Orange SA (ORAN) 2002 Q3 法說會逐字稿

Good Afternoon, [indiscernible] speaking, welcome to France Telecom Q3 Revenue Conference Call. For this presentation we will refer to the documents you have received via email, they are also available on our web site. Just after the presentation, if you have any questions, please dial ‘* #’ on your keypad. I leave the floor to Jean Louis Vinciguerra.

Good afternoon everyone. Making this presentation with me are Jean-Francois Pontal, Chief Executive Officer of Orange, Nicolas Dufourcq, Chief Executive Officer of Wanadoo, and executive officer in charge of Mass Market Fixed Services and Internet; Jacques Champeaux, Executive Vice President in charge of Corporate Business Services, Roger De Bazelaire Executive Vice President and Chief Financial Officer TP Sa, and John Allkins, Equant’s Chief Financial Officer.

Given that Wanadoo presented its Q3 revenues last week, and that both Equant and Orange are holding conferences today, my presentation will focus on the key contribution by these companies to the France Telecom figures.

So if we move to the Q3, 2002 key message, slide number three. Our 9-month 2002 revenues highlights, five major points. Wanadoo and Orange keep growing with plus 31.7 percent growth for Wanadoo and plus 13.3 percent growth for Orange in France Telecom accounts during the first nine months of 2002. Development of ADSL has met our expectations and the group is confident that it will achieve its goal of 1.3 million active lines at the end of 2002. France Telecom has stabilized its market share in the long-distance fixed line telephony in France, while a decline of local calls is under control. The decline of revenues for fixed-line voice and data services in France has been contained to around 5 percent. Fixed-line voice and data services outside France are stable at plus 0.6 percent on a pro forma basis and excluding forex. Overall we think that our full-year EBITDA and EBIT targets will be maintained.

I will move to the next slide, slide 4, which shows only the third quarter consolidated revenue by segment. With euro around 12 billion in revenues is Q3, growth is plus 7.1 percent and on a pro forma basis, and excluding forex growth is 3.5 percent. Fixed-line voice and data services outside France has shown by plus 18.1 percent, mainly as a result of [indiscernible] TP Sa Group and Equant in 2002. On a pro forma basis and excluding forex revenues are stable at plus 0.2 percent. Wanadoo is still growing fast, with an increase in revenue of plus 30 percent on an actual basis and plus 30.4 percent pro forma and excluding forex. In spite of [indiscernible] slow down, Orange is maintaining double-digit growth, plus 14.2 percent and plus 12.5 percent pro forma and excluding forex. Fixed-line voice and data services in France are doing well, with a decrease limited to minus 5 percent, plus 4.4 percent on a pro forma basis. This has been achieved in spite of negative nonrecurring events such as local call preselection in the first quarter.

I move to the next slide, which shows the consolidated revenue, which compares Q3 to Q2 2002. You see that Orange rose by 10.5 percent; Wanadoo reported a 4.4 percent increase, with a [indiscernible] on directories. For fixed voice and data services in France stabilization is mainly due to a slowdown of local call market share losses; the impact of subscription fees increase implemented in July. The impact is roughly of EUR20 million. Fixed line voice and data services outside France dropped by 10.9 percent affected by the transfer of [Mobinil] to Orange, so it’s mainly a perimeter effect.

If we move to the next slide, slide number 6, the Q3 pro forma exchange rate analysis. It shows the impact of perimeter and forex on our Q3 revenue growth. The chart on the left outlines the perimeter effect of EUR0.7 billion and the forex effect of EUR0.3 billion. When restating the Q3 revenues in the light of those two effects, pro forma and excluding forex, growth amounts to plus 3.5 percent. On the right side of the slide, we indicate the main factors; a zloty devaluation for TP Sa Group, represented an impact of minus EUR92 million. As regards the scope of consolidations the pro forma growth takes into account the end of the consolidation of Telecom Argentina, minus EUR0.4 billion and the TP Group plus EUR1.1 billion.

I move now to the 9-month cumulative consolidated revenues by segment, slide 7. with EUR34.44 billion in revenues over the nine months, growth is 9 percent. On a pro forma basis and same scope of consolidation and excluding forex, growth is plus 2.9 percent. Fixed-line voice and data services outside France have grown by 38.4 percent mainly as a result of consolidating TP Group and Equant in 2002; on a pro forma basis and constant exchange rate, revenues are stable at plus 0.6 percent. Wanadoo is still growing fast with an increase in revenue of plus 31.7 percent on an actual basis, and plus 29.8 percent pro forma and at constant exchange rates. In spite of limited slowdown Orange is managing double-digit growth, plus 13 percent and plus 12.5 percent pro forma at constant exchange rate. Fixed-line voice and data services are performing in line with expectations with the decrease limited to minus 5.5 percent, and minus 5 percent on a pro forma basis. Revenue from international activities now account for 41 percent of total revenues, including Orange and Wanadoo.

The next slide, slide 8, shows the evolution of the nine-months revenues published by the group, and the contribution of each segment to achieve the 9 percent growth year-on-year. Improvement in orange and Wanadoo is twice the decrease in fixed line voice and data services in France. For fixed line voice and data service outside France, a EUR1.9 billion increase in revenues, mainly due to a change in the scope of consolidation, with Telecom Argentina leaving, as of December 31, 2001, and TP Group coming in as of April 01, 2002. The impact of Equant is also significant, since Equant was not consolidated in the first half of 2001.

The nine-month pro forma and exchange rate analysis, slide 9, you see on the chart on the left the perimeter effect of EUR2.2 billion, and the exchange rate effect of EUR0.4 billion. When restating the nine-month revenue in the light of those two effects, pro forma and constant exchange rate growth amounts to 2.9 percent. On the right side of the slight we indicate the main factors, the zloty devaluation for TP Group, [indiscernible] around 50 percent of the total exchange rate effect. As concerns the scope of consolidations the pro forma growth takes into account the end of the consolidation of Telecom Argentina, EUR1.3 billion, and the consolidation of Equant, plus EUR1 billion, and TP Group plus EUR2.3 billion.

Next slide, slide number 10, shows the pro forma number of subscribers in controlled subsidiaries. The increase of revenues has been achieved through the continuous growth of France Telecom customers. At the end of September 2002 the number of controlled subs has reached 108.4 million, compared with 98.6 million subscribers last year. This strong basis will ensure our recurring revenues. We now serve more mobile and Internet subscribers than fixed line subscribers, our previous core activity.

Next slide shows the evolution of the ADSL domestic market. ADSL connections are now a very promising development. As shown in this slide, France Telecom had 881,000 ADSL connections at the end of September 2002, compared with 267,000 year-on-year. Wanadoo accounts for 691,000 ADSL clients in France, that is 78.4 percent of total. The base acceleration in this market expect by the end of the year, allow us to confirm our target of 1.3 million of these ADSL lines connected by the end of December. ADSL has become a mass market, and is identified as one of our main growth engines.

Beyond the number of ADSL lines, impact on our revenues amounts to EUR265 million for the nine-month period ending September 2002 - that is slide number 12. This means plus 235 percent growth on a year-to-year basis. The breakdown of this EUR265 million is as follows. Wanadoo access EUR146 million; fixed line voice and data service in France, online services Internet access, EUR85 million. Fixed line voice and other services in France, other product equipment, EUR34 million.

I move to slide number 13, which shows the evolution of our market share in fixed telephony. As you know the beginning of 2002 was difficult for this fixed line telephony segment, whereas our market share on long-distance call, including national and international, have been stabilized since the end of 2001. Local calls have been hit by regulatory change. The local calls market has been open to competition through automatic carrier preselection on local calls. This means that all local calls made by a customer previously using a competitor for a long-distance call on a preselection basis, have been automatically switched to that competitor’s.

This impact of automatic carrier preselection on local call explains a drop in our market share during the first quarter and the second quarter, but as you see it was a one-off result. You see that the decrease in market share was minus 10.8 percent in Q1, minus 3.3 percent in Q2, and minus 0.7 percent in Q3. So it means that from the beginning of Q3 the normal competitive process can be measured. Our loss of market share in Q3 is not noticeably low, and we’re seeing that at the end of this year, probably we will reach market share in the range of 80 percent on this market. As far as the long distance is concerned you see a slight gain of market share in national and international long-distance telephony.

So now I move to the segment analysis, and before making further global comment on the Group and its main financial target for the end of the year, I would like to examine each of the Group four segments in more detail. I will let Jean-Francois Pontal comment on the Orange figure, Nicolas Dufourcq will comment on Wanadoo and fixed line voice and data service in France for international customers. Jacques Champeaux will deal with the corporate market, Roger De Bazelaire for TP Group and John Allkins for Equant. So now, Jean-Francois, thank you for talking about Orange.

Let's begin with Orange I think [indiscernible] is on the line and will answer the questions with me after that. So Orange today represents 35.5 percent of France Telecom’s total revenue, and this contribution will probably continue to increase n the future. Orange showed a growth of 13.3 percent in contributive revenues year-on-year. Those number shows the momentum in Orange business at this moment to continue, and it shows that the increased focus on profitable growth is successful. We have raised our financial target for this year, you remember, from 4.3 billion EBITDA to 4.7 billion, and today the number shows that we are well on track.

So let’s see in slide 16, orange key messages. The first one is our customer base increased by 2.5 million in 9 months, which has allowed for the sharp increase revenues, 13.3 percent. We see an even stronger increase in network revenues of 15.4 percent. And ARPU evolution in line with our expectation, the inflection point is behind us, and ARPU is growing more than 3 percent in the UK, and is the first year-on-year increase in the UK in terms, and the strongest quarter-on-quarter growth for UK overall ARPU.. In France, we see a significantly reduced rate of ARPU decline.

On slide 17, you will see Orange customer base analysis. Net adds represent almost 5 million in one year and the evolution is linked to the metric profile of each subsidiary. France remains high profile growth market, and Orange France has achieved a 13 percent growth in its customer base over one year. UK is a more mature market in which orange UK with a 7.2 percent growth maintains its leadership on the market. And the rest of the world segment has a strong growth with 18.4 percent growth in its customer base, and that on a pro forma basis.

This subscriber base growth has had a similar impact on revenue, with comparable dynamism. Revenue in the UK is growing more rapidly than subscriber base growth, mainly thanks to the ARPU increase. France and rest of the world experience opposite trends, with revenues in France and the rest of the world increasing respectively 11.6 percent and 21.9 percent. This is a slower pace than the subscriber base progression, due to decrease on ARPU. It should also be noted that new clients revenues are only partly taken into account. With reference to this last nine-months revenue figure, it’s likely that excluding Egypt, Orange will show a total revenue slightly below 17 billion at the end of 2002.

Slide 19 refers to Orange ARPU in France and in UK more details, so ARPU trends are satisfactory, and remain in line with expectations. Up to plus 3.2 percent in the UK, in a highly competitive market, and I repeat, it is the first year-on-year growth for ARPU in the UK. Down 3.8 percent in France, due to a still immature market, but slowing the decline. And there is still a lot of growth to come from voice as the UK shows in growing voice ARPUs. Non-voice is also strongly up in other countries, with now 10.5 percent of the total Group revenues, and with already above 14 percent of data revenues in the UK, and above 8 percent in France.

And you are not yet seeing in data revenues the impact of the new services and new devices that are just being launched. Orange Solinet package EUR0.6 per month subscription shows encouraging results, with more than 150,000 active users at the end of September versus 42,000 at the end of June. And we have already launched picture messaging in the UK, we are launching it in France. We launched on a European basis last week the SPV phone, using Microsoft Office with which so many are familiar. So from all that new services we expect strong growth. All those services are part of Orange’s thinking to lead with services not with technology, to make the services simple and good value, with simple tariffs. And to ensure that our customers are future proofed the increasingly get 3G type services on our 2G networks. So we expect an improvement in the growth momentum through all those services, and I have to finish saying, the future is bright, the future is Orange.

So talking about Wanadoo before and that part of fixed telephony for residentials and professionals afterwards. As far as Wanadoo is concerned, Wanadoo represents about 4 percent of group consolidated revenues at the end of Q3, with revenues of EUR1.35 billion for the first nine months. The growth, as I announced it three weeks ago, is 32 percent compared to the first nine months of 2001, and on a pro forma basis the growth is 30 percent. In fact 32 percent of growth. We have some interesting figures, for example the growth of pure access in France is 69 percent, nine months to nine months and Q3 to Q3. The growth of the revenues of Freeserve, Q3 to Q3 is 230 percent, it’s an important figure. If we look at Directories, the growth of [Da Jone] paper only is 2 percent, and the growth of Online Yellow Pages is 41 percent. So that’s some examples of the speed which is ours today.

If you look at next slide, you have some volumetric indicators of Wanadoo, in the two segments that we are describing, Access Portals and E-Commerce first, and Directories on the second part. The total number of active customers is growing very rapidly in France as well as abroad, reaching 7.1 million at September 30, 2002, versus 5.4 million at the end of the month of September 2001. This is a figure, which doesn't take into account the one million clients of the Eresmas Company we bought in July, and which was a transaction which was closed last week on Thursday night. This shows an increase of 33.4 percent in one year. And in addition to this, our product mix, of course, is most positively strengthening the weight of our bundles and specifically of our broadband product, mainly ADSL access.

ADSL access represents 50 percent of our sales in Europe in Q3. Our broadband customers in Europe totaled 981,000 at September 30, 2002, which represents 14 percent of our total active clients in Europe, versus 363,000 at September 2001, at that time the proportion was 7 percent; so the proportion in Europe doubled. In France, we will end the year with one million clients in broadband, and this will represent 25 percent of our total number of clients in the country.

So, in spite of the decrease in revenues of portals activities. Pure banner advertising in portals, the figures are EUR56 million versus EUR76 million last year. The total revenues of the access portals and E-Commerce branch amounted to EUR719 million this year, which is an increase of 74 percent. The Yellow Pages branch has shown an increase of 3.3 percent to EUR631 million but [Juan.FA] as I said, is still growing extremely fast, 41 percent. The budget that we are constantly building for next year gives us exactly the same figure actually, about 40 percent in the course of next year. And altogether Wanadoo's growth attained 32 percent on this third quarter.

You have in slide 22 the key indicators, I won't comment on them, you already you have this information before. Just have in mind that e-Merchant, I didn't comment on it, had a growth, as far as revenues are concerned of 37 percent Q3 to Q3, which is also an interesting number.

If we go to fixed line voice and data services in France, some reminders; this business represents 41 percent approximately of Group consolidated revenues, with a figure of EUR14.01 billion of revenues for this first nine months of 2002. The evolution is a decrease of 5.5 percent versus the first nine months of 2001. On a pro forma basis, very little differences, the evolution is minus 5 percent. Now, what are the two key messages we are referring to this business? First we contained the decrease of local calls market share in the first nine months . You know that we had a big drop in the first quarter and in the beginning of the second quarter, which was due to regulatory constraints, that you know perfectly. There was not a comparable drop in the third quarter and there will not be any other drop in the next months. If we experience a decrease it will be very slight, very light decrease of local calls market share.

We experienced also a slowdown in the rate of decline in Q3 as far as all the other markets are concerned; that is specifically national calls and international calls. And due to the increase of the subscription tariff on July 20, 2002, the overall subscription revenues of France Telecom for this market were just stabilized compared to last year.

The next slide gives some more indications about this evolution. The drop of 5.5 percent that I stated before in total revenues for the segment is made up of four factors. First, minus 7.1 percent for fixed line telephony services in France, which is the main business, which also includes carrier services. Second, plus 1.9 percent for corporate services, apart from tariffs services. Third, plus 2.3 percent for cable and broadcasting activities, that is France Telecom, Cable and TVF. And fourth, minus 12.6 percent for other revenues, which are mostly rentals of equipment. So the decline is overall contained compared to what we announced at the end of June.

Before we go into greater detail I would like to stress that these figures demonstrate that the momentum of decrease has now stabilized, and that 2002 has being impacted by what I said non-recurring effects, which at the end of the day make us more optimistic than at the beginning of the year.

If you look at slide 25, you see that it illustrates the variations in the different revenue lines. So, we go from EUR14.853 to 14.01 billion of revenues with the different factors, which are cited in the graph. What you must have in mind that this decrease of 5.5 percent if you let aside the big decrease of 19 percent in carrier services it shows a new figure of minus 3 percent. So the reality, if you let aside again carrier services, the decrease of the traffic revenues and subscription revenues in this segment is minus 3 percent.

Next slide 27, you have some more detailed indications about the evolutions quarter-to-quarter. You see that Q1 is minus 4.5; Q2 was difficult one for us, minus 7.1, and Q3 again has stabilized the decrease on the minus 5 percent rhythm.

Slide number 28, you see that the decline in revenues is 7.1 percent over the first 9 months; minus 6.6 percent in Q3 alone. Again you see the red color it is subscription, the tariff increase has a consequence, which is the stabilization of the revenues. You see the green color, which is the minus 10 percent in calling services and in those calling services you again have some portion of carrier services.

Then you look at slide 29. We gives some explanations of the decline in revenues. The two important significant explanations are first, the decrease of EUR467 million in calling services over the first 9 months of 2002. Out of this EUR233 million were due to local call losses. And clearly 2002 will bear most of this one-off impact again. The other EUR234 million lost came from substitution between fixed and mobile traffic and carrier decrease effects. It is noticeable that there was no massive churn from fixed access to mobile access. The main impact was first, loss of market on local calls; second, the increase of the volume of fixed mobile traffic; third, loss of market share to competitors on national and international traffic. Second point, carrier services revenues have dropped because of a decrease in connection revenues, I think Jacques Champeaux will comment on this afterwards. And third, again increase in rental charges impact has financial translation of EUR21 million as it was taken into account only from July 20, 2002.

Slide number 30. It gives you an indication of what we want do, actually. You see here the growth of the number of France Telecom clients in France that are subscribers to telephony bundles. Our policy now is extremely simple, we want to reconvert all our telephony clients to the bundle offer, as was the case in the mobile industry or in the Internet industry. We launched various initiatives to increase customer retention bundles and those initiatives are extremely successful, so that at the end of September we have 6.2 million customers. At the end of this year, 2002, we would like to have at least 1 million customers more on those bundle offers.

I can answer the questions afterwards if you want.

A few words first on the carrier services revenue which were explained on page 29. The carrier services revenues have dropped because of a decrease in connection revenues due to three main factors. First, this is result of market consolidation among our competitors. Second, our competitors are progressively rolling out their own network, up to the local switch, which means that it reduce our revenue. And finally, the implementation of the flat rate system for Internet access, what is called free [Free Aco System] from January 2002, has had an adverse affect on our Internet access carrier services revenue.

I would like now to comment based on slide 31, what has happened to corporate services.

Corporate services globally increased by a modest 1.9 percent, but this results from two very different movements. First is on carrier revenues on leased lines leased to carriers. The revenue declined on this market by 19.5 percent, which is roughly the same type of figure we had on the interconnection revenue. Excluding these revenues, the revenues coming from corporate customers were up 8.4 percent. The 19.5 percent decrease of network services sold to other carriers is due to the consolidation process among our domestic competitors, a decrease in the average leased line length and a decrease in prices. As I said before this decline was more than offset by an 8.4 percent rise in corporate network services sold to end users, to corporate customers. In this market, revenues from data-network services were up 16.1 percent. This steady growth generated by internet and intranet services, which accounted for more than half of the total data network services at the end of September 2002. The success of data network services is due to SMEs data-network extension, but also to the continuing conversion of leased lines private networks into managed data networks.

I am now commenting the fixed line voice and data services outside France. As you know this, this segment collect every kind of international business, other than Orange and Wanadoo. Those mainly involved are TP Group and Equant. In 2002 fixed line voice and data services outside France were largely impacted by a change in the scope of consolidation, with Telecom Argentina leaving as of December 31, 2001 and TP Group coming in as of April 01, 2002. The impact of Equant is also significant since it was not consolidated in the first half of 2001. All this explains the strong difference between actual figures and pro forma figures; plus 38.4 percent in actual figures versus plus 0.6 percent in pro forma excluding forex.

What are the key messages? Slide 33. Equant revenue decreased by 6.8 percent in the pro forma. TP Group revenue increased by 2.9 percent in pro forma, also excluding forex. Please note that Mobinil the Egyptian Mobile operation has been transferred to the Orange segment as of July 01, 2002. It represented EUR125 million impact.

If I move to the slide number 34, this slide shows the different components of fixed line and voice and data services outside France, in terms of actual revenues. You see Equant, fixed line telephony. Fixed line telephony is mainly TP Group, whereas its mobile branch, PTK Central is included in mobile services.

If we move to the next slide, slide 35, the same presentation but on a pro forma basis, with constant exchange rate. And we will give you more detail on the two main contributors, which are Equant and TP Group. So now I ask John Allkins to come on the next slide, slide 36 on Equant.

Thank you Jean Louis, I am talking to slide 36, and as we reported earlier today Equant's revenue on a pro forma basis showed a decline in the nine months of 2002; at constant exchange rates that was 6.8 percent, but in dollars it was slightly different it was about 5 percent. This decline was largely caused by the economic environment, which continues to be weak. But we can see good demand and revenue for our IT based services. The total order intake for network services amounts to some $1.5 billion for the first nine months of 2002. And we're also beginning to see the first signs of price stabilization in the network services area.

Network services revenues in fact were up 2 percent in dollars compared with the three quarters of 2001. Direct sales channel revenues, increased by some 7.8 percent, with increases broadly across all of our regions. But, this increase in direct sales was offset by an 11.3 percent decrease from our indirect channels, largely Deutsche Telecom and Sprint, which reported revenue declines year-over-year. Revenues from our [technical difficulty] have now stabilized reflecting the increased management focus on the company's sales efforts in this particular product line, rather than any pick up in the broader economy.

At the end of 2002, Equant cash position was US$384 million positive, which was actually an increase of $11 million on the year-end 2001 cash position. This obviously reflects positive EBITDA; the fact that we have optimized and reduced our capital expenditure, and the work we are doing on keeping our working capital under control. As noted on the slide, we maintain our guidance of $2.95 billion of revenue and $180 million for EBITDA for the full year 2002. Thank you, I'll now hand over to Roger De Bazelaire to talk about TP Group.

So, I will just briefly comment on TP activity, both the fixed line and the mobile business, which is Centertel. The first slide, slide 37 is showing the TP Group contribution to total revenue reached EUR2.6 billion for the first nine months of this year, which is a 2.9 percent increase pro forma excluding Forex effect. We can see is basically a 3.8 percent decline on the fixed line operations, while we are seeing a very, very strong growth in the mobile business, which I will comment later. TP Group at the end of quarter three had 2.5 million fixed line telephony customers, which represent a year-to-year increase of 2 percent. In addition to those fixed line customers increase, TP Group benefited from quite rapid growth on in the Polish Internet market and had a 1.4 million active Internet customers as of September 30, 2002.

Coming to slide 38, it is showing what is happening from the mobile business. Centertel has been performing in the quarter as in the previous quarter in the year, quite well, with the market share reaching 31.7 percent and most significantly, reaching 4 million customers, which is very close to the number to [indiscernible] now. And this is up from 2.3 million at the end of September last year, which is then 70 percent increase over the period.

I would turn it back then to Jean Louis [technical difficulty]

So now a few words about the outlook for the full year 2002. As you see on the slide number 40, I would like to draw some conclusions. With a nine-month revenues growth rate of 9 percent, we’ve see that we would achieve a full year growth between plus 8 and plus 9 percent, for the full year 2002, compared to the full year of 2001. This lower target compared to what we said at the beginning of the year, we said that it would be around 10 percent. This lower targets will be offset or counterbalanced by better cost control. So as a result, we maintain a target or we can confirm a target of more than 15 percent growth for group EBITDA and EBIT 2002, for the full year 2002.

Thank you very much, I will now, together with my colleagues, answer your questions. I have to tell you that Jean Francois Pontal, Chief Executive Officer of Orange has to leave unfortunately in 35 minutes, so if you have to raise questions on the mobile business, it would be better to raise these questions first, because he will leave us roughly at 5:00 Paris time, so at 4:30 London time.

I have two questions. The first one is regarding your ADSL target for the year end. You maintain your target of 1.3 million lines. Now just to look at what that implies in terms of net adds per week, it’s around 32,000. Looking at your performance in the last quarter which was closer to 12,000 lines added per week, I was wondering why you were thinking that would accelerate so much than it has in ADSL? And the second question is to the transactions that were announced in the earlier part of the week [technical difficulty] and I want to if you have any update on those transactions? Thank you.

On ADSL, the last figure that you have are the figures of September. We launched in the middle of October a new offer, which, as you know, is an offer [indiscernible] for 128 kb of bandwidth. And this offer is extremely successful. As far a Wanadoo is concerned, we will reach our target of 960,000 [indiscernible] at the end of this year. [technical difficulty]. As far as the [technical difficulty] is concerned the target was 1.26 billion that is exactly [technical difficulty] 300,000 ADSL lines clients. It may be a little bit more difficult but it absolutely and only depends on the [technical difficulty] of the competitors of Wanadoo because they are the buyers of the lines from France Telecom.

Do you have any data points in terms of how the new product is working in October?

Well I can tell you that in September, as you said yourself, we had about 2000 sales per day of Wanadoo ADSL product, and in the end of October we are at 4000.

Thank you.

I have three questions. The first one is on your last slide, you say that the lower target compensated by cost control. Could you shed some more light in the areas that you [indiscernible] giving some thoughts on more information about the audit which is ongoing in France Telecom? That's the first question. Second question is regarding MobilCom, I see there is a deadline at the end of October to a [indiscernible] to that deadline. Could we expect a final end to MobilCom very shortly, and could you give us some more information? And also to the repackage of the [indiscernible] do you confirm the information we have in the press for that? And lastly, I think there was reiterated in the last question, could you do give us some update about the disposal and the progress made in third quarter. Thanks.

About the cost control, we have already implemented, you know, better cost control all along these last months, so that explains why we are very confident that we could achieve better EBITDA growth and our revenue growth. These cost control measures would be accelerated and reinforced by the new Chairman named Mr. Thierry Breton on the fourth quarter, and next year. But I cannot give you more detail. Mr. Breton has said publicly that he will give his view and his plan at the end of November or early December, So he will tell you at the time and these first two months, what he think he could do and what are his plant. So, I have no other comments.

Regarding MobilCom, it is clear that we remain, with France Telecom in the same line as we were after our Board of the September 12, 2002. We have decided, to abandon the UMTS business in Germany and not to support anymore MobilCom. But we maintain also our proposal to repurchase the bank loan the Nokia/Eriksson loan against a quasi equity instrument, a capital bond convertible into France Telecom shares at EUR47 per share. So we have discussion with the banks about the implementation of this instrument. But the only change is that it seems that for the non-UMTS business it seems that MobilCom is trying to implement a German solution with some financial institution in order to maintain alive as this company in the non-UMTS business, service provider business and fixed line and Internet business.

So there are a lot of discussion between MobilCom and this financial institution, and if this plan, which is not the problem of France Telecom, it’s a pure German problem, if the non-UMTS business can survive, in this case we are ready to implement the repurchase of the bank loan and the Nokia/Eriksson loan. We hope that this plan could be implemented in the coming days or weeks, but at this stage it’s in the hands of the German institution and MobilCom, not in the hands of France Telecom, which is not involved in the non-UMTS business.

About your third question, which is the update of our divestiture, we always intend to close the TDF sale for 65 percent of TDF, our broadcast business, at the middle or the end of November, and about [Casemar], we are waiting for the authorization of the [indiscernible] Netherlands, and we hope to get an answer in the coming weeks. So that’s for the main divestiture forecasted for this year.

I have two questions. First, we have seen a drop of about 70,000 fixed lines for the quarter than last quarter. Could you comment on this trend and what could we expect for the coming quarters? And second question is about the disposal program, could you update us on the satellite disposal because we haven’t been hearing about that project?

On the first question, which is the number of lines. I remind you that the overall subscription revenues are stable as we increased tariffs at the end of July. But what I can tell you also is that we have the stability of the total number of telephony lines which is the number being 54 million lines at the end of September. You can also note that the number of new [indiscernible] leased lines, that is an inter-service line, is continuing to increase rapidly. The total number of [indiscernible] leased lines is 4.9 million at the end of September, which is an increase of 5.6 percent in one year.

About your question on the satellite disposal You referred to Eutelsat and maybe also [Stellat], Stellat was done at the end of September for roughly EUR160 million, it is of completed. For Eutelsat we are in talk with several candidates, several investors and we have a lot of private equity investor who are interested. Also some strategic investors. We have a choice to sell either our stake, our 23 percent stake alone, or so sell with the other player, like Dutch Telecom and British Telecom to sell a majority. We think that it’s likely that this sale will be completed next year, not before the end of this year probably.

My question about the fixed lines was not on the mix, but the total member of fixed lines. This has been dropping a bit less than 150,000 lines on the last quarter which is not negligible. Have you made analysis of this, is this second line going back or something like that?

No. You know that the market for second lines in France is very small. So, overall what we noted again at the end of September, is of course the stability of the number of lines. This is the only comment that I can make; this is the way we see this business.

I have three questions please. The first one is just regarding fixed to mobile substitution. On the Orange conference call earlier today, Graham Howe sounded quite focused on this area as a potential means of growth at Orange, and I was wondering if you saw this as a conflict of interest in France, particularly given that the majority of your Group’s debt lies at the parent level? The second question is just regarding Casema. [indiscernible] trust authority might actually block the sale, and I was wondering whether you could give us any more feedback on that please? And then the third issue was just on your mobile assets in Lebanon; I was wondering whether those will be consolidated in the revenues [technical difficulty] and in particularly whether you actually still have control over those assets or whether those now actually transferred back to the Lebanese government?

Fixed-to-mobile substitution is a question of customer usage trends. In all the markets we see, and you know that because you do it more and more, you use your mobile for having your calls when you are out of home, but also when you're in at home. Then we see a very strong substitution in the UK for example, and we combine that with the specific tariff, off-peak tariff called Everyday 50. In other the markets where the trend is less obvious we push it through specific tariffs, that's the reason why we launched this specific tariff on that in Denmark very recently. In France, perhaps [Didier] is on the call and may answer, but we had also launched as an experimental point of view, off-peak tariff, and we will generalize this tariffs next year. The proposal is to combine the trend in customer habit. Any complementary comment, Didier?

Just, we are not pursuing in France, obviously, the [indiscernible]. Point number two, we have launched this tariff, as Jean-Francois said, on an experiment, when we will go hopefully on that in 2003. what we want to do is to increase the usage of the mobile business, decreasing cost of network during the off-peak hours without introducing [indiscernible] of our business. So It’s a very fine tune complementary offer, we are not doing anything which is not complementary.

In terms of your question on Casema, I have no specific comment. Liberty Media is the buyer of Casema, and France Telecom met several times the [indiscernible] Netherlands. Obviously the competitors are also sending their comments to the anti-trust authorities and we wait for their decision. We remain confident that this transaction could be implemented. About Lebanon, maybe I will ask Jean-Francois Pontal to give an update on Lebanon.

So you know that since the 31st August, we are just managing the network, which is now a property of the Lebanese government. So, Lebanon figures turnover are consolidated in those accounts until August 31, 2002. Then we are still in negotiation with the government in order first, towards the payment of the network and then too are the conditions of the new license, which was [indiscernible] to be granted in Lebanon.

Would you be willing to pay for additional licenses in Lebanon?

I think that the Lebanese government is not in a situation to obtain strong payment for both these license, due first to the regulatory uncertainty, which was created in the country, and second, to the market. So probably, which will be in this discussion in this license. This not really an up-front payment, but in discussion will be the revenue sharing accompanying the license. That is why the decision is not yet made by the government.

Two questions if I may on fixed-line businesses. First one is, at which rate do you expect subscription fees to increase over the next 12 months? Second question, you lost about 10 percent of [technical difficulty] this year, how could you spread it between local calls and long distance calls? Third question on MobilCom again, are you interested to stay as a minority shareholder in MobilCom, which will act as a mobile service provider in the future?

On this first question, you want the evolution of the traffic per destination?

No, your rate for subscription fees over the first three quarters [technical difficulty] and will this accelerate for the future?

No, we will not continue to raise the subscription fees. What we will try to do is to increase the installation fees. You know that when you are changing your house you have to reinstall your line and then you have to pay an installation fee. This tariff was never increased in the past six years. It may be that we decide to increase it, at least we will propose it to the regulator. This is my answer to the first question. The second question was about traffic per destination, wasn't it that?

[technical difficulty] voice traffic, is this only effect from the local calls preselection or have you also lost a few percentage points in minutes from the long distance call?

Okay, as far the residential and professional market is concerned, let’s say the mass market, just keep in mind that 50 percent of the revenue losses on traffic comes from the local call competition; 19 percent comes from the competition on national calls and international calls. And the rest of the percentages comes from the pricing effect and an overall decline in the overall fixed-line market. So if I sum it up, 50 percent comes from opening up the market to local line competition, local traffic competition; 19 percent comes from the competition from long distance fixed-mobile and international calls, then 15 percent comes from the decline in the fixed-line market, substitution to mobile and Internet, and the rest is a price effect linked to the effect of prices of long distance minutes, and of fixed mobile minutes declined in the first nine months of 2002.

About your third question on our 28.5 percent stake in MobilCom. If the company is not going bankrupt, and if the whole business service provider business is surviving, it’s true that we will remain. And if the UMTS business is stopped and frozen, it is true that we will keep this 28.5 percent. We have no specific plan about this 28.5 percent, but on a medium term, medium/long term it is not our goal to remain a shareholder of MobilCom as a service provider business, because it’s not our business.

A couple of questions, if I could. Could we talk about the outlook for the wholesale and interconnect businesses going forward from here. They have obviously been hurt quite badly by both volume and price up to this point, and I am curious what you think we can expect over the next year or two in that business? Also, can you tell us what the pricing effect of the bundles has been, on the fixed line calling bundles? And finally, can you give us a sense of the outlook for the fixed line business in TP? It looks like it has been declining, and we saw some stuff recently on price declines there. Should we expect those declines to TP to get worse?

the first question was on the decrease in revenue coming from carriers market. I think we had a conjunction of factors in 2002 which pushed us to a very strong decline. Consolidation of the market, the fact that the prices of leased lines had decreased, the fact that we went to a flat rate interconnection for Internet access. So there is a conjunction of factors, which explains the very high drop this year. We believe that in the coming years we will still see a certain decline based on one of two factors will remain. For instance the fact that our competitors are growing the networks and they accessing more and more to local switches. The fact also that the prices will decline, but we believe at a slower pace. So we believe that in fact if we are perhaps not completely stabilized, but obviously decrease at a much slower pace than it has been in 2002.

On the pricing effect of the bundles, the comment that they want to make is the following. Of course, if we are over-selling more bundles to clients that are not really strategic to France Telecom, and that [indiscernible] then decide even to leave France Telecom, we are destroying values. We are [technical difficulty] aware of this possible negative effect. We are of course focusing on the high volume bundles, there is for example, on local calls, bundles of more than eight hours per month. And the commercial actions that are being monitored in France Telecom outlets are concentrated and focused upon those bundles and only those ones. The other comment I wanted to make is that as soon as the fixed line market in France, specifically, is now being organized, and animated through a competition on bundled products, be they France Telecom ones or [indiscernible] or Tele2 or [indiscernible] tomorrow or whatever, it is the case we will have a very dynamic market. It makes the fixed line market much more vivid, much more living, if I may hazard a guess for the mobile market or the Internet market, which has we think positive consequence of the volumes.

Can you say what the price effect has been so far?

I can't tell you precisely the quantity effect. It's relatively negligible because we were extremely cautious the day we launched those bundles.

I would comment directly on the fixed line revenue trends for TP in Poland. Effectively we have been seeing, over the three quarters, a relative decline on the fixed line operation, which is mainly obviously as you would expect on voice revenues. [technical difficulty] zloty was about 4.5 percent year-on-year [indiscernible], and this is mainly due to stronger competition, and partly in the first half-year on the domestic long distance market, which has been opened in the country. And partly when the company [technical difficulty] which has been quite aggressive and was, as long as it was not regulated properly, and they hadn’t [indiscernible] their customers. However, in the second half year we have see TP regaining very significant market share, coming back to the levels of 90 percent plus, in term of domestic long distance, where none was then forced by the regulators to invoice these customers. So we are quite confident that we will maintain that position in that segment of the market.

That decline in the voice revenue has been partly offset by an increase in data [indiscernible] which is quite significant, because it’s about 30 percent year-on-year, and it’s [indiscernible] with a strong increase in the revenue for Internet access through ADSL technology, which we have been rebranding into [indiscernible] and which is picking up very, very strongly since August and September. So that’s what I could comment briefly on the fixed line in the Polish market.

Are there some price declines coming into it recently?

No, you know the main challenge for us is mainly the international long distance, which is opening early next January. And then obviously we need to look at that very closely.

I have three questions. First one is regarding the evolution of the fixed line business the calling services part; you have a decline of 500 million in the first nine months, in terms of revenues from 2001. I would like to know if it is possible to have the split of this decline between mass market client and corporate clients? I would like to know whether you see some difference in terms of fixed line business in France between corporate client and mass market client? The second question relates to CAPEX.

The mass market part of the 500 million is 327 million exactly.

So the second question relates to your guidance, you gave some on guidance for EBITDA and EBIT could you may be give a guidance for the CAPEX for 2002?

About the CAPEX, we said at the beginning of the year that the guidance was between 8 and 9. It’s very clear now that the guidance is close to 9 and maybe a little bit lower than -- close to 8, excuse me, in the lowest range, and could be somewhere around 8 maybe less than 8.

Okay, thank you, and the third question relates to MobilCom again. I would just like you to make sure that I understand what you said. What is your position regarding the press article, which said that you may inject some cash into MobilCom for leaving the company, just to avoid trials and conflicts with the other shareholder. Is it correct or is it wrong?

I will not make any comment on this discussion. You know the key issue for MobilCom again is to be sure that the company could survive after freezing the UMTS business. So we are waiting for a clear visibility on this issue, and we are asking the German parties involved in the non-UMTS business to guarantee that MobilCom could survive medium-term. You know the non-UMTS business of MobilCom could survive, and when we will have this certainty we will see what we will do for the UMTS business. So the key issue now is this element. So we will see later in what condition could we could help MobilCom to abandon UMTS. It is very clear that we remain again in the same line as we said in the September 12, 2002, so we will exchange or repurchase the bank loan and the supplier loan in exchange for this perpetual bond, convertible into France Telecom shares EUR47, and we are currently discussing with the banks and the suppliers in order to define the final parameters of these instruments - that is what we are doing now. And we are waiting for a clear solution on the non-UMTS side which is not of use at this stage. We are waiting for an answer from the German parts.

We may add that we don’t see any risk from shareholder claims in MobilCom for Orange, and the situation is better for France Telecom than for Orange than it was before. So we all hope the situation will be solved, but it’s no more to be seen as an opportunity, this solution, than as a strength.

You cannot expect bad news, I would say, other bad news about MobilCom. We have been [indiscernible] a provision of 7.2 billion in our account at the end of June, so the only thing we could [indiscernible] is that the total cost of MobilCom will be lower than we have been accounting in our balance sheet. That’s the main point what we could expect, it’s only good news.

I am still a little bit confused about your installed line base. And I wonder if, maybe you could just help me with the definition of your line base. 34 million lines; is that your physical installed lines or is that your revenue generating units? I.e., do you count the DSL customer as one line or as two lines?

Is the number of lines that are paying a subscription to France Telecom.

Including the 800,000 DSL subscriptions. So it’s revenue generating units.

Absolutely, because if you are not [indiscernible] of France Telecom, you can't be a subscriber to ADSL. In fact, you have [indiscernible] and have ADSL.

Okay. That was my first question. The second question was, just on page 31, the corporate data services, or corporate services; the nine-month numbers, I wondered if it's possible to get the growth rate for Q3 on Q3, particularly for managed data networks and for services sold to carriers?

I think it’s higher than [indiscernible] because it’s accelerating, but I will give you the figure.

Maybe I can ask the final question about capital expenditure for 2003 then. There have been some comments on Bloomberg and Reuters about the prospect for significant CAPEX reductions into 2003. Is there any comment you can make about that?

About the CAPEX, no I will not make any specific comment, I think it will be commented by Thierre Breton when he will present his plan in early December. What I can tell you is, as you know, at the end of June 2002 the CAPEX was low compared to the expectation of the market and compared to our budget. We have been already reducing our CAPEX. And we said at the end of June that the operating free cash flow, which is the difference between EBITDA and CAPEX, we said at the end of June this year that compared to the first half of last year, that this operating free cash was increasing by more than 50 percent. I can just confirm that this trend is continuing at the end of the September, and will continue for the full year 2002. So this trend [indiscernible] full year 2002, the operating free cash flow will increase by more than 50 percent, we think compared to the year 2001.

If your question was referring to the corporate quarter-on-quarter, you have in there, next of the presentation on slide 46, the quarterly analysis. If you want a sub segment you can call me later on.

I wonder on the ADSL if you could give us a rough breakdown of the percentage of [technical difficulty] And also, given the price [technical difficulty] in Q4, how you expect that bit to evolve going forward?

I'm sorry, there was a huge loss there. I didn't really hear the question. Can you repeat it?

The question was, the new subscribers on ADSL that you added in the first nine months, can you give us a rough breakdown of the percentage of those new customers which had previously taken an ISDN line or a second line from France Telecom, and how you expect that split to change going forward because of cheaper products you introduce in Q4?

You can assume neither. It may be a French specificity, but the proportion is ridiculously low, people using a second line or an ISDN line.

I will answer the question on the growth rate quarter-on-quarter of the managed data networks. The figure comparable to the 16.1 or the nine-month period. On the quarter-by-quarter the figure would be 19.1, so a bit higher. So that means that in fact we accelerating in this growth.

I have a follow-up question on the [indiscernible] fixed line. I just want to be sure that you are counting an ADSL line just as a fixed line and not as an ADSL line and a fixed line - am I correct?

In the 34 million there is the number of ADSL lines [indiscernible]

It’s counted what, as a fixed line?

Absolutely. In that 34 you have specific lines which are ADSL lines.

Other questions? No other questions? Okay. Thank you very much everyone and we will close this conference call on the third quarter review of France Telecom, and thank you very much for attending this conference call. Bye-bye.