Orange SA (ORAN) 2002 Q4 法說會逐字稿

[Edited without the benefit of the audio]

[through interpreter] Ladies and gentlemen, may we start please? Thank you. Thank you for coming along, making yourselves available. The day will be fairly top heavy, in terms of presentations, because as you know, we are reporting our France Telecom results for the full year, of 2002, so my colleagues and myself will be here to talk to you for more than an hour or so and answer your questions thereafter, and the executive committee of France Telecom is with us, too, here, in the first row, and will of course help us to answer your questions.

This is an important meeting, of course, first of all, because it's always important, this being our full-year results, and also an important meeting because France Telecom is announcing the results that are the worst in its history. They are expected. There have been significant asset depreciations, in the range that we indicated. But as announced yesterday and approved by the board-- so as I say, these are the worst results in France Telecom's history, but it is the past. We shall also be speaking about the future. We'll speak about the first three months of the FT 2005 Ambition Plan. We'll give you some concrete elements as to what I and my colleagues are trying to change at France Telecom and the measures we are taking in order to fulfill our objectives.

Now, this is the outline of this morning's presentation. First of all, I'll be speaking about the highlights, then we'll have a detailed analysis of 2002 results. Our financial manager, Michel Combes, will provide you with that. Frank Dangeard will speak about the progress of the TOP program, which is very important to France Telecom, as you know. He will also speak about indicators that will be constantly tracking now to monitor our progress, and I will conclude by speaking about key principles for growth. We believe that our industry is a growth industry, where consumers use our products and services more and more extensively, and we'll tell you how we wish to achieve greater synergies as we move forward.

Now, let me begin with the highlights. Our results are above what we indicated in operating terms. This essentially reflects a significant, a very significant recovery in Q4, when I joined the group on the second of October, I called for all-out mobilization at France Telecom in order to be able to move on to a virtuous spiral, following the lackluster, or even dreary months, before I joined the group. As you may know, we made every effort to improve the tragic cash situation that the group suffered in order to focus on what we have to do. This is to say, our operations, essentially, so we had to settle the cash issue. Now that issue is, indeed, behind us.

We will also say a few words about the restructuring of the asset portfolio. First of all, you have to consider the financial depreciation. Unfortunately, there are no surprises there, and there are assets that are being reviewed by France Telecom's new management, and in the asset portfolio, we have to identify those assets that match the criteria that we announced on the fifth of December, and those for which we're going to have to take measures. The tough program is up and running. It's fully operational. That is the good news. The TOP program is already delivering what we are expecting. Everybody is heavily involved in the 100 chantiers that we have in the TOP program, and we are all rolling up our sleeves to support our growth.

So, let's take a look at the figures now. Revenue, you know, the guidance we gave on the fifth of December, so this gives you a reminder, just to show you where we stand. We indicated that growth would be anywhere between 8% and 9%. It stands at 8.4%. EBITDA, as we said, should be greater than 14.5b. The consensus was 14.3b, and 2002 closed with EBITDA a little over 14.9-- 14.917b, to be precise. Good performance there, therefore. For the first time here, you have the EBIT figure, the operating profit, to follow the instructions of the French COB, we have to use the term [speaks in French] and not EBIT in French. Anyway, you see the figure stands at 6.8b.

Now we're going to be followed on an indicator. This is an operating indicator that is very relevant indeed. It seems we have a sound glitch. If you can hear me, I will continue. CAPEX was expected to be below 8b. Actually, in 2002-- in 2002, we spent 7.4b, which is a 16% ratio, a very comfortable position for CAPEX, therefore. Then we have financial debt, net financial debt -- we indicated that it should be around 70b. Actually, it stands at 68b Euros. We'll come back to that figure, to tell you how we succeeded in cutting the debt. Of course, it is a commitment made by France Telecom's managing, with our operations, and generation of free cash flow. Technicians are scrambling to try to solve this technical problem.

So, the liquidity position was-- well, we indicated six. Actually, the actual figure is 10.9b. There was the bond program in December, 2.9b. You may remember that. And a number of elements that I'll come back to in a minute.

OK, the sound is back now. The liquidity position -- well, I think it's fair to say the liquidity crisis is behind us, because we have what it takes to bolster our operations for the two years to come. So, you see significant figures here, as indicated on the previous chart. Cash available at 2002 year-end is 10.9b Euros. All you have to do is add the bond transactions made in May-January, 6.3b Euros, some asset disposals, announced. I'll come back to that. That amounts roughly 1b Euros. It's already complete, by the way, so which means that the cash available amounts to 18.2b Euros.

The free cash flow generated by the company in 2003 should be anywhere E3b and E4b. That is the commitment made by senior management, you add another E3b or E4b, there will be additional asset disposals. The amount is not featured, to be very high here. It's E1b, maximum, plus the free cash flow that we're expecting in 2004, pursuant to the efforts made in the TOP programs, we're looking at an additional E9b to E10b. So the total cash available in the two years to come should range from E27b to E28b, which is more than enough to cover our repayment obligations, which stand at E25b. So you see, we have the necessary resources to do away with this liquidity crisis.

We have shaken it off, and there's also a capital raise-- the general assembly accepted in principal last week, so we're ready to do that, and we'll do it when we feel in it's the interest of our shareholders. We have the opportunity to do it now, so we reconnected the liquidity crisis. As I say, we shook it off. It was an actual, genuine crisis, and that is now disconnected from the operations and the rebuilding of equity.

Also, we renegotiated our syndicated credit line, and this adds up to the figures I just gave you, and we'll speak about that when we speak about our debt.

On the next slide, and-- well, I'm just giving you an overview. Michel Combes will speak about it in great detail later on. Now, these-- this is the exceptional depreciation, financial depreciation, of course, but the figures are very significant. Unsurprisingly, we estimated that the total would be near E18b, and indeed, we have E18.23b, so you have a, in Mobilecom and NTL, amounted to E18.9b. We indicated that there would be exceptional asset depreciation, amounting to E5.77b. This is the case for Equant, Wind, and the Orange subsidiary in Switzerland, OCSA. Total amount is E6.87b. And then some depreciation items that are more conventional. And we're hoping that the major depreciation efforts are behind us.

So, first of all, restructuring costs -- that was written off when closing the accounts, and some other, smaller items. The Ivory Coast, Dutch Tone, and so on and so forth, but we'll speak about that in detail later on. So the total write-off for 2002 is E18.23b.

On the next slide, it is pointed out that we are systematically reviewing our asset portfolio with a number of assets that we've decided to sell off, that we have sold off. First of all, in December, there was TDF, Panafon, and Noos. We raised E2b with that. In early 2003, we completed the sales of [Utel San Casino], amounting to nearly E1b. Assets restructured to meet the financial criteria connected to financial performance. Let me remind you that we clearly indicated our policy regarding these assets.

We-- the assets in the group must, our main group, must guarantee EBITDA positiveness in 2003, and positive free cash flow in 2004, and also, we have to be able to control the assets. If it's just a stake, we have to consider what can be done, either single-handedly, or on a partnership basis, so that is the rule that we apply. It applies to Douchtone and Orange in Denmark, with some additional provisions, that we wrote up, as you shall see. Assets that are not in that program are either shut down, closed, or sold, due to their unsustainable competitive position. That is essentially the case for Orange in Sweden and Wanadoo in Belgium, and assets that we do not control are under scrutiny. This is essentially the case for Wind. We have a mere 28% stake in Wind.

So, you see that this is an ongoing effort. We have not procrastinated in any way. We're moving ahead with this. It's unsurprising, as I said, because we are just doing what we said we would do on the fifth of December. On this slide here, you can see that the TOP program is up and running. TOP is the backbone, the operating backbone our three times 15 program, so TOP is rolled out across the group. Regarding the TOP program, we created a centralized steering group for the three years to come, the 100 chantiers are all being rolled out. The action plans in 2003 have been designed with individualized objectives for each chantier, and now we're finalizing the short-term gains and wins, which will translate into a significant improvement in the first half of 2003, in order to achieve the target, which is E3b increase in net free cash flow, which will be used to alleviate the organization's debt. In mid-March, the implementation of Quick Win projects and monitoring tools in place. We'll speak about that later on, and at the end of Q1, when we release the results. We will show you the first tangible results of the TOP program, but we already know what they are, and they are quite palatable.

Now, the key principles to drive our growth, because of course TOP is a program that gives us the means to come back with a vengeance. The TOP program is aimed at achieving excellence in all our business activities, so we benchmark extensively against competitors, and the best competitors. We know that there is room for improvement, but we're well under way. Innovation is a competition advantage and a driver of growth. As I will say later on, our industry is growing. People communicate more and more. Companies communicate more and more, year on year. France Telecom operates in all those businesses where communications are critical and contributes to that growth. We're convinced that the market maturity is there, and innovation, therefore, will help us accelerate the group's growth, and I will tell you how in a minute.

And we are also convinced that a cooperation policy between the various assets of the group is the most suitable policy for France Telecom, in order to meet all of our customer's needs, however exacting. This is particularly true in France, where we have a leadership position on all the business segments that have to do with communications, general and telecommunications, in particular. This is a competitive advantage. We have decided to make this a fundamental asset for France Telecom, by more efficient efforts, by cooperating systematically throughout the various entities of the group. It's a huge project, because this was not in place. It also generates operating improvements and it drives additional growth.

This leads us to state that in 2003, we estimate that double-digit growth of EBITDA is achievable, and that is our objective. We are committed to generating over E3b in free cash flow. That will be directly used to repay the debt, and naturally, we will take each and every growth opportunity on all our markets. We are a global telecommunications player, and that is how we wish to stand out.

Those were the highlights that I wanted to give you. Now I'm going to ask Michel Combes to give you a more detailed presentation of the results for fiscal 2002. Thank you, and I shall see you in a short while.

Good morning. I shall therefore break down my presentation into three main parts. Firstly, the key figures of the group, just to give you the general framework and a segment by segment analysis of the different businesses, and then finally the consolidated accounts of the group.

Firstly, let's look at the key figures of the group. The slide you see, you see the three salient figures. Firstly, a reminder concerning the revenues -- up by 8.4%, our revenues, standing at E46.630b, reflecting the strong growth of our businesses -- mobile, Internet, and international businesses, and offsetting a slight decline in our fixed, wireline telephony business. Second highlight is the EBITDA. As the chairman intimated, this stands at E14.970b, a margin ratio of 52%, up by a bit more than 20% as compared with last year. In historical terms, also growth of 18%, as compared with last year, in pro forma-- on the pro forma [inaudible] basis. So that shows that the improvement was also an organic performance improvement, or turnaround for the company. It'll be operating income- that's an indicator we're going to communicate on a bit more, from now on. That, this part, shows a growth of almost 31%, but less than 30% on a pro forma [inaudible] basis. So all in all, that gives us a free-- an operating free cash flow, which is the difference between the EBITDA and the CAPEX, EBITDA minus the CAPEX, free cash flow, operating free cash flow, of E7.475b, a growth of more than 75% as compared to last year.

OK, second slide now, to show you the speeding up of the improvement in the group's performance, in the latter half of the year, in the second half. If we compare the second half of 2002 with the second half of 2001, what do we see? We see that the EBITDA shows a significant improvement, with growth greater in the second half than what we have in full year. Similarly, for the operating income, on the previous slide, I told you a moment ago about the improvement in the-- at the operating level, 30% for the whole year, but just for the second half, if we look only at the second half, that growth rate is 45.8%. The operating margin of the group stands at 15% for the second half.

Same comment holds true for the operating free cash flow, so you see on this slide, then, the strong acceleration, bound up with the-- when we mobilized company, since last summertime, around our operational objectives and our responsiveness there, too. Now, a further item of data that I think shows up in graphic form, about the speeding up in the second half, you see the operating income as it evolved over the different halves in the last three years. Now, for the first time in three years, the operating income in the second half shows an upswing, as compared to the operating income in the first half.

Well, here you see the great performance in the fourth quarter, in particular, standing out. The chairman pointing out that also we should indicate, obviously, everybody, legitimately, is expecting -- on the board, and the shareholders, are expecting the initial results from the TOP Program, but you see already in the last half of last year, the initial results from the TOP Program, even before it was called ``TOP.'' So we have initial results being reaped already from the TOP efforts, and those initial results are very encouraging. It's, I think, something that augers very well.

Thank you. So, still talking [inaudible] level, but focusing a bit more on to particular segments of the business. The first segment is the operating free cash flow earned by the fixed line, voice, and [inaudible] on this chart. A slight increase in the operating free cash flow in our fixed line voice and data services in France. That shows a change, as compared with the downturn we saw between 2000 and 2001, and it does reflect the status that this is a sustainable source for generating cash flow, so it's a business that we've always been involved in, and [inaudible].

Second point being made is that we considered all the segments together, feeding positively to the operating free cash flow of the group. That, of course, holds true for Orange, which has reached a level of about E2b at this point, as opposed to a loss last year. Also, it's the case for our fixed line businesses internationally, and is the case also for Wanadoo, as the officials presented that on Monday, because we are marginally negative, and of 2003, that indicator will become positive.

So, all in all, we see the trends in operating free cash flow since the year 2000, rather spectacular progression here. We've multiplied by two the operating free cash flow with the interesting point to note, being that for the first time, it's-- it shows all of the segments contributing positively to the operating free cash flow. If you don't mind now, I'd like to go into a more precise analysis, segment by segment.

The four main business segments we have -- Orange, Wanadoo, fixed voice and data services in France, and then those services outside of France. We'll have a look at those different entities.

The first point to note, on the EBITDA line, is that the level of EBITDA are superior to the market expectations in each of these segments of the business. It's the case in particular for Orange. It's also that something holds true for Wanadoo, as intimated last Monday, and also for fixed line voice and data services in France. Now, the CAPEX, I didn't comment too much on that, and the split between the different entities. Well, I'll go back to that in a short while, but you can see it stands at E7.441b. That is quite considerably less than the billions, as I already indicated when we talked about the revenues.

Now, the operating income segment by segment. That's something that we'll be focusing on more and more in the upcoming period, while a positive contribution here, too, with a very significant trend between 2001 and 2002. A lot of growth, expected for Orange, but it had to be done nonetheless. Almost 100%, the changes you've seen, in terms of the operating income for Orange. A marked improvement on the Wanadoo side, ahead of its roadmap, and an erosion of the operating income for fixed line and data services in France, but under control. Kept under control, under reign. And internationally, well, that's due to the change of the scope of the group, that I'll talk about in a short while.

Well, let's look at Orange first. The trend in the EBITDA for Orange stems mainly from two main reasons. First, their growth in the Orange revenues that we've communicated quite a lot already, plus 15.2% of growth in the revenues, that's 24.4 million clients at the end of the year. That's a 13% for the growth rate, and an RPU that is on the up and up, especially after the development of non-voice services, and refocusing on added value services. So, revenue is going up, and also we've kept the expenses well under control, especially considering the drop in costs of acquisition-- subscriber acquisition costs and the retention costs in the two major markets we're involved in -- that is France and the UK.

So, the drop in expenses, growth in revenues, and EBITDA performing well. So CAPEX, then. Well, slightly down, reflecting in France a slowdown in expenses, because the second generation and the expenses to do with UMTS that's-- we note, and also in the UK, the spend on the second generation has done down, and however, acquisition costs and preparation work for the UMTS network was less than we expected to have to make because of our practical approach taken to the deployment of the UMTS network in those markets. All in all, then, EBITDA, minus CAPEX, growth in the cash flow- operating cash flow in Orange now accounting for more than 25% of the operating cash flow of the group, and that should be-- should continue to grow in the coming number of years.

Wanadoo, then, second business segment. Same comment there, regarding the EBITDA, reflecting a two-fold phenomenon. First, the growth in the revenue figure that we commented -- plus 32.7%, mainly driven by access, a bit more than 60% percent growth in access, but also directories feeding into growth, with a growth of 4% in revenues. Opposite the growth in the business, we've got a good containment of expenses, expenditures, especially marketing and sales spends in the- and also [inaudible] to the productivity levels for directories and the development of the online directory business, also reflecting quite a big progression in the EBITDA, which was negative by E104m in 2001. It now stands at plus E90m in 2002. The level of CAPEX stands overall on the par, on the two years, so in spite of the growth in high-speed networks, Wanadoo is able to contain the development, the growth in CAPEX, so the free cash flow was nearing balance, nearing equilibrium, and it will be quite a lot on the positive, as of next year.

Now, about the third segment, which is the segment we've always been involved in, which is fixed line voice and data services in France. This first slide, on this business segment, shows you some items we talked about when the revenues were presented. That is the revenue trend, down by 3.7%, which is [inaudible], too. That reflects contrasting effects, positive ones -- the one you see here on the right of this chart, that is the ADSL effect, with spectacular growth in the number of ADSL accesses. Also, a lot of growth in the last quarter of the year, because we went from one million accesses to 1.4 million at the end of the year, so that's quite a lot of progression in the revenues for ADSL for 2002. So, we must [inaudible] as compared to 2001.

Other positive items not on the slide here, but I'd like to point out, nonetheless, is a positive trend in the corporate services, especially data networks provided to corporations. But on the negative side, something that's kind of driving the trend in revenues down a bit, is the impact of the automatic transfer to competition, the local pre-selection customer base is transferred to some competing companies, and you see an impact in the first half of that event, and it leveled itself off in the second half of the year, so we hope that our local and long distance market shares will steady themselves in 2003, so it's a one-shot event, as far as we're concerned. The effect dwindles in the last part of the year, so we'll probably level off at that level. And we are therefore hopeful about that business going forward, into 2003.

What, then, should I say about the EBITDA and the free cash flow for this business segment? Well, the EBITDA shows a decline by 6.5%. In fact, there is a non-recurring item here in the EBITDA figure, because of the disposal of real estate assets, because we divested a large share of our real estate in 2001. That was reflected by higher rent having to be paid by France Telecom, and the effect of that is E200m. So, excluding the real estate effect, the EBITDA would have gone down by about 3%. So, we were able to more than offset the drop in revenues by keeping expenditures under control in the field of fixed line voice and data services, especially mobile calls, international calls, but also we've got, on the external expenses, and we've stabilized our payroll expenses, too.

Now, on CAPEX, quite significant decline. Contrasting trends in CAPEX, too, because we had to redeploy CAPEX towards high-growth businesses -- ADSL, growth of CAPEX of about 14% for ADSL, and decline in other CAPEX items -- access, because as you know, we had to invest quite heavily in 2000, 2001, after the wind storms at the end of 1999. That did a lot of damage, wreaked havoc, indeed, to our networks, so we've now leveled off. We've steadied the operating free cash flow, and that's good news for the fixed line voice and data services in France. That business feeds in quite heavily into the operating free cash flow of the group as a whole.

Now the last segment, the last business segment, is the international one, and it's always a bit more difficult, I think, to report on this, because we include in that segment a rather disparate group of businesses. You've got Equant and TPSA in there, and also other stakes in fixed line voice and data services outside of France, in other places, too. We communicate on the results of Equant in detail, of course, a specific presentation on Equant [inaudible] take from this? Well, revenues up 34%, explaining partly the growth of EBITDA and we've managed to keep our expenses under control, especially TPSA and Equant, with a major problem underway in TPSA for the last 18 months, in fact, which is reflected in substantial savings in operating terms and in CAPEX terms, and also with the fruit of the Global One/Equant amalgamation reflected in synergies and cost savings. So, you see here there are consolidation scope effects to be seen, because CAPEX, for example, of the TP group, is now integrated. CAPEX of TP group is now integrated into these figures, so all in all, we've got a positive contribution in terms of operating free cash flow and a positive contribution made by our two major companies, TPSA and Equant.

The third and last part is the consolidated accounts, after this presentation, and the operating dynamics of the company, and I think that's the positive feature of our accounts, the operating dynamics, and the speeding up we've seen in the latter half of last year. Let's review together now the income statement, right down to the net income figure. So, you have the revenues here, and it is a bit different in terms of expenses.

It shows you the changes in our payroll expenses, labor costs and non-labor costs. They remain fairly stable overall, in spite of the changes in the scope of the group, weighing on payroll expenses. I'm thinking of TP Group being incorporated as of the first of April, 2002, because that accounted for several thousands of staff members who joined the group, so appropriation to appreciation--appropriation to depreciation and accruals, provisions - well, that also had an impact, as you can see on these figures, and we get down to the EBIT figure we saw a while ago, E6.8b, and that is the one I'd like to zoom in on now and look at the lines under that. So, starting off with the EBIT, the operating income.

First item that impacts that would be the net interest expenses, slightly up, as compared to 2001, reflecting first of all the increase in the average outstanding. We owe E65b in 2001 and E69.601b the following year, so also, a more costly debt, which went from 5.8% to 5.9%, because of closes we have, in fact, in our borrowing agreements. So, excluding the effect of financial instruments, issued under Mobilcom transaction, that should steady itself and level off next year, because the absolute debt figure will do down. But the cost of the debt will go up slightly, and will go beyond the 6% mark.

So after that, then the net plan is a change [inaudible] costs for retirement plans-- well-- the early retirement plans, because of the assumptions we've taken on board for our early retirement plans, in general, and we've started off with an early retirement program, that assumes that it will be 70% successful. That will be the assumption we base ourselves on, the 70% will be the figure. We're now running at a success rate of 99%, so we have to review our assumptions accordingly. Net exchange losses and profit -- well, profit is a positive, as you can see, and profit sharing. And the equity and the net income of the [inaudible]. The one [inaudible] equity with that item in particular encompasses Wind, which accounts for a bit more than E300m loss, and an Orange subsidiary in Thailand.

So our forex exposure, this slide shows that France Telecom as a group is not vulnerable to foreign exchange exposure. You can see that our revenue is denominated in Euros, and the debt for each entity, in view of the different currencies, show that our entities are mainly funded in their operating currencies. They're swapped from the very beginning, and any remaining amounts is centralized at group level, which leads to the foreign exchange impact that I showed you on the previous slide.

Now, if we drill down a bit further, aside from- well, behind current results before taxes, we have corporate income tax, which is quite considerable, and I will talk to you about that when dealing with the next slide, following goodwill amortization, including Orange, Equant, and Wanadoo.

Next, Thierry Breton spoke about another item in his introduction, namely, the exceptional that will be stated in our accounts this year, amounting to E18b to E20b, E18.227b, and minority interest are dropping, because our companies are improving, more particularly, Orange and minority interest is therefore declining.

Just one word about corporate income tax -- there are two gaps, due to exceptional, due to differences between 2001 and 2002 in terms of how we process deferred taxes, with a beneficial effect in 2001 and negative impact in 2002. [inaudible] just said that with respect to the previous slide, we're talking about E30b in less than two years, so I was worried. That's true. Yes, indeed, we're talking about big figures, and we'll see that when dealing with the group's shareholder equity, as I will present in just a short while.

With respect to these exceptional items, which account for a significant portion of our accounts for 2002, with the split down items in the first half of the year, meaning Mobilcom and NTL, amounting to just over E9b in the first half, followed by other exceptional items that were presented on the fifth of December. So, we pointed out up to E7b for three main items, and they're here -- Equant, E4.3b, Wind, E1.6b, and Orange Switzerland, E872m, so a total of E6.8b for this item, which we had expected to be at around E5.5b to E5.7b.

Furthermore, in the view of the deployment of our recovery plan, and mainly restructuring costs at Orange, and primarily due to the shutdown of our business in Sweden. And also, other provisions linked to changes in our portfolio, business portfolio, and assets we have in our accounts for different companies. In agreement with the group's audit committee, we set up further provisions for share holdings in the mobile sector -- Deutsche Tone, in the Netherlands, as well as in Austria. In fixed telephony, JTC in Jordan, or Unidos in Spain, all amounting to E1.5b, corresponding to the statement in our accounts, based on the real use value, based on information from our operating staff managing these accounts on a day to day basis. So, a high level of exceptional provisions, so that our different share holdings would be posted in the accounts at their use value.

So, a simplified financial statement, after seeing the segment of income. So, financing capacity, funds from operations. Well, in 2002, and at the end of the second half of the year, we can see that in 2002 overall, the net changes were negative, due to changes in our scope. In the second half of 2002, we actually reversed that trend. In other words, our operating activities enabled us to reduce our debt from 30 June to 31 December, reduce it by E1.7b. That's quite important, from a financial aspect.

We saw the operating aspects before the write-offs, so this here is the first tangible indication of a significant reduction in our debt. How? Based on funds from operations, first of all, and to this, you should add changes in working capital requirement. This is quite important, and as a matter of fact, I have a specific slide on that, to explain changes in our working capital requirements. This is the resource enabling us to manage our cash flow from limited investments, physical investments, amounting to E7.9b, and financial investments, including the France Telecom shares buyback. We're talking about E5b for buying shares held by Vodafone, within the framework of the Orange buyback. There were also other funding transactions. We can see the E4.4b, due to the scope of consolidation, because the first half, we integrated the TPSA debt, amounting to just under E4b.

Here is a-- we can drill down in our working capital requirements, and it shows a significant change. First of all, inventories, an improvement in this item, especially because of the reduction in terminals, a significant reduction in the customer item, as the trade accounts receivable item. We're talking about E600m less in trade accounts receivable, so why should accounts payable down slightly. Other creditors and debtors-- but in terms of operations, over E1b, in terms of improvement, in trade accounts receivable, of which E600m merely in the last quarter.

A few highlights, to conclude with our consolidated financial statement, with two key information-- information I already commented upon, linked to our debt. At year-end, our debt amounted to E68b. That's the sum of long-term plus financial term, less available funds, so down by E60b in view of our forecasts, as the end of the first half of 2002. So, this shows a turnaround in terms of debt that had been increasing beforehand. Secondly, we can see changes in shareholder's equity, so this shows that the group is- has been impoverished, let's say, over the past 18 months, impoverished by nearly E30b, as Thierry Breton said, having an impact on shareholder's equity -- E21.7b at the end of 2001, and negatively, at a consolidated level, at minus E9.9b at year-end. We had said between minus 8 to minus 10, so we are in line with what we said on the fifth of December.

The main reasons -- net losses, E20.7b, movements in capital, as I pointed out earlier, with respect to Vodafone, the payment of dividend in 2002 for 2001 results, and translation adjustments. A while ago, I said that in terms of foreign exchange, we were not vulnerable in terms of our operations, but on our balance sheet, we do have assets in foreign exchange. For example, Orange, or TPSA, so of course at least a foreign exchange variations leading to an impact on the value of those assets in our consolidated financial statements.

So, consolidated shareholder's equity, E9.951b, France Telecom SA, we're positive, at E8.6b. But with a similar developments, down by E6b with respect to our shareholder's equity.

Now, with respect to what the chief executive said earlier, we can see here, the main refinancing carried out in recent weeks with the dates, currencies, maturities, with a total amount of just over E14b, with E9b in bonds and E5b in debt. Now, how to exchange the profile of our debt and our debt schedule? We can see that E15.5b to be paid in 2003, bearing in mind that some of that debt has matured in the first half and was reversed. For example, an Orange bond, E3b, that's a part of the E5.1b you can see on the far left. In 2004, we have the maturity for E9.7b, less than what we said on the fifth of December, since we no longer have the E5b debt.

That has been postponed to 2006, so we can see the figures referred to by Thierry Breton were the E28b to E30b in available funds. At present, we can easily cope with our maturities for 2003 and 2004. The next deadline for us will be the first quarter in 2005, so-- and we can handle that bank line in 2005, as we will be doing in 2004.

Just a few words about this slide, just to make this clear. We haven't become extremely liquidated-- we won't become extremely liquid until 2005. I would say that the problem of liquidity is fully solved in 2003, 2004, and this slide, you can show here, excludes actions we will be taking. In other words, what we will be reimbursing does not take into account the TOP plan or any capital increase, since we are convinced that the capital increase will take place beforehand. And therefore, the funds allocated will be used-- funds will be dedicated to repay the debt. The line here, E10b, is not drawn, and we will try not to draw on it as far as possible. And I wouldn't be surprised if we didn't renegotiate this debt before maturity, so we will handle this more easily than we could have done three months ago.

Just a few pointers that do not appear on this slide. Our accounts, in U.S. GAAP, since I showed you our financial statements, based on the French GAAP, we also publish our accounts in the U.S. GAAP, and the net income, group income, in U.S. GAAP, shows a loss of E33.6b. Why? Well, we start with a net negative result of E20.7b in French GAAP, and two adjustments must be made. In U.S. GAAP, you state in your accounts companies accounted for at the stock market value, and not their use value. And therefore, for Orange, we post E20b in provisions in our accounts, recorded at the end of the first half of the year, so that's not new. But in our accounts, we did not post goodwill amortization, amounting to E8b, as I said earlier, for Equant, primarily, and also for Orange, so that gives us a E30.6b in net results, and at 30 June, in U.S. GAAP, it would be minus E31b, so the impact of Orange was already recorded in our accounts of the 30th of June.

In terms of shareholder's equity, in U.S. GAAP, it amounts to minus E26.8b, as compared to minus E8.9b in the French GAAP, because of goodwill amortization and the way it is processed in our accounts.

Lastly, for our debt, in U.S. GAAP, it's slightly lower, at E67.4b as compared to E68.1b because the U.S. GAAP, you do not record the TPSA debt, but we pay back securitization or that's securitized, and which are deconsolidated in the French GAAP, so these are the figures at year-end, based on the U.S. GAAP.

Thank you, Michel. Now let's review the TOP Program. Well, this will be an impressionist view, so we're just starting, just kicking off, but I will try to give an example of what we have done so far. So where have we reached? Well, TOP Program is up and running. You know that in December, we set up all of the persons in charge of the different chantiers, the chantier leaders have been appointed, all contract managers appointed, monitoring systems, benchmarking has been set up, and favorable remuneration for each contributor in these programs have been defined, based on TOP goals. Our incentive [inaudible]. So what's important is that today, the TOP Program is fully operational. We have reviewed personally each project and each project manager, and we know to what extent they are actually doing well. So, let's take a look at what these programs all about.

First of all, we have this sourcing program, which is quite concrete. I'll give you just a few examples. I won't review all the slides in detail. Well, our sourcing program is quite simple. We broke down all our purchases into about 90 categories, well-identified, with dedicated teams. So there's one buyer at group level, working with operating units, business units, units to determine these units' needs. So there are about 30 categories in all the entire program. Now, of course, this is linked to identifying needs, defining needs, redefining needs, and specifications. Then, you deal with suppliers, and you launch new calls for tender.

Let me give you an example. For mobile phones, there are 133 different models in the group; 133 models. Over 50 of these models can only be used in one geographic unit in the group. Those used in two or three units, well, there are just about 30 such models, so there's a lot to be done there, and we realize that the same models had very different prices, to the extent of about 15%, and that wouldn't last much longer. So, as a matter of fact, as Thierry Breton said, TOP organizes and gives a new dynamics to certain programs that had already started last year.

It was specific call for tender was set up. We're talking about over E500m in terms of sourcing, and we reduced our suppliers by generating some 30% in savings, meaning about E50m this year, after we're talking about E150m. So this program started at early March, with respect to some 47% of our total purchases, so you can just imagine. Of course, this will take some time. Well, since the 5th of March, and at the start of-- as of the start of January, we believe that our-- this program will generate some E60m in savings. Next slide, please.

Now, in terms of CAPEX, here, too, we set up all the different procedures at group and departmental level, in all divisions, so a detailed review of the CAPEX program for 2003, and we reviewed flexibility in terms of CAPEX, linked to changes in demand, so as not to miss out in terms of improvement in income due to investments not achieved, or not made. So we also identified the risks for the year, and opportunities for 2003. We believe, as we said before, that we will be below this certain billion euros, which as we said before, for 2003. Here, I won't go into the details, you can just take a quick look. Next slide, please.

Another major item relates to IT programs. [inaudible] identifying needs and projects, and also the fact that a large number of projects became useless, or were redundant. We also reviewed information systems within the former SAI division. We believe that we can reduce our projects from 1,500 to 1,000. You can see that 5% decline in terms of subcontracting, and that will continue, and all of our programs will be rolled out throughout the year. So, there's a lot that can be done in the first quarter, as we shall detail at a later stage.

Another major investment project relates to marketing and communication, advertising and sponsoring, so in these two areas, we have set up decision-making processes that have been rationalized, streamlined, and the units in charge of quarterly reviews of advertising has been set up, and a sponsoring committee has been set up, and has already started to streamline certain sponsoring activities, so we expect a E200m reduction at group level, and we should be able to save some E600m overall, and at the same time, France Telecom will still remain one of the leading advertisers in Europe.

Another important aspect for generating further cash flow is through changes in working capital requirements. We have reduced it by E900m, with E600m due to trade accounts receivable. The efforts made in the first quarter will continue. Will continue to be rolled out in 2003, and I am convinced that we will do better than forecast for our working capital requirements. The slide, you can see what it means to work on working capital requirements for concrete increasing the direct debit customers, instead of receiving checks by mail, speed up the invoicing process and increase pre-paid fixed line offers to final end consumers. For suppliers, and payables, there's lot to be done, in terms of payment deadlines, rules with respect to invoicing, and payments, and regarding inventories, it's important to improve your forecasting. I spoke of 130 different-- 133 different mobile phones, leading to errors -- of course, inevitably.

So, by harmonizing our range and our better foreseeing needs, we can improve on inventories management. You know that we're talking about just over E1.5b as the target. We have not changed our target, in spite of very good results at the end of the fourth quarter, but I am sure that we will do better in 2003. Other projects that have already achieved good results - they are on your slides, but I will conclude with a few words about top indicators that have now been defined, with each of the heads of different divisions and chantiers.

The top indicators relate to CAPEX per segment, operating expenses per segment, and for key items.

I gave you a few examples, such as expenses in marketing and communication. Working capital requirements -- well, we'll give you that at group level, and we will focus on certain key areas. For example, the average number of trade accounts receivable days per division. That can have an impact on working capital requirements, leading to a report quarterly figures for working capital requirements, enabling us to monitor our program quarterly, but you also have an impact on CAPEX per segment, opex per segment, and on our working capital requirements.

With respect to financial management, streamlining of decision-making process, and monitoring our decision-making process, I would say that this is not a growth program, but this is a program that will enable us to drive growth as Thierry Breton explained to us right now.

This presentation is probably the gloomiest in France Telecom's history. I'm well aware of this. This presentation comes at the end of a period with huge losses. This is the situation that we've found when we took over the management of the group, so management is at work, and so is everyone in the group. People have taken their fate and their destinies in their hands, and the Q4 figures show that the group's responsiveness is intact, and that is, indeed, the good news that I can share with you as chairman of France Telecom.

As a matter of fact, I'd like to pay a tribute to all the people at France Telecom, all the employees, managers, engineers, because of course the figures stand, but there is a genuine determination to move forward and to always serve the customer, more and more officially, and cooperate between the various entities across the group, which were perceived as disconnected from one another in their management approaches. We spoke about that on the fifth of December. They were seen as being separate from a capital structure standpoint, from a management standpoint, but all that is in the past.

We have the same structure, but now there is a determination in the minds of the men and women at France Telecom to work together, because we know that is what it takes to find and implement the solutions for the future of France Telecom, and more importantly, and this is something I'd like to address with you very briefly -- there will be other press conferences in the coming weeks and months, the technology -- how we wish to make the most of leading-edge technologies to bolster growth.

We're going to give you a few quick slides this morning, so you can understand which way we're heading. I'm very happy to be able to spend some of my time on that aspect of things. We had to turn a new leaf, as it were. That is now done. And now, at France Telecom, we're going to move ahead and make the most of our core of businesses. Now, what is growth based on? First of all, some macroeconomic data.

As we said earlier, the telecom industry in terms of customer-related vitality is a buoyant industry. You can see this on the chart on the right-hand side of the screen here. Of course, telecom expenses are high on the list of households. People spend more and more on telecommunications, and the increase is greater than that of alcohol. Overall, 13% a year in the household spending, a 30% growth in household spending, for telecommunications. Hopefully, while we're going to outperform women's apparel, you see. Women's clothing -- maybe we're going to do better than that. So, it's ninety Euros-- ninety Euros every month spent by households. You see? So-

Our business is a very exciting one, because, you know, people spend a little bit more here, a little bit less there, within the telecom business, that is to say, but we have to be present everywhere, and bolster the overall growth, so we're talking mobile, fixed line, broadband, narrow band. It's true that we communicate more and more, both individually and on a professional basis. So every year, people spend a little bit more in telecommunications and telecommunications accounts for a growing share of GDP. The UK is ahead of us; we're at 3%, similar to Germany. Apparently, well, we're catching up with the UK. All this to say that the growth in telecommunications spend is structural, which is a good news for an operator such as France Telecom, which is not a pure player, but an overall player, that can address all the business segments where growth can be tapped into.

So, how are-- how do we intend to grow? This is what guides our behavior. Well, first of all, excellent in all our business activities, and TOP is supporting us. There is genuine determination to be-- president in the field. I go out in the field very often now. I'm very much impressed by the way in which the company is customer-focused, and more and more so, paying heed to customer expectations, anticipating them, and exceeding them. This also shows up in operational terms. There was room for improvement, there still is, and the programs are in place.

We have a family of brands; some may say it's too broad, but it's part of our assets, it's our strength. We have brands that enjoy very good awareness, and these are brands which we wish to leverage, of course. I'm an engineer, so I cannot forget that, well, behind brands, you need something concrete. Service, usage, usefulness, which is what bolsters our brands today. We're going to make even more efforts to make the services behind our brands more and more innovation, and of course, there's service quality, and so on and so forth.

The second point that we really wish to focus on, and we have started. I mean, this is not just words -- it's innovation. Innovation-- nope, going too fast for the slides here. Innovation as a competitive advantage, and a driver of growth. In our industry, to date, well, the public at large is addressed, so there's quite a lot of maturity in our industry, and also the industry does not-- is not hinged on one technology only. We have 15 million mobile customers, so we're talking tens of-- well, dozens of millions of customers.

Therefore, France Telecom must integrate different technologies, different types of network technologies, and it is the co-operation between these technologies and services that helps us to track the changing needs of our customers. At France Telecom, we don't think that any network can prevail over others. We think that in our day to day lives, sometimes you need high or very high-speed broadband Internet. Sometimes, narrow band is enough. Sometimes you need mobile technology for fast access. Sometimes, all you have to do is go to a hot spot, [DGA] and Jean Francois right? In order to get more broadband, but you don't need that all the time. Sometimes you need fixed line, in order to have comfortable usage and security, and so on and so forth. You see a myriad of needs out there, and our-- it is our job to track our customers' needs as day to day lives change.

So France Telecom is an integrator -- an integrator of technologies, integrator of networks and services. When it comes to co-operation -- mark my words -- co-operation. For a long time, France Telecom's main business was to develop usage -- voice to voice, individual to individual communications. That was France Telecom's bread and butter for nearly 100 years. And then gradually, well, it took 50 years, to put in equipment in all households. By the way, it only took 10 years to equip with mobile phones, so you see the speed, but the same dynamics, basically, so usages were developed and the Minitel was a major contributor to all that. When everybody was equipped, we started to develop value-added services in fixed line operations. In mobile operations, it's the same story, but it took just 10 years to equip the whole population. Of course, there are a few pockets-- in Italy, 105% of the population is equipped. Well, we're getting close to Italy.

At any rate, we are fully equipped with mobile phones, and there are new usages in mobile operations, and a fantastic innovation in mobile operations, namely developed at Orange, is that we have taught our customers to use their telecommunications differently, to communicate differently, to build an informational, their own little informational environment, that supports them, so a list of names, contacts, frequent calls, caller ID -- caller ID, with GPRS. Some very straightforward websites, that give you real-time information, things like that, that are now part of people's personal informational environment. And now, when you move from one type of a network to another, you still have to keep the same informational environment, so you don't want to reacquire the data, you don't want different formats, and this is true for Wanadoo as well, where, with a great many customers out there, people have habits, and we're trying to make informational environments portable, from one network to another.

And which means that our various businesses must co-operate. We are convinced that this is a fantastic growth driver. Well, our customers should be given mobile functions on fixed line, to have Internet functions on fixed line, on the Internet, to have access to fixed or mobile networks, et cetera. And that is what we mean by co-operation.

Last week, I was in a call center, and we sensed customers' needs, customers say, ``well, I need this and that,'' but they want something seamless. They want services on a network to be transportable on to another network, so all this involves innovation. Innovation means being closer to our customers. We're very close already, but we really have to pay heed to their demands, however exacting, and we need to make the most of our research and development center, with over 3,000 engineers. We think this is a fundamental element of growth.

In the TOP Program, we have decided not to affect R&D, but rather to increase it, to bolster it further, so we have to work better together among the various business entities, and also, there's- greater stress will be placed on partnerships. Now we're in a world co-operation, so it's absolutely necessary to have partnerships with technology providers, with telecommunications professionals, who, as we know, are in dire straits, so we have to maintain and even grow R&D expertise, not to work in their stead, but to have people who can help us and develop what is best in terms of operations, namely regarding networks.

Supplier-- well, content suppliers, we see more and more data on our networks. In order to achieve that, France Telecom does not- does not have a calling to become a content supplier, but to has to cooperate with content suppliers more efficiently, to consider the economic models that we're going to adopt, the content that we're going to circulate, how we're going to circulate it, all the digital rights management, the DRM that has to be considered on a pay-per- pay system for every service. We are not pure players; we have the means to work on research and development. Once again, we think that a single network is not the silver bullet. It's not the solution. We're in a more and more integrated world, with juxtaposition of network technologies, and France Telecom research and development and France Telecom's research labs at Orange, TPSA, and Wanadoo and that is where the solutions are going to be found.

All this calls for strong managerial commitment, fully in line with the management teams in our entities and subsidiaries. And obviously, we have to work in the same direction to serve customers and shareholders. There you are regarding innovation. Next slide now.

Co-operation, as you can see here, in our three broad types of networks, should-- well, here at the intersection of the three types of networks, you can see the fundamental functions that our customers request -- accessibility, presence, location, a list of contacts, certification of identity, payment tools, all this gradually cropped up from one type of usage from one network, and it moved on to another network, and now it's a common heritage that customers wish to share throughout all networks, which is what is very exciting in the telecommunications industry, is that Internet and mobile operations have educated people very fast.

It took less than a generation -- maybe, say, 15 years to provide mass education to a large population of people who know how to make the most of new usages in their daily lives. So, how can innovation fuel co-operation between our various networks. Here, you have a number of services that are now basic services. Household words, almost, and they're going to communicate among one another. Continuity of voicemail between fixed, mobile, and Internet, SMS, home networks, virtual domestic networks, in fixed line and the Internet. This may also be developed in mobile. Video on ADSL. Well, naturally this is being developed in fixed line as well as Internet operations, while with mobile it'll probably be different standards.

We could do it on GPRS, by the way, and naturally, it will be done with UMTS. Location-based services on all three networks. Payment solutions, all three networks. Single sign-on; that's available on mobile and Internet. Content sharing, mobile and Internet. WiFi on all three networks. Security, all three networks. So you see, there are a number of functions that stem from more and more extensive usage, and that'll be shared between networks. It also appears on this slide.

This is business applications, and let me just digress, take attention, on Equant here. Equant is back to where it should be. Equant is a fine asset. We reviewed the business model of Equant. it is a single asset that serves genuine international customers that we support and our international deployment. Equant is back where it should be, and it's back at the core of our businesses for our key accounts. So, VPN, all three networks. Service and portals with public exchanges; this is fixed line, and the Internet. IP centers, giga Ethernet, WiFi. Once again, all three. Multi-media call centers. So you see that for corporations whose request is even more stringent, because they have explicit requests and they are not ready to wait forever. You see, we have to serve them well and we have to serve them fast, with our telecommunications offering. So we are, indeed, convinced that portability and co-operation are critical to meet our customers' needs. Our customers' telecommunications needs increased 10% a year on year, so we have huge potential for growth, provided we can work together efficiently and that is, indeed, the ambition that is at the heart of the FT 2005 program. TOP serves the purpose of giving the organization the earmarking of the most appropriate resources to meet our objectives.

Then we have a few slides for our operations. I'll spare you the details here, because I don't want to encroach upon Q&A. You have the materials and the handouts, so here on a segment by segment basis, we explain how we're going to deploy our programs to bolster growth by co-operating together among entities.

Just give me the last slide, which is the conclusion slide, which gives a wrap-up of the commitments that France Telecom management is making this morning for fiscal 2003. Revenue growth objectives -- while we are aware that our industry is a dynamic one, we have deliberately tried to be realistic, with a mere 3% to 5% revenue growth in guidance for 2003. As I mentioned earlier, double-digit EBITDA and EBIT growth, and once again, over E3b in free cash flow increased, to repay debt.

That, ladies and gentlemen, concludes the presentation of our full-year results, and now we'd be glad to entertain your questions. Please make sure you speak in a microphone.

Yes, I'd like you to explain to us, please, very briefly, if possible, and simply, how you explain this figure of E20.7b, Mr. Breton?

Well, first of all, I think that is no surprise for anybody, we gave the broad outlines of it when we made the presentation of fifth of December, and we intimated at that point that one of the reasons for which the company was in the situation it finds itself in, well, was the acquisition policy, doubtless, pursued over the course of the year 2000, that prevailed on the company to acquire about E100b worth of assets, largely outside of France, and those acquisitions were made in cash terms, because France Telecom was in the position to do that.

It couldn't use its shares, because of the critical threshold of 30%, so almost all those acquisitions were paid for in cash. Of course, all of this followed the undoing of the alliance that was engaged in prior to that, with Deutsche Telecom, because up to that, they had decided [inaudible] they tried together to go international, so France Telecom found itself a bit of orphan, so just take-- and then on in 2000, it made acquisitions to the tune of more than E100b, paid for in cash. And because of the peaking of the bubble-- that was the peaking of our bubble, and then it started to find out the debt is weighing very heavily on it, and that's the very factual analysis of the situation, so that we are now drawing the learning’s from that process.

Yes, a question without a microphone. The interpreters unfortunately haven't heard the question, or the answer, for Mr. Breton.

On the industrial relations side of things, well, there's nothing new to report as compared to what we intimated on the fifth of December. We're going to implement exactly what we said on the fifth of December. We indicated, just to recall, we indicated that in the coming three years, if we focus on France in particular, we're talking about redeploying civil servants, so it's in the French context, but a few facts and figures, just to make sure we're talking about the same thing, that we're referring to the same figures, so as of the 31st of December, 2002, France Telecom had 233,000 staff members, 96,700 outside of France, mainly due to the integration of TPSA, by the way.

Largely due to that, and all that, of course, TPSA, and the rest, 136,500 employees in France. Now, that was as of 31st of December, 2002. Now, at the 31st of December, 2003, we estimate that we'll have 220,200 people in France, 91,200 outside of France, and 129,000 on the other side. So, the total, and that's the breakdown. So, by the end of this year. So, we indicated in the coming three years, we integrated into our plan the fact that 22,000 employees would leave the group.

So, 22,000 employees leaving the group naturally?

Naturally, with natural attrition. The rest, because they'll be in the early retirement scheme.

Now, how then do we estimate those figures?

4,100 early retirement departures on the table for 2003. We expect a figure of 4,000 in 2002, and 3,400 for other departures-- are expected in 2003. There were 3,220 who left in 2002. So the figure is clearly identical. So we've got the FTFA retirement, people are going off on retirement, our new retirement schemes, so comparable figures.

Now, that, therefore means that those figures were then reflected in the budget, and we had to look at what happened in the last four, five, even 10 years, in that respect, to see what happened, since 1996. In 2002, 7,500 staff members left the group, by way of natural attrition. 2001, there were 7,200. In 1997, 9,500, so you know, year on year, those are the figures. They're realistic and they are, you know, on paper, we have them. So there's nothing new, really, in that respect. Nothing new. Nothing new.

So, then, they're redeployments?

They're redeployments to the public sector. Well, the HR manager is here, present. Will add further answer, perhaps, if he likes.

But we think there will be some hundreds of natural departures, about 280 last year, was the figure. Natural departures.

Now, as it's on a voluntary basis, voluntary departures, we've organized ourselves fairly well, in fact, with dedicated teams in Paris and being deployed out into the regions. The problem is, too, with people who specialize in supporting, helping individually, on a voluntary basis. Of course, the civil servant staff members who want to join the public sector, some central administration, or some regional, local government administration, for example, and decentralization has been announced in France, and of course, in that way, there will be definite needs out there to decentralize some administrations, as announced by the French government.

So staff members will be needed more and more, civil servants will be needed for local government administration. So, it's done on a voluntary basis. It's built into the budget, but we didn't put a lot in-- I don't want to give a commitment. That's not something I haven't got under my control. So, it might be double this year, as compared with last year. Last year was about 300 or so. We assumed it might be about 700 this year. That's in our budget. It's prudent, because it could be more -- could be more, not saying the opposite, and so far, there might be requests for that.

It will be up to the company, then, to individually address individual cases and the state is doing the same, on its side. It has a team there, with a person appointed to take charge of it, to redeploy people into the central administration, the central government department, and the local government servants. So nothing new as compared to what we announced in the past in that respect.

It is a challenge for France Telecom, and we're, you know, something that we're heavily involved in, seriously involved in, but we can, I think, pick up the gauntlet on that, because we believe we have strong growth capacity through our strategy to cooperate between the different businesses we outlined earlier, so therefore we think we can pick up the gauntlet and say we will devote France Telecom and mainly, using it through existing resources -- so nothing new as compared to what we stated on the fifth of December. Other questions? Yes?

Sir, I'm here. You said a while ago that you were concerned -- you think that the worst is behind you?

Well, no, I didn't say I was worried or concerned, really. But the slides that we were showing just then showed E20b losses in two years, and that figure is, well, it's the figure says what it says, so there's no reason to be happy when we see such figures. That being said, I think-- and that's why even the press conference on the results, I wanted to spend some time, maybe not enough time, but some time on growth aspects. On the future, I want to be forward-looking, tell you how France Telecom is poised to bounce back, and I've been very favorably impressed by the quality of our fighting forces, the people out there, the staff members of France Telecom. So, on the future, I think clearly we have, you know, lots of trump cards in our hands to win the battles that are out there to be fought. But of course, that figure was very big.

The restructured loan, the E9b loan that the French government helped you with, is being investigated by the European Commission. If the European Commission decides that that is state aid, and you have to pay that back, does that blow a hole in your debt repayment plan?

It's OK if I speak in French?

English would be helpful.

OK. Maybe this is because I spoke in French that something was wrong in your comment. The loan was not activated, so I don't have to reimburse it. We, so far, we did not get anything from the French government. There is no loan. We just-- the French government said that if, by any chance, or if, unfortunately, we may need a loan, the French government will be ready, as the main shareholder of France Telecom, to activate this loan at normal market conditions. I said to the French government. I went to the market. We raised E9b on the bond markets; that's it. But, meantime, the European Commission, at the request from some of our competitors, which is absolutely normal, to investigate what we are doing, and we are extremely willing to cooperate with the European Commission, on a total transparent manner, how we operate, which is what we're doing right now. Thank you.

OK, one more question. Are you interested in buying back the 15% of Orange that was spun off?

You know, I said in our presentation that we are at the stage, on the process, to work much more closely together, and Jean Francois and Didier and Serge, who is next door, and will join us later on, we all know that we have a lot of things to do together, which is great, by the way, eh? It's a tremendous opportunity. Today, I don't need to do other things but manage these two entities, which is the same thing, by the way, with what I do, the way I described. The future is something else. I don't need it today. We know that we share the same view in the benefit of our common shareholders.

Are you ruling out now that you won't buy that 15% back now, then?

I beg your pardon?

Are you ruling out that you won't buy that 15% back?

I'm just telling you that it's not in my eyesight right now. That's it.

Yes, I'm from ``The Parisenne'' newspaper. I am down here. Could you tell us, please, how a company can operate with E10b worth of negative equity?

Well, it's consolidated, and in proper terms, E10b positive. That's because it's consolidated, you see. What you've got to look at--

OK, well, if you were a private company, wouldn't you be legally obliged to file for bankruptcy?

No, we're talking about corporate accounts. It's not E8b, the figure there, for the corporate accounts-- so that's-- the corporate accounts, that's E8b. It's not huge, but systematically, we present the consolidated accounts, and the corporate accounts, have you got something to add, Mr. Combes?

No, Chairman, just to confirm that figure E8.6b is the exact figure. Stockholder's equity in France Telecom. That's what prevails, really, in answer to the question you raise.

Well, I'm sorry, I might be a bit naive, but what is the entity that's listed? It's France Telecom SA, is it, or is it--

France Telecom SA, yes. France Telecom SA. But the accounts are always presented in a consolidated manner for corporations. That's the answer to your question, I think. Mr. Combes can spend some time with you bilaterally, if you like. Nothing to do with the state having a 50% stake, so of course the consolidated accounts that are presented always to the press. Mr. Combes will talk to you later if you like. Yes? Yes? Question here?

I'm from [inaudible]. The dividend payout, I'm interested in -- do you think you'll start paying out the dividends in maybe 2004?

No. For the moment, we haven't really talked about that. 2003, in any case, we've stated there would not be payout, but we'll see later on.

I've got a question for Frank Dangeard. I think he's somewhere in the background. Yes, Mr. Dangeard, have you taken account of the possible impact of the international situation in your forecast for the coming two or three years? Is it something you've factored in or- and in the presentation of TOP, the TOP Program, the specific purchasing actions, there is something I'd like you to explain a bit more, please. When you talk about interactivity with suppliers, to speed up cash generation, what does that mean, please.

Firstly, on the international situation, I think there, again, while nobody can really seriously factor in the potential impact, but the budgets that were presented to me at the end of the year, reviewed at the beginning of January, were budgets that were more ambitious in terms of growth. It doesn't mean that-- I mean, we've kind of adjusted our growth to more reasonable levels, put it that way, between 3% and 5%.

So, internally our objective may be a bit more ambitious, a bit more of a stretch goal there, but I think it's reasonable, not only in response to your question here today, but overall, I think it's better to tighten the reigns in terms of our growth ambitions and you know, we want to catch the bull in the heart when growth comes back. And I'll certify the [inaudible] that the average consumption of households in telecommunications services. I don't know if international events that you're referring to will have an impact or not on the consumption of households, in terms of communication in any case. Some people say no, some people yes. You know, overall, we've been conservative in terms of growth. And the other question you asked?

Our supplier are partners, and often they have- they do lots of misconceptions, maybe about the way in which we work and sometimes, certain ideas and something they don't always tell us. So, sometimes they hesitate, maybe, in making suggestions to give improvement to of our processes, that would make their lives easier. So, you know, responsiveness and interactivity means working with them more tightly, so they can tell us what we're not doing right, or we can improve to. And the idea would be to tighten our partnership, improve their revenues with us, and for us, drive down costs, and we've already got some positive experience in that respect. Yes?

Well, can we expect a return to net profit this year, or given the exceptionally negative figures-- can you tell us why the UMTS license was not depreciated, as others have done, for example, and what about the off-balance sheet items? What's the amount of those at the moment?

Well, I give the floor to Frank on that, I think, because there's a mistake that systematically made. I think it's just a question of people understanding, I think.

It's not that others depreciated their licenses, they depreciated the business model. That's actually-- but I'll go back to that in a second. You can't depreciate the license as such. You can depreciate an object, an economic object, a business object that, you know-- the license is part of the valuation of the object.

So, mission, of course, is to come into the black again, to become positive, in terms of net income. Now, that's our stated mission. But there's no surprise as compared to the last time we talked to you. We've tried to be very systematic and auditors want us to do certain systematic things. The audit committee has met a lot, and we've all been working in tandem on this, and exceptional depreciation was voted through yesterday by the board of France Telecom, on what we thought was consistent right now. So, you cannot do just any old thing in one direction of the other. It's all very stewarded, let's say. You've got to look at your business model, and that gives you a snapshot, too, of France Telecom that's in line with what the auditors think it should be like.

Now, in the future, what will happen? Well, there again, it will depend, clearly, when you've got so much goodwill, and the issue for France Telecom and certain other telcos is that in the light of the change in accounting rules, the way in which we process goodwill and state goodwill will impact all of us, you, as the financial community, and other companies, in the coming two or three years. We'll be stating goodwill in different ways. And it's the transition period from one model, one template, to another.

So, the way in which we state goodwill, it was done in a specific way under the French GAAP rules, and now it will be done differently in IAS, slightly differently, and differently in the U.S. GAAP again. So, that is going to keep us quite busy in the coming two or three years. You'll have to get used to the changes, during this transition period, and each valuation that sub-tends our goodwill quite a lot in the books, comprising in particular the UMTS license, in the UK, in particular. Unfortunately, the rest was depreciated, de facto, without anything before or after, so you see what I'm talking about. So, that's it.

So, the ones regarding the UK, well, the business model of Orange, which is number one, isn't that right, Jean Francois, in the UK? You-- isn't that correct? Yes, indeed. So the business model is such that the goodwill is in line with the valuation and in line with the DCF that's applied to it. So, the company has to stick to the business model, that sub-tend the DCF, that sub-tend the goodwill. So, this work was done very clearly, with all of the auditors, everybody [inaudible] and all the committee really fed into it, was highly involved in it, but don't think I'm trying to dodge the issue or anything. I'm not dodging anything.

I'm saying the way it is right now, given the way the accounting rules are changing at the moment, nobody can give you a very precise answer to, you know, things that are still kind of changing. For France Telecom, of course, in the coming two or three years, this is the time- this is the time for living, and for France Telecom, we have issues to address, of course. Bigger figures to address, maybe. E100b worth of acquisitions made in the year 2000, or a year or two earlier, so we've got that to deal with, and the auditors did support us. And last evening, at the board, declared that they unreservedly supported the accounts proposal. This gives us a correct snapshot, at the time we're speaking. Michel Combes, do you have something to add?

Well, the second part of that question relates to commitments. They are described in our financial statements. We spoke of that on the fifth of December. We have two major financial commitments -- one on Equant, within the framework of the Equant transaction, and the other on our put, provided to [Putchit] in Poland. Aside from that, we have certain commitments linked to our operations in terms of conventional business, sales, industrial activities, all detailed in our financial statements. So no changes in-- as compared-- based-- no changes in view of the accounts published as of the 30th of June.

With respect to the UMTS license, I'm sure that you're thinking of Deutsche Telecom, which wrote off its business in UK. No, you don't write off a license. That doesn't mean anything. You have two cases. Either some operators left the country they operated in with a UMTS country. In that case, you write off all your assets. If you stay in a country, the UMTS license cannot be written off, in view of overall activities in that country. When Deutsche Telecom decided to write off its business in the UK, it's not the license that was written off, it's the entire business. The license accounted for a good portion. It's based on their old calculation of DCF, and their old valuation in view of the competitive position.

Today, France Telecom made some write-offs in, for example, Germany, where we left, but in other places, such as France and England, the competitive situation is very different what you have with Deutsche Telecom. There's no reason for us to change anything, not in terms of valuing the license, but in terms of valuing the overall activities, 2G, 2.5G, 3G, in those countries. Well, of course, with a brand-new eye, we looked at this in great detail -- to write off or not to write off? You have to find a way to justify that in one direction or another.

I'm from the [inaudible]. I have a few questions. With respect to the capital increase, first of all, you didn't give us much detail, but there's one thing you could shed some light on -- do you think it's possible, or not, to do this before the Iraqi crisis is settled?

And what's your second question? You said three questions. Let's take all three.

Well, OK, if you promise you'll answer me, I'll move on to the next one.

I will be answering you, but give me the questions!

Well, the others are not as good.

OK, OK, let's answer the good question, then. OK. OK. Here we go, so it's a very good question you have there. So let's look at the facts objectively. I'm sure you can understand that with this management, we tried to announce what we plan to do and to do as we said. We organized a general meeting last week, where I obtained authorization from the meeting to increase our capital. As you can see, that was indispensable. Authorization was granted, the amount indicated-- it's not like we don't want to talk about it, but we want to give information as needed, and say what we do when we do it. So, the amount, it will amount to approximately E15b.

There's no surprise there. I pointed out on several occasions that it will begin, of course, once all the information available to us, and we do have some information, and I'd like to congratulate Mr. Combes and Mr. Bernard Bresson's teams for having worked so as to close the accounts in due time. Once the information is available, it'll be made known. So, it will start now. We've pointed out that, bearing in mind the liquidity crisis and how it can be handled, there are three windows of opportunities ahead of us. They are still there.

We will use these windows once we are certain that they will be beneficial for our shareholders, taking into account information at our disposal, so as to adequately handle our business for the best interest of shareholders, and do this in a friendly manner for our shareholders. That's all I can say, and it shouldn't surprise you, because we haven't changed in any way. The day we start the capital increase, we decide on it, we will inform you. That was a very good question.

OK, you will be a bit disappointed by my next questions, then. A recent report from the ART said that France Telecom may be part and parcel of a change in the cable business in France. You haven't spoken about that. Do you know what you plan to do with respect to cable?

Well, listen, quite openly, I will tell you that cable-- France Telecom must have an opinion about it. I have noted that France Telecom had a bit more than an opinion. I humbly admit that some of-- that there are disagreements in France Telecom. Some have an opinion, and others have a different opinion. I've been there for five months, and I haven't had enough time yet to settle. Some say that the cable business is difficult and would need to be restructured. They're certainly right. Others say that they're- we're talking about millions of customers, and cable can be used for things aside from video. Thirdly, I hear that France Telecom plays a role in all these three areas, and is a key player and will have a key position. I agree with all three positions. I will need to bring them all together before I can say anything, but I will say that's also a very good question.

My last question--

And the answer is not as good, I agree. But what I said, this is true fact.

Next, the technological partnerships you spoke of, do you plan to set up partnerships with other telephone operators?

Yes, that's a possibility. To be more like cooperation in innovation, research, and special means of payment, and, as a matter of fact, we are working on cooperating with other mobile telecom operators, with respect to payment means, so as to set up identical standards and processes. So when I say partnership, of course, this, I mention, is also there. Don't forget that GSM stems from strong cooperation between different operators in Europe.

Hello, I'm from the Italian newspaper. With respect to Wind, I heard that you are negotiating on disposing of your investments.

I'm delighted to hear that you took part in our press conference, but as I soon I heard your accent, I knew that you'd have that question.

I could put the question to you in Italian, if we wish?

I think we ought to do this in French. Anyway, Wind. Here, too, unsurprisingly, for you, anyway, as we said, clearly in our presentation, it's under strict- it's to be closely monitored. When we look at Wind today, we have a minority shareholding. This company, it's financial position, we're not sure that it can have a positive EBITDA in 2003. Positive free cash flow-- EBITDA positive, but not a positive EBIT.

And what about free cash flow?

Free cash flow will be positive a bit a later on.

OK, free cash flow positive a bit later on. So, positive EBIT in 2003?

Maybe, but free cash flow, not as yet in 2003. 2004, we'll have to see, so we'll have to review the business plan. That's what we decided to do, and speaking on the control of Mr. [Gufas], the president of Wind's supervisory board, who is here with us today, and we pointed out that we would certainly need to review the business plan, to bring it in line with what we believe to be the best interest of shareholders in this type of business.

A manner to shareholding-- a budget that will still need to be reworked, so that it can be in line with our plans for business such as Wind, so automatically there's a red light that came up for us. As for other activities, as we mentioned earlier, we gave it the names. Yes, Wind has been closely reviewed by France Telecom's management. Either it can meet our criteria, but it has a long way to go, and Wind will be a part of France Telecom's portfolio, or it cannot, in our opinion, and it is not impossible that we may think of disposing of it. That's all I can say at this stage of the game.

Yes, [inaudible] from ``The Express.'' A financial question -- regarding the capital increase, you said and you confirmed the amount, about E50b, bearing in mind the negative shareholder's equity, that gives you a margin of what, E6b, E7b positive, or am I getting the figures wrong?

It's always the same story. What matters, once again, are the corporate financial statements. Of course, financial performance is materialized in the consolidated accounts, but what matters from a legal position is the corporate accounts. Even in our corporate accounts, France Telecom's corporate financial statements -- we're talking about nearly E40b, in terms of shareholder's equity, which is normal for a company of this size. In two year's time, it destroyed E30b in equity in corporate accounts and consolidated accounts. So today, we believe that E8b in equity in our corporate accounts is clearly insufficient for a company of our size. In the consolidated accounts, you have the figures and the U.S. GAAP, the figures are even lower.

In terms of reducing indebtedness, you haven't said any figures, for 2005 or 2006. I heard about the E3b that you announced. What is that for?

No, no, no, that's not true. I think frankly we gave you the details. We were very precise. We said it very clearly. We have two commitments from that gearing. First of all, the company's efforts to reduce its debt, due to cash flow -- E15b by 2005.

So that's 68 minus 15?

No, not 2005. You saw that we are E3b in 2003, and six in 2004. It's on the second page of our presentation. So we--

So six-- so 15 at end of 2005? That's 68 minus 15.

The capital increase also should take place within one of the three windows indicated by Mr. Breton, and this capital increase will also reduce net gearing in the same amount. So, our commitment is quite clear. Reduce net gearing by E30b. So, 68 minus E30b, that means really below E40b, giving us a net gearing, over EBITDA, at between 1.5 and 2, in terms of ratio. Giving an A-plus rating, and bringing us in line with our peers.

What about in terms of self-controlled equity?

We have no special plans in terms of self-controlled assets. About eight-- we own approximately 8% of our equity. It's-- these are-- this is group equity, and it will stay where it is. Yes, you had a question?

Yes, I had a question. Could you tell us the goodwill in your accounts at the 31st of December, 2002, in view of your provisions, and since you have provisions based on U.S. GAAP, can you also have provisions for Orange in the French GAAP? What about reducing your account CAPEX in 2003? Some say that that could be an obstacle for growth?

Well, when you look at the amount spent in CAPEX over the past four years, it's enough to be spending in the next four years. It's almost on par-- our goal is to spend some 13% of our equity in CAPEX over the next three years, which is an average on the market, with respect to our competitors. And I don't say-- I wouldn't say that that will be hurdle for growth in the future.

And KPN was down to 10%, as a matter of fact, and we believe that 13% is a good level, and we're not the only ones, because it's a European average. Yes, and don't forget, that in the TOP Program, aside from disposals announced and carried out in December and January, there are no further disposals, so any further disposals would improve the group's cash position, and it can be used for further investments in the years to come, if necessary. One, reducing our indebtedness, and we know very well where we would need to invest, so there's no problem there.

With respect to that first question, Michel, regarding goodwill, we had a slight on [inaudible] E27.675b in goodwill in our account at the end of 2002. That's on page 34. Next, regarding goodwill, Orange, in the French GAAP, as I said earlier, the difference between French GAAP and U.S. GAAP is that in the U.S. GAAP, it's based on stock market value, whereas in the French GAAP, valuation is based on economic value, and that was based on up-- the discounted cash flow in view of its valuation for the company. Today, with our business plan, which has been reviewed, the discounted cash flow method give us a valuation which does not require any provisions for Orange in the French GAAP accounts.

[Henri Bessier] from [inaudible]. You said a while ago that you had revised Equant's economic model. Could you tell us what that entails?

Well, let's say-- OK, we had quite a sizable write-off. Let's say things clearly. And our discounted cash flow for Equant is in line with our current valuation, so we readjusted the economic value that we thought realistic, and especially in view of the value that it will be generating. That's what I wanted to say. And now we are realistic. In our mind, very clearly, and for all players in the division, they were business plans that were far too ambitious with DCF, discounted cash, that was too ambitious, in view of the cash position at Equant.

Ladies and gentlemen, thank you so much, and I hope to see you soon again, to talk about growth and technology. Thank you so much.