begun in 2011 to deal with these multiple shocks will be expanded on in 2013. These measures include a more aggressive commercial pushback, improved offers, exploration of new growth areas as well as the careful management of our cost base. As a result, we can realistically envisage a return to cash flow growth in 2014. 
This will be achieved while fully respecting our social contract and continuing our investment in the deployment of very high speed broadband networks – fibre and 4G – particularly in France where we confirm our 2 billion euro FTTH deployment plan which runs over the period from 2010 to 2015. We will preserve the Group's financial strength, assuring its independence and its ability to prepare for the future. Accordingly, we are adjusting our shareholder remuneration with a dividend for both 2012 and 2013 of at least 0.80 euros per share, which remains attractive in the current conditions. I am very confident in the ability of the men and women of France Telecom-Orange to meet these challenges. We have both the means and the ambition to do so.”...

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