Orange SA (ORAN) 2005 Q4 法說會逐字稿

Good afternoon and thank you for coming in such good numbers to this meeting. It’s our traditional meeting together with, of course, the target to present our 2005 results. But today we have a lot of other message to convey. Perhaps I will start this meeting by delivering a short address, which incorporates the main message I would like to convey to your attention.

First of all, concerning our 2005 results, as you know, they are good, better than that in fact. Our €5.7b net income is the best ever achieved since the creation of France Telecom Societe Anonyme. Of course, it includes some extraordinary figures inside. But, nevertheless, the basic is very good. And yet, many factors, as you know, have weighted heavily on our business.

But the point I would like to stress here is that despite the acceleration almost a disruption of -- in technological change, despite increased competition, despite the massive impact of some regulatory decisions, our operational and financial performance has been maintained, or even improved in 2005.

This meeting also gives me the opportunity to go back over our 2006 objective. You know them already and particularly, our objective for organic cash flow generation. It is a clear objective. And I decide with the Board that each member of the Executive team will be personally incentivised for meeting that objective, namely over €7b organic cash flow generated in 2006.

In addition, our operational and financial performance in 2006 will allow us to pursue reimbursement of our debt, while at the same time substantially improve shareholders’ compensation. The dividend for 2006 to be paid in 2007 will increase by at least 20%.

Beyond announcing our 2005 results and 2006 objective this meeting gives me above all the opportunity to present to you the accelerated transformation of the Group that I have initiated.

Last June I share with -- my strategy with you, today we are going to speak very competently about implementation. As I will demonstrate, a new France Telecom is emerging in this beginning of 2006. And I will highlight its three key pillars.

The first pillar is increased speed. As the world government is changing we must change even faster. In a market that is evolving faster than ever, with one week reaction time, the Group decision change must walk at the same speed. I, therefore, installed a streamlined Senior Management Team with nine members instead of 23 before, focused on performance and growth.

I decided to drastically shorten the reporting and decision lines, which no more -- with no more than three to six levels versus seven to 11 currently. Last, the reporting system I just implemented is not a big quarterly or monthly but weekly. We are in a position to react as fast as the market.

A second pillar is accelerated transformation. Our NExT strategy is more relevant than ever. And I may add that it has been more or less duplicated in one form or another by most of our competitors. Yet, the Group transformation that we planned to conduct over three years must be completed much faster, practically twice as fast.

To pick on the two examples, I decided that network integrations and country integration, which were anticipated to be implemented over the course of the NExT plan, finishing in 2008, will be implemented before year -- the end of the year 2006.

Besides increased speed and accelerated transformation the third pillar of the new France Telecom is about improving our marketing effectiveness. France Telecom was the first to announce an integrated operator strategy. We were also the first to undergo the full impact the IP disruption and also to use the means to control it.

In 2006 France Telecom is the first to have an integrated product factory to develop its future offerings. In 2006 France Telecom will be the first to have an integrated worldwide brand. And also in 2006, France Telecom will be the first to have an integrated portal and a unified customer relationship management.

Thanks to this increased speed this accelerated transformation, thanks to our improved marketing effectiveness we are going to keep our lead over our competition. And we are going to do this leveraging our key competitive advantage, which will really start bearing fruits from now on. And I am referring to our number one position in Europe and number two in the world after China for ADSL, due to our past investment, our growing success with the Livebox, our development in mobile broadband, and our content and TV on own network strategy.

ADSL, Livebox, mobile broadband, content, these are the four pillars -- the four building blocks for all our new services, a large number of which will be launched in 2006 hand in hand with our rebranding program.

The list of our competitive advantage would not be completed without also mentioning our Group wide customer oriented quality programs, a better balanced distribution of the Group’s source of growth and profits also across territories, and at last our track record of meeting our multi year financial performance objectives since the end of 2002, and our firm commitment to continue doing so in the future.

2006 -- in 2006 a faster and more efficient France Telecom is determined to keep its lead over competition. And it is determined with all Group personnel to best leverage scale competitive advantage to our customers and our shareholders benefit.

And now we can enter the details of the presentation, next slide, next. First message, despite the lower than expected pro forma revenue growth, we achieved or exceeded all other financial commitments for 2005. We delivered €7.5b organic free cash flow, significantly above our target even after the payment of the €256m mobile fine. Excluding this fine, our organic free cash flow is €7.7b.

Actual revenue growth is above expectation at 6.2%. At the end of 2005 we had more than 84m customers. Plus 16% compared to 2004. And we managed to stabilize our ADSL market share in France, despite a difficult competitive environment and thanks to a strong success of our Livebox.

Gross operating margin, before the mobile fine and excluding Amena, that is to say the one we referred to when we sit at -- we set our target in February 2005, reached €18.56b inline with the guidance.

CapEx amount for €6b or 12.3% of the revenues. Next.

I will not comment our financial results in detail. And I will let Gervais Pellissier come back later on all this. Nevertheless, let me emphasize that despite our pressure on the revenue strength, we increased once again our gross operating margin thanks to the success of our ambition 2005 plan and our TOP program. Our gross operating margin increased by almost 3% and in spite of the €256m penalty.

We also recorded a very strong increase in net income Group share up to €5.7b, the highest figure even -- ever since the IPO.

Thanks to some financial fundamentals and despite a slight increase in CapEx needed to prepare future growth, we maintained our organic free cash flow generation, and even increased it before the payment of the mobile fine. Our net debt decreased by -- to €47.8b with a net debt on government ratio below 2.5% as we were permitted on.

Preparing NExT also means being successful in building a sound base of customer in access. It was the case in 2005 with more than 1.7m Livebox sold or rented in Europe and over 1.6m broadband customer.

Beyond the scale of NExT ready customer base in the meanwhile France Telecom start to roll out NExT offers with success. We launched our very first convergent offers in France with Family Talk to the retail market and Business Talk on the Enterprise one, and in the U.K. through the Wireless Talk.

At the end of 2005 we had more than 400,000 businesses everywhere end users and 200,000 MaLigne TV customers. We successfully start to implement our content strategy with the launch of video on demand and personal video recorder. In the payment area, we register a strong success with the Madonna everywhere operation, a good example of our partnership with Warner.

Let me finish on 2005 indicators with this slide, where you can see that we are now ranked number two worldwide ADSL player, far beyond our main European competitors. This is another proof that FT is leading the way. This means, of course, sooner challenges than everybody will face anyway. But it brings also more opportunities for us as new entrants as we will be able to transfer our know-how more efficiently, more effectively on other markets in which we operate.

However, at the end of 2005 we had to face a tougher competitive environment. As an example, in France competitors have start to launch very aggressive ADSL offers, offering subscription fees to their customer in order to gain market share. Those offers were followed in December by free unlimited international calls. In October and November our main European competitors announced aggressive commercial investment plans, particularly in the U.K. where the level of competition was already high.

I could also elaborate on the success of the MVNOs in France. This tougher Polish market of NTL [powerful play] project in the U.K., we are not surprised by the fact, but rather by the timing in which this move took place.

In the meantime, we face a number of new regulatory constraints, including ARCEP’s cut in SMS mobile termination rates in France, pressure on the international roamings and MVNOs regulation.

What was the consequence of all this? Obviously, more attractive all in broadband offers, which we had to follow start the take up of Voice over IP. We were a part of that move, of course. When we presented our plan in June we were already anticipating a significant increase in Voice over IP traffic in France. As you can see, our forecasts were already ambitious with 25% of traffic on Voice over IP at the end of 2006. The take off of retail IP traffic between September and December was impressive and led us to revise this forecast. We now expect this traffic to represent between 30 and 40% of total traffic by the end of 2006.

Was that true for fixed business applied also for broadband? What is true for fixed business applied also for broadband mobile. In Spain 2005 when 3G and Edge offers were introduced the total broadband customers base for end 2005 was due to be slightly over 500,000 for each operator. That is to say, 1m for the market.

As you know, the final number was more than 1m customer for each of the two actors. For the end of 2006 the market is expected to double once more with over 5m mobile broadband customer in France. This evolution is not a problem in itself, because it is, in fact, a set of more attractive customer that we have in our hands. But it should propose higher from the formed trust, of course.

The very good part of the story is that what is happening is consistent with our strategy. What has changed is the pace of the evolution. What has not changed is our ultimate goal and means to reach it. More than ever I believe that NExT is the best answer to take the best of our industry. The pace of the action is even helping me to enforce the right moves sooner than later into France Telecom’s structure to ensure a strategy.

Now, in a very pragmatic way, what are the effects on 2006? In order to manage the direct consequence on our business model I took immediately actions. This is why we communicated to the market as early as January 11 in order to give explanation -- expectation for 2006. I want to underline supportive actions we have decided to take in order to support a sustainable business model.

First, it means supporting our medium term growth potential. It implies higher CapEx and OPEX to support Livebox, TV set up box, new services launch and improve quality, which is key in a more complex environment.

Second, it requires keeping the relevant customer base for these new services. That is why even if FT doesn’t intend to escalate the SAC war, we have decided on selected customer segments and markets to secure our market share.

Third objective in order to provide the right structure and gain enough flexibility, we have to adapt rapidly. This will be done with country integration, an early set up of marketing organization, down size of corporate and support functions, and adaptation of our workforce including in France. This is, on the short term, more painful. But FT will get quicker and bigger rewards to have gone through this before our main competitors.

Let’s give you more details on the way we intend to transform France Telecom. The three main dimensions are on this slide. A country focus and streamlined management team to enhance reactivity, an accelerated transformation with a focus on cost reduction and an improved marketing to streamline and accelerate the launch of new offers.

First of all management to enhance reactivity, as explained a few days ago, I have decided to streamline the Group’s Senior Management organization in order to ensure maximum focus on the Group’s transformation and operating performance. By doing this I have four objectives in mind. One, make sure that everyone has a clear country focus and accountability, two that everybody shares the urge to make convergence happen, three to take advantage of a more effective market facing organization. Four, maximize cost saving opportunities.

The Management Team will be particularly focused on country integration on each business. I will -- it will exercise direct responsibility for all Group business on a geographical basis for Home and Personal. And I want to break the silo approach, which is creating cost duplication and too many missed opportunities to better serve, get or keep our customer.

In France and Poland where we are incumbent the country’s [mission] will be its major [exes]. In other country, we will have a matrix logic. In 2006 budget execution and reporting will be done by division as they remain as a management dimension. Managerial country responsibility will be announced later.

With my team we will review on a weekly basis the most critical project and all transformation projects will be reviewed monthly by the Executive Team. Strong focus will be required on cash generation with cash targets and the related CapEx allowance. This is the first time such stringent control of CapEx is applied in the Group. We will spend what is needed. But we will spend when appropriate and with the cash flow under control.

On top of this management, incentive has been set on organic cash flow target. I want also the Company to become more agile in order to improve its source allocation process. Something else that the silo approach was not able to deliver, bottom line on our existing footprint, we want to optimize our profitable growth potential.

Country integration is the cornerstone to succeed in implementing our integrated model. County level appears to be the most relevant level for managing marketing and transform the Company. This is why I will nominate very soon one manager for each change of working zone, and to operate business will continue managed as a whole. For France, Louis-Pierre Wenes is responsible for the overall business, for example.

This is supporting a better integration and the reactivity of the local business. Rebranding will support this approach and I look for faster synergies between former separated entities. As an example, let me elaborate on the success we experience already in Spain.

We achieve in 4Q ’05 strong operational results, with share of contracts maintaining about 20% for FT Spain and strong Amena net adds. While monitoring the integration and being on track to deliver the €130m synergy per year that we announce in July. In 2006 we will be already close to be -- to the announced target for 2008 communicated last July.

Second step to support transformation focus on the cost structure. Besides this new management team and country focus organization, I have decided to improve FT efficiency with the creation of two key functions, Transformation and Strategic Marketing. Let me first present the objective of the Transformation team.

A dedicated team is put in place to lead the Group transformation. Its function is to determine which project is to be followed at the Group corporate level and then to set up specific roadmap for each objective. For example, processes and organizations are to be integrated per country by end of 2007. This team is responsible to make sure that each objective contributes to the NExT achievement. The team is there to track delays, to prioritize between projects, ensure to make it happen.

Let me go through some of its objective in detail. For sourcing and support functions, the objective is to deliver the €2b savings over 2006 and 2008, announced in June 2005. This objective is well on track with already €400,000 sourcing gain achieved in 2005 and €1.2b accumulated savings secured in 2006. We are, in fact, ahead of the plan from the start.

For the IT networks for which you had a presentation last week in London by Jean-Philippe, if I well -- I am well informed. For IT networks the objective of the Group raise the rates in January during our IT network presentation in London, is to deliver 200 basis points of EBITDA margin gain before the end of next -- for 2006. We have settled a short term target of 50 basis points on OPEX gain.

Human Resource, and at the Group with regard to Human Resource is also a major change. We have implemented our Act program anticipation and competencies for transformations to provide employee with the means to build their own development project inline with NExT objective. It requires an increase in training budget.

France Telecom today has 17 internal training schools to support this transformation and allow for putting the right skill at the right place. For employees also incentive will take into account organic cash flow generation targets.

And as far as the world headcounts are concerned, NExT needs a continuous headcount adaptation, especially in France. This is why we are announcing today 22,000 departures in France over the period ’06 to ’08, as we know that we must adapt our headcount there. Given that, we also need new skills for FT and we will recruit 6,000 new talent in FT. So, net headcount reduction for the Group over NExT will be around 17,000.

Three priorities. The third pillar to support transformation is to leverage on our product factory to improve marketing effectiveness. The mission of Group strategic marketing is to offer a similar France Telecom user experience throughout the footprint thanks to operational marketing excellence. Prerequisite is a unified market vision and increased coordination between business units and countries, to build once and be deployed across the Group. All 2006 proposition are to be targeted at specific segment, structure as a project with a three year roadmap and should develop segmented proposition.

Let me describe our existing product factory. First, we have expected our vision and market needs through 13 key projects. We have answer to technological disruption by a home networking concept leading to our Home Zone offer to be deployed across our footprint for residential customer or our Office Zone for business. Anticipating a usage we have developed wide band our location based services. To move industry frontier we put ourselves in the infotainment universe and developed music and TV everywhere.

One, key needs of our customer are identified. When we have done that we settle a clear roadmap to deliver on a segmented manner and with the aim to replicate our success on every market. This is a built once deployable everywhere strategy that will allow huge gain in time to market efficiency and quality of services.

In the meanwhile, we prepare for future developments with [spider] project with an open mind. France Telecom is the first telco to implement such a structured approach. And this is a competitive advantage that we are building well before the others.

Before giving the floor to Gervais for the 2005 results and 2006 trends, delivering NExT is about [punch vision] that our vision best match market needs. Our strategy framework is confirmed, and is even taking place at a faster pace. Our answer is a management focus on country integration to deliver quicker on convergent offers. A special attention is being paid to strategic marketing and commercial efficiency. As you see, we more determined than ever to deliver the integrated [inaudible]. And we have -- and we will continue to take the require action even if they are sometimes painful over the short term to succeed.

And now, I start -- I pass the floor to the Gervais for more details about the 2005 numbers and the 2006 numbers.

Thank you Mr. Chairman. I start my presentation with some flesh on the 2005 results, starting with the evolution of the revenue.

So, revenue in 2005 has been about 2.5% above previous year in comparable terms. In old terms its plus -- excuse me, plus 6.2%. If you look at the composition of the revenue evolution in the different business segments, you see that -- I think we met on the line first the strong growth in the Personal business with the plus 7.4%. The growth also in the Directories business. I will not spend much more time -- much time on Directories. You may have participated to the [Pachon] announcement.

And at the same time, there are two businesses which have been decreasing. The Enterprise inline with our expectations. I think it’s no surprise for nobody at least in this room. We knew that because of the evolution of the business model vis-à-vis Enterprise, because the fact that the Enterprise -- the businesses are early adopters of new technologies. There is a trend, which has happened a little before than in other businesses and we are transforming that. And you will see that in spite of the decline in revenue we are keeping the gross margin rates at the level we would like it to be.

And the last one is a decrease in the Home division, which is, I would say, partly expected with a switch from traditional voice business to the new businesses what -- which have probably been slightly accelerated at least at the end of the year.

And again, I think compared to the guidance you kept in mind, which is to post for 2005 revenue increase above 3%. So, we are 0.5% below. And the main reason for that is clearly some discrepancy in the Fixed business in France, some events also in the Mobile business in France just at the end, and also some discrepancy in the Home business in Poland, as well as a slight decrease in Enterprise at the end of the year.

In terms of profit, and again, I think profit is clearly in line with the expectations of everybody, we are posting a 37% gross operating margin to revenue in 2005. If we take out some of the non recurring items we had in this year, then what the evolution is an increase of the contribution of the personal business rest of the world, which is outside France and U.K.

We have an increased pressure on the gross margin rates on the Home in France. An increased pressure in Poland, and also an increased pressure in the U.K. here not on the gross margin, but on the commercial expense which is at -- a little more detail afterwards, and also some impact of the Enterprise -- of the contribution of Enterprise with the overall Group figures.

However, again, even if there is this erosion of gross operating margin that we plan again in 2006, you will see that in the guidance. This is in line with what we expect and this will be mainly linked to the evolution of the mix and to most those investments we have been doing either to keep the market share, or to increase the market shares where we wanted to increase them.

So, in terms of global terms the gross margin before commercial expense remains at the same level. There is a slight mistake on the slide. This is 50.8% not 15.9%, sorry for the mistake. But 15.8% compared to the 50.5% on comparable terms in 2004 reduces. But you see that if you look at the gross operating margin, including the commercial expense, we have this decrease of 0.6 point.

Now, if we go to a little more details in each of the business segments of the Company. Regarding the Mobile business, I think the main comment is that we have a sustainable new growth and a sustained profitability. These are the two -- I think there’s a -- not a lot to say. A 7% increase in profitability and in terms of gross operating margin a slight decrease of 0.4 points. But again, if you look at the figures completely linked with the need to increase our commercial expense.

I will go very briefly, because I think you can read almost of what we have said on the different businesses. As you know, our insurance there’s -- there is this increase in number of customers, 22m customers. The success of the mobile broadband and maybe one comment, this is the ARPU. In spite of the pressure of the termination rate -- call termination rate cut, we have been able to stabilize, slightly decrease the ARPU. But just to keep in mind that if there had not been any decrease in the price of the termination rate we would have -- we have posted an increase in the ARPU.

And also maybe another point to underline, this is the success of Orange here in France in MVNOs. I think we have kept -- so let’s say, increased our market share thanks to the MVNOs.

In the U.K., U.K. had a difficult 2004 and 2005 show, I would say, quite the reverse, because we are increasing again with 5% growth. Slight increase at the end of the year. And I think it’s good news, not far now from 15m customers, which is an increase of about 5% and with strong net adds in the last quarter of the year.

Again, the ARPU penalized by the regulation, but with a strong fight to maintain it from, or let’s say, increasing it before this price decrease posed by regulation on the market.

In Spain you are aware that we finally purchased Amena early November. And Amena has been able to increase its number of customers above 10m just the -- a few weeks after the acquisition. And ended the year with 10.3m customers, which is an addition of 11% over the previous year and very strong two last months of the year, where we think we [inaudible] the leaders of net adds.

Regarding [Poland] [inaudible – technical difficulties] year, in terms of mobile activity, penetration rate is 76% of the market at the end of December totaling [inaudible - technical difficulties] 10m customers, and also a strong addition of -- net additions of customers in terms of market share at the end of the year of 41%.

And the rest of the world [inaudible - technical difficulties] where France Telecom has the highest [inaudible - technical difficulties], and here we have now [some] 27m customers. So, if you compare to the figures I have given before [inaudible - technical difficulties] in total. [Inaudible - technical difficulties] number and there are two main areas, one in Central Eastern Europe and the other is Africa Middle East. And in all these countries we have a very strong customer base increase. And we have at the end a strong increase of [inaudible - technical difficulties] on a pro forma basis is a 16% increase of the revenue, which has a very good impact on the gross margin.

Now, to a few words on the Home business, [inaudible - technical difficulties] market share increase [inaudible - technical difficulties] the positioning of the two or three main incumbents that we have where the voice is increasing, and where despite both our success in the Internet access and in broadband the [weak] of the business doesn’t appear showing a growth. And I think it will continue probably in 2006 in this way. You see that total revenue has decreased by a little more than 1%.

And regarding the GOM, there is a decrease of the GOM. Again, a decrease which is partly due to the need to increase. That is a commercial expense, but also some decrease of the GOM before commercial expense.

Here maybe one comment, there is an increase of the CapEx. You will tell us why are you increasing your CapEx on a decreasing [basis]. Maybe and probably in the questions we will be able to answer. And mainly my colleagues and not me because I’m not the expert on that. But I think that if you look in a little bit more detail in our business, we are investing to protect the market share, to increase the market share, and to get the market share on the future businesses we will have.

The extension of Livebox, the extension of TV over the Internet are really items which require investment. This is one of the reasons for the increase of investment we have here.

And we can look at this, especially for the French situation, where there are, in spite of the decline of revenue, a couple of good news. The ARPU has increased now to €27. We have, and I think it’s good news at the end of the year we have stabilized the total number of lines to a little less than 28m lines.

And I would say that what’s important is the increase of our market share in terms of ADSL. We are now at 47.5% of market share, which is not far from the limit we can achieve. And again, 1.6m Livebox installed and a strong acceleration of the Voice over IP on our own base. Okay. This means we are mastering this technical evolution.

Poland. Here again I think the Polish situation is not comparable to the French one, but could probably be compared with maybe a few years difference between the two. First, we start with a decrease of the price of Voice. We see a migration of traffic, new tariffs, etc. We have a reaction to that. And at the same time we increase the ADSL customer base, which is 80% and which is a very good start in Poland. And I think the more we will increase our ADSL base the more we will be able to capture and to mitigate the evolution of the PSM business.

In the rest of the world, I would say this is where some of the good news are. We are not, in the three countries there, U.K., Spain and Netherlands. We are not incumbent. We don’t have the volume business. So the overall profitability is probably lower. But here we have the position of a strong challenger and with increased market share.

Enterprise. So, as I just commented before, Enterprise business posted a declining revenue. But it is clearly in line with the expectations. And the margin rate, you see that on the left below, you see that the gross operating margin rate at 25% is even slightly increasing compared to the year before. And with the same level of CapEx, whereas the business is evolving.

It’s evolving because of the technological migration. Don’t forget that companies are the first to migrate to the new technologies, DSL and IP. And if you look at the market we have, I think we have considering that is in line with the plans we are positive there.

Now, if you look at some more details, the Voice is continuing to decline, even if there is a slow down in the decline at the last quarter. Don’t forget that Voice is regulated, like Voice for consumers. So there is the same competitive pressure and the same regulatory pressure.

And regarding the Business Networks, we have increased the number of IP-VPN accessed by not far from 60%, plus 27% of the first real convergence we have for the enterprise world, which is Business Everywhere. And we have now the base where DSL connection, which represents more than 67% of Enterprise access in France versus 51% a year ago.

Directories. So plus 6% revenue increase, and plus 2 point increase in the gross operating margin. I don’t say more than that.

So, if we look now at the profit and loss statement in terms of cost by nature, let me just to recall one point. Non-labor costs amounted to €21.9b, whereas labor costs amounted to €8.8b. So we should always recall that labor costs are one third of the total. So not to minimize the labor issue that some of you raise from time to time, but on the totality of the cost of the Company, it’s one third.

And you see that between ’05 and ’04, they have slightly decreased. Decreased because of the decrease in manpower offset by a change of the mix. There are some people either by acquisition or by requirement that are more paid than some others. And there is the general increase and salary increase we give which represents an offset to the number of decrease.

On the non-labor costs, therein is about €1b increase. And when we look in detail into it, most of it is related to commercial expense. It was increase of the commercial expense to a fight on the market.

In terms of CapEx investments, the Group CapEx have been increased by 12%. And return now more than 12% to revenue. And in terms of main areas, clearly there is the investment in the new technologies for the broadband fixed network, including the Livebox. You see a very strong part now of Livebox in the investment.

There is a continuous increase in the IT and customer service because one of the key conditions to succeed and to keep the market share is to improve the quality of service. This is one of the reasons for which we have been increasing our CapEx.

Maybe to give comparable figures, if you take out the Enterprise division, our CapEx rate is rather in the range of 15 to 16% which is comparable to the other players who do not have such a strong Enterprise business.

Other items in the P&L. So gross operating margin, plus €500m and a couple of items. Employee profit sharing. I know this is calculated against specific rules. And the increase is linked with the previous year results.

Share-based payment. This is -- you know that according to IFRS and U.S. GAAP rules we take into the labor cost of the Company the attribution of shares, even when the French state is selling some shares, we have to take the difference of price between the market price and the advantage given to employees as a labor cost. But you see that it has decreased in 2005.

In terms of amortization, there is about €1b less. This is mainly due to the fact that we have been reviewing the amortization durations for most of our equipment, [cable] on one side, and real estate items. And because of the introduction of new technologies and the fact that thanks to the ADSL, thanks to the broadband, the [cable] has a longer life, we have extended the amortization period.

Then you have a couple of extraordinary items, on which we can come back on the questions. Just to keep in mind that in the 2005 results, there is about 1.4 non-recurring positive items we will not find again the year after, unless they are good news, but they are not planned today.

Next slide. So operating income is about €2b above the previous year. Financial charges €300m less. We are continuing to decrease the financial charges.

In 2004 the total cost of debt was 6.8%. It’s now 6.46%. Slight decrease. And in terms of income tax, the decrease is mainly linked with some change in the deferred tax assets. We can come back on that afterwards. It’s the reversal of the tax asset provision on Orange and France Telecom S.A.

Because of the good performance of some of the activities where there are minority shareholders, you see the increase of minority interest. This is Directories, Poland, and Mobistar in Belgium. So this explains the fact that you have now €650m of minority interest to give the net result Didier Lombard has been announcing of €5.7b.

The cash flow now. Based on gross operating margin of 18.4b, we come to a net cash provided by the operating activities of 13.4, which is about -- excuse me -- €700m above previous year. And I think it’s where we see we have really a good achievement.

Now, how is the cash used? Out of the €13.3b, €6b have been reinvested in terms of CapEx. You have seen the CapEx before. We got about €200m from sales of tangible and intangible assets to give the organic cash flow already announced of €7.5b, which is probably one of the strongest cash flows we ever posted and, again, good news.

Thanks to the cash flow, we have been able to continue to reduce the debt, which is now amounting to €47.8m compared to the €49.8m one year ago, which allows us, thanks also to the increase of the gross operating margin, to achieve our intermediary targets, our milestone to be at 2.5 times the EBITDA at the end of 2005, after the acquisition of Amena.

Maybe just technical precision. This reissue of 2.48 which is calculated is taking into account a full year of gross operating margin of Amena and the full debt of Amena to be comparable. If we were measuring our debt ratio before the acquisition of Amena, this means without the profit coming from -- the EBITDA of Amena and without the debt of Amena, we’d be at 2.2.

My last slide on 2005, maybe to give a measure of the portfolio of France Telecom, where are we in terms of geographical portfolio. Didier Lombard has announced that we will look much more at the country-based businesses. And we integrate our business at country level. It’s important to have a first view of the split of the activities, as we are trying to do on this chart.

You see that in 2002, the Fixed business was more or less representing 64% of the profit. In 2005, it’s about 50%. And the French part, which was representing 49% in 2002 is now representing 39%. So -- and whereas at the same time the profit has increased.

So this is just to give you a first picture. The fact that the portfolio is expanding, and the risk linked with the portfolio is also evolving. Because of that we are less and less depending on the pure incumbent result, even if it contributes still at a very high level into the profit of the Company.

2006, again, I would like to be quick, but you can read what we have in the documents. And we have tried to organize the document by country. So we look at the segments. But I can quickly start with France and the Personal business in France.

I think regarding the challenge, you know them. Regulatory and competitive pressure. I think also that the MVNOs will have an impact in terms of price and competition. And this is some of the changes we’ll have to face. But in terms of opportunities, through starting the year with market leadership in terms of MVNO and with the broadband offer we have, it will probably give us very good chances to maintain our market share in 2006 on the Mobile business in France.

In terms of Home business in France, the challenges, again, are the same. Note understood now there is clearly the problem of the excess, with the consequences of the full unbundling. The problem of the increase of the Voice, first in terms of price, but also in terms of transition to Voice over IP.

But also there is some pressure, we know that, on the two ADSL offerings. Our view there is that again our positioning again today gives us probably good opportunities to improve our retail ADSL market share. And this is clearly our main objective in terms of business.

In the U.K., on the Mobile business, we should remember that this is probably the most major market, even if there is never major market because new opportunities are always happening. But at least in terms of penetration of mobile equipment, we are at 110%. This means that competition is strong. And that there are a number of players. We should also never forget that the U.K. is one of the big countries where there are still a lot of mobile players compared to Spain, to France or to other countries.

In terms of opportunities, I think here is the opportunity for France Telecom in Orange is to play the game as an integrated operator, using the ability to mix the offers and to present very rapidly a convergence offer. We need to continue the momentum we got in the pay-as-you-go market. And we need to strengthen our pay-monthly position. We need to clearly invest in the 3G network.

In terms of Home business in the U.K., changes are also the same with a lot of strong players on the DSL market and with strong pressure on the market price. Here we don’t have the legacy business to protect. So we can fight very freely on the Voice over IP market. And we will also use the developments we have made here in France. There has been a launch of [Activa] TV. And we see also that in the U.K. to join forces and to rebrand [One admin] to Orange, and to have a common brand for our business there with a strong opportunity.

Spain Personal. Increased level of competition. Introduction of the MVNOs. You have seen the announcement of the local regulator audit. And again, some decrease of the voice termination rates.

Again, we have strong momentum right now. We need to continue to fight in the right direction and to use the leverage -- to leverage the rebranding of Amena into Orange, to increase the value of the brand, and to increase the ARPU.

Spain Home. Maybe just recall, Spain Home for us is 17% market share in Spain, the equivalent of some players here in France. And here it’s a question to bring new offers, especially IP-TV and video on demand, as well as ADSL2+ on the market.

Poland, Mobile business, again has seen the other markets increase with the competition, with the fourth operator operational in second half 2006, regulation. But we have succeeded with the rebranding. Centertel has moved to Orange last year. And this has been a success. And again, we think that with the strong growth in the customer base regard last year, we can continue on the same trend.

In Poland Home, we need to use the lessons of the French market, and probably to anticipate some of the moves that will happen on the Polish market. We need to capitalize on the ADSL business to protect the future market shares.

And then I would say on the rest of the world, I will not comment on the slide, but it’s clearly to take the opportunities to increase the revenue where we can, and to consolidate our positions.

On the Enterprise business, the challenges, again, are well known. Voice decline. Pressure on the data ARPA and, again, the impact of regulation. The opportunity, this is the fact that we have preserved the market share in terms of IP access. We are developing services. And we are really leveraging IP and telecom to create a convergence as well, which includes more as a pure telecom offer.

A summary now by country. I think it’s interesting to look. In France, on top of the commercial and marketing changes I described, there is clearly a challenge to improve the cost structure and to launch innovative services. In the U.K. we have to leverage on the rebranding and the convergence to consolidate the two businesses we have and to better face the increased competition. In Spain, it is to manage integration and also to leverage the rebranding. And in Poland this is to continue the implementation of the integrated operator.

Based on all this, I’m sorry for having been so long, what is -- what are our objectives for 2006? No change to what was said to you and to the market on January 11. We commit, and I think this is what Didier Lombard discussed, there is a strong commitment of the management team. On the organic cash flow, this is the objective, to produce an organic cash flow of €7b, returning a little less than in 2005.

There’s one point I have not commented on the cash flow statement. We have been observing in 2005 a second year of strong increase, excuse me, of the working capital -- sorry, of the working capital. There is a strong improvement of the working capital, about €800m in 2005. We think that it would be not very careful to budget and to commit on the exact reproduction of this improvement, even if we will do our best to continue to improve the working capital.

But to achieve the €7b cash flow, clearly we have to continue revenue growth, even if the revenue growth is lower than initially planned before. We still plan for a 7% revenue growth, which is about 2% in comparable terms.

We are considering that there will be a decline of the gross margin between 1 and 2 points. This is exactly what we said in January. And because of the need to invest and to protect our market share and the quality of our service, we will have CapEx at the level of 13% revenue.

Thank you.

Thank you Gervais. We still have 50 slides so we are in a hurry. No, we only have three slides, just to conclude.

To be very clear, in fact, strategy is one thing. We are sure to have the correct strategy. And now you have understood that we are 100% focused on the operational excellence, on the execution of the change, and we are no more considering any change in the strategy. We are really focused in delivering the numbers and the performance of the Company. That’s very important.

And for 2007 and 2008, what I would like to say is that what we are doing in 2006 is designed to improve our operating trends in the future. We will balance our growth target with the required profitability level in order to deliver a sustainable organic cash flow. This was a repeated message. But it’s very important because it’s exactly the way we will tune everything day after day.

I am convinced, of course, that if the regulation is not distracting or reasonable assumption, and I have no reason to believe so, that I am sure that our operational model can deliver an attractive level of cash flow, while being able to transform the Company in order to sustain it for the long term.

2006 is -- we have a double challenge. Continue to deliver the cash flow and transform the Company at the same time.

Next slide is about the use of cash policy. We have decided to move forward on our use of cash policy because now we have a strong basis. And given that on one hand our assessment, even in the fast-moving market of our cash generation capacity is very strong. And on the other end, the fact that we do not consider that next required majority [decisions], as our European footprint is now sufficient. It is now possible to raise shareholder part of the organic cash flow.

Last June, use of cash was roughly split in three thirds between debt reduction, dividend and remaining cash. Today we have decided to keep our debt target ratio of 2 for the end of the next plan. I think this is very important. And we continue to have this key target. But, at the same time, to raise the dividend part.

For dividend, of course, €1 is confirmed for the 2005 dividend paid in 2006. I don’t think it’s a surprise. What is more interesting is that distribution target for the coming years, which has been approved by the Board yesterday evening, between 40 and 45% of the organic cash flow. And, more specifically, we gave today an indication of €1.20 for the 2006 dividend paid in 2007.

For external growth, we will be very selective and cautious. France Telecom will examine opportunities in fast-growing countries. And at the present time the only opportunity in which we are considering are the investment in Tunisia Telecom, for which we have to determine our opposition before the beginning of March or something like that.

Apart from that, we have no -- forget about all the noise you hear in the newspaper concerning all the big deals which investment bankers are always dreaming to do in Europe. We are happy with our footprint. We don’t do anything more.

Last slide, strong assets to keep lead. We have all the strong assets which are recalled on this slide. We have a clear strategic vision which is set into motion through the product factory, the unique commercial brand, the leverage of the existing international footprint, a leading edge in broadband, supported by integrated and efficient networks.

So we are on the way to become the operator, the service -- telecom service operator in Europe. We will do that quicker than what we have announced in June because our environment is moving quicker. But now we have all the factors, all the assets, and all the procedures which are around me to be sure that we will be successful in this move.

Thank you for your attention. Thank you.

I am sorry because it has been a little bit long, but it was very important after the noise that we have made before and after the beginning of the year 2006 that we give you all the information to reassure you about the way we will manage the situation.

And now we are ready, of course, to answer your questions. But I will ask the members of my team to come on the floor so that you will have the direct answer by the best expert concerning all the questions you might raise, I hope so.

As I told earlier this morning to the journalists, in fact, the way we have selected the members of the teams is that each of them has been previously in charge of the same type of task in different companies, and they are shown to be very successful in their previous -- with their previous track record.

So they are not new birds in this game. They have already flied a long time in some of the companies, being very successful in the same type of responsibility. So that is the reason why I have chosen them, to be as efficient as possible, and not to have to need time to adapt to new situations. They are already in since two weeks.

Okay, let’s go for the questions.

Thanks. Nick Belfast from Morgan Stanley. I’ve got 12 questions, but I’ll try and limit them to four! First of all, on the headcount reduction, could you clarify if the 22,000 are full-time equivalents or part time, and what the cost per head of the reduction is going to be?

Secondly, on the handset side, you talked about pushing for 3G handsets. What’s your thinking behind the push for 3G at this time, given that you’ll need presumably new handsets for HSDPA or potentially new handsets for DVDH in the future? Is there any sense in pushing forward now for 3G?

And finally, well two more. Amena. When you bought Amena, you said that FT Spain for 2005 would have revenues of €4.1b and EBITDA of 1.2, and customers of 11.8. Can you clarify what the actual result for 2005 was?

And the final question is on Livebox, you’ve got a very impressive result. I think about 35% of your customers in France on DSL have Livebox. What’s the ARPU uplift of a home with Livebox, as opposed to one without. Thanks.

So, first question. Headcount reduction. Olivier?

Out of the 22,000, most of them are full-time people. We have very few part-time people. Only in the shops today. So most of them, let’s say, 99% of them are full time.

The cost of the people leaving on the pre-early retirement program is already in the reserve of the balance sheet. So it’s only a cash impact. And for the other cost, for the other kind of departure, for instance, mobility to civilian administration in France, it was roughly slightly above one year of selling.

Okay. The next issue is answered, of course. The question you raised is a key issue because the way we managed the strategy was you have opened the different paths we have in front of us with changing the HSDPA, the TV -- the broadcast TV on the same terminals. And there are many others, of course.

And of course the way we will spend money on the handsets if a very fundamental issue which we have to take care very carefully. But Sanjiv, you are head of that.

HSDPA, as you know, handsets are not ready yet. We are demonstrating HSDPA as we speak in Barcelona with Amena right now. And we are doing trials of that in both U.K. and France. We expect handsets and data cards to be ready second quarter and third quarter timeframe.

Customer experience will also evolve over time. It’s not ready to be launched or we would have launched it. But just like we did the transition from 2G to EDGE, to now we are going to 3G, it has to be prudent and gradual. It is not a sudden transition from one to the other technology, and never that you stop selling one technology and you just start pushing the other technology. You have to do it gradually. And not all customers need HSDPA on day one. They will need that over a period of time. And just like not all customers need or require 3G immediately.

So we are going to continue to sell 2G and 3G for the rest of the year and into the next year. And even as we look at our plan cycle, 2G continues to play a very important role. So we expect 2G, 3G, followed by HSDPA later in the year into next year. And it’s going to be one on op of the other, not stopping one and starting the other.

I think behind that there is the issue of segmentation of the Mobile market. In the present situation, there are a kind of race where all the young people try to purchase their dream to have the most sophisticated terminals, including a lot of features which they will never use.

And, in fact, for the future, I think we have made some very specific analyses in terms of segment -- market segment. We think that we will have several segments very precisely defined. For example, people who are very fond of TV. I am not so sure they will be very good consumers of ISP data transfer because they are not -- there are no faces or they are not really professional.

The real direction I have in mind is in fact, at the end of the game, people will have their mobile in their hands and they will be connected to the WiFi when they are in the airport or to their line box when they are at home. So you will have, at the same time, different types of customers with different approach of the way we will sell terminals.

But we are not yet at that time because we are still in the mood of people willing to acquire everything, even if it is not useful. The market is evolving, for example, quicker in the U.K., where perhaps people are more pragmatic than in France or when you are in the rest of the world. We still have the [organization] reaction, which is I wish to have the best terminal, whatever is the situation, even if we don’t have GPRS in the country.

So it’s a key issue because we can spend a lot of money on this issue, beyond these items, without having revenues in front of that. So we manage that very carefully with Sanjiv, who is very focused on that.

The next question was about Amena. Do you have the figures? Last week he was responsible for Spain, so I assume that Gervais --

I have already forgotten the figures. No, for last year, the total revenue was €3.85b, with total GOM of €1b. And just to recall that there were 10.3m mobile customers, about 600,000 broadband customers.

And for 2006, the target is above 4.1b. And Spain is including Amena and the broadband business -- fixed broadband business which is branded up to now Wanadoo.

What we can say is that the leaders we have in Spain, the two leaders we have on both sides on Amena and on FT Spain are very good leaders. And so we have no doubt that that’s affected. First they will realize the synergies -- the gain with the synergies. They will be on the trajectory for 2006 without any problem.

For Livebox, I pass the floor to Olivier, who is really the best expert in Livebox. He has realized excellent performance with Livebox.

Thank you Mr. Chairman. Perhaps we can go directly on slide 86 where you get the evolution of the customer services ARPU for Home. And what you can see is the evolution of the ARPU. That is the answer I can give you because you can see that the ARPU is pretty stable during this period.

Equivalent ARPU for home was 26.9, and end of December ’04, and now it’s 27, out of which you got 3.9 in online and Internet services, growing to 4.7. And in this 4.7 you have got the ARPU coming from the Livebox because the consumer who’s got the Livebox is paying towards €3 of monthly rental fees.

50% of them are subscribing to Voice over IP, which includes €10 of unlimited fixed access. On top of it you’ve got an ARPU for the fixed to mobile. And you can see that globally this increase of ARPU largely compensates the decrease of the PSN, which is reducing from 10.8 to 9.5.

Thank you. What I would like to say concerning Livebox is obviously that it’s more efficient than the increase of ARPU which is quoted now, because in fact, for all the future products we have in preparation in the product factory, Livebox is the entrance point to accommodate all the signals which will be available in your home.

At the end of the game, you can dream of a situation where you have the Livebox. You communicate inside in the home. In fact, if you don’t need to link with the outside world. In fact, you will have the link with the outside world. But even as a box, allowing you to transfer the images, the sound, all the information between the different terminals in the house, it’s a plus. It’s a kind of -- it belongs to the Home business.

And moreover, they are connected to the external world. It will be, of course, for us a key asset also when we will deploy the [FTTH] because it’s also the way we will deliver the signal inside the home. We cannot afford to destroy the interior of their apartments when we arrive with the fiber to the home connections. So we are connected -- we will be connected to a Livebox. And then even the [HGTB] signal will be delivered directly through radio links to the TV or to all the terminals you have in the home.

Please?

Just to clarify on Amena, so you’re expecting €1.2b when you bought the asset and it came in at €1.0b. Is that right? And what was the reason for the shortfall in terms of EBITDA? In the press release when you --

Sanjiv can answer the question.

Shared both Amena and Wanadoo, our FT Spain business, which includes both our fixed line and our mobile business. Also there is an IFRS adjustment to the number that we had shared in the middle of the year. So if you take that adjustment, we are on track on what we committed for all of last year.

It’s an IFRS issue, but we can give you the details if you want.

Okay. Next.

I’ve got a mike, so I --

You have the floor.

James Britton from Lehman Brothers. Three questions please. The first two on Mobile and then a more general one.

So, first question. There’s a pretty marked divergence between the level of customer investment in France and the U.K., your main units. So obviously U.K. at about 33% of revenues and France 19%. Are those normalized levels of investment in both markets? And can you perhaps wrap that into anything you can say on margin guidance for those markets?

Second question, on Orange France, more specifically network revenue growth fell from around 18% in Q3 to below 10% in Q4. There have been some exceptionals in that figure. Can you just help us strip out those exceptionals and focus in on the pro forma growth rate for network revenues in that quarter?

And also on slide 58, you talk about market growth in France being driven by MVNOs. Does that imply that the market’s going to be pretty much flat without the impact of MVNOs?

And then just a general question, just interested to find out what sort of changes you are likely to -- or your are planning in the role of the finance function at France Telecom, and more directly to Mr. Pellissier, what opportunity have you had to conduct a thorough audit of the internal targets or external targets as well that you had inherited? Thanks.

So, concerning the Mobile, perhaps Sanjiv and then perhaps Didier for the French issue. First Sanjiv and then Didier Quillot.

So James, let me start, and I’ll -- first customer investment in France and U.K. They are pretty comparable to what the industry is in those two markets. And we expect similar investment this year. And we essentially are expecting, as we have shared with you, not a significant change in the margins.

I do want to point out the U.K. margin numbers though. We started the year, first half was 27.2%. And we closed the year at 28.3%. If you put the brand fees and management fees back, which we did not use to report to, and our competition doesn’t report to, that’s another 2.3%. So we closed the year at 30.5% on gross operating margin in the U.K. market.

But you’re absolutely right. Our customer investment in the U.K. is significantly higher than customer investment in France, and that’s representative of market, although the customer and user prices are significantly different. It’s just the value chain is different. We go through a different distribution channel.

I’m going to pass it over to Didier for the rest of the question. I’ll just make one remark. On the fourth quarter in France, a significant part of the cut was due to the SMS rate cut. And now I’ll pass it over to Didier.

So Didier, on the French market.

Good afternoon. So you have two questions. One on the revenue growth Q3 compared to Q4 and then one on MVNO. On Q3, year-to-year growth revenue was 4.5%, when in Q4 we did only 1.5%. We think one explanation for that. Number one, IFRS adjustment on a full-year basis passed on Q4, roughly €35m.

Second explanation was termination rates cut, as mentioned by Sanjiv, which was decided by IRT, November 1, starting July. So you have six months effects of termination rate on SMS cut which is €50m. Total 50, which is 2% year-to-year growth.

One point is missing which is simply due to high commercial aggressivity, promotion on services, unbundled free minutes of TV, free minutes of voice that we do every year on Q4. All of that explained that Q4 ’05 to ’04 was 1.5% compared to Q3, which was 4.5%.

Your second question on MVNO, MVNO in Q4 ’05 took 9% of net sales. So to your question, the net growth in ’06 will not be done only by MVNO, fortunately. Our anticipate -- our forecast is that MVNO in France will take roughly 30% of net sales for Q4. Net adds, not sales. And that’s for Q4. This is our forecast.

Keep in mind that in terms of MVNO we are at 60% market share. We are hosting two main MVNOs and we have the highest market share compared to [2004]. So we do believe that we will be the one who will profit more about MVNO growth in ’06.

Thank you. And Gervais?

The answer is very simple to your question. I have been hired by France Telecom mid October. I have accepted the proposal made by Didier to join the General Management Team, so I am part of the team okay. Simple answer.

Hi. I’ve got a mike here so I’ll go ahead.

I’m sorry, you’ve got the mike here. Okay, fine.

It’s David George from Credit Suisse. I wanted to just focus on the cost-cutting areas. If we look in the presentation, there’s three areas of cost cutting, the 2b saving cumulative that you mention from sourcing and support. There’s 2 basis points on margins from IT and network savings, and then obviously there’s the headcount comments you’ve made today of a net 17,000 reduction.

What I really wanted to understand was to what extent should you view those as very much three discreet areas, or to what extent do they overlap. And particularly on those headcount cuts, do you need those to make those savings in those other areas, or again, is that very much a discreet area of saving.

And a second question, trying to be a bit more specific on the operating margin for France Home, which I know is not a number you disclose, as such. But I’m interested in getting some guidance for the medium term outlook, or at least a two to three-year outlook.

If we look at the balance between top-line pressure and that cost cutting, should we expect that margin in France to be flat going forward? Can you actually increase the margin from here? Or, indeed, is there risk that the margin for Home France goes down?

Thank you. Returning as overlap of the cost cutting, perhaps Louis-Pierre, you can make -- you are the father of all this cost cutting, with Jean-Philippe, who is there. Give your point of view and then I will complete the operation. You answer.

Yes. You’ve seen on the slides that we have already identified clearly around at least €400m savings in our resourcing plans. Why can we identify them so early? Because we have a rolling plan and we have currently a lot of negotiations going on. Plus the contract we signed at the year end so that if we made the comparison, that is what we will pay this year compared to what we paid last year.

We are almost sure that we will exceed this €400m. Which, if you take the €200 -- sorry, the €2b over three years, it makes 3 times 400, which is already 1.2. So if we just do something like 200 or 300 next year we will achieve our target. So my wish is to come back to you in a few months and say it’s now more than €2b that we will achieve over the three-year period. But we are careful people, so so far we say only €400m this year.

In fact, you’re right in when we look at all the projects we have in the cost-cutting issues, most of the time we have no [inaudible], but we have borders between the different issues. And what is important is at the end of the game we can really win.

And, for example, as you asked on the operating margin in France, I have delivered a speech this morning and perhaps you have understood through what we have said that we will simplify the structure in France. We have inherited some structure which come from the old administration which means that the format is fully copied on the administrative organization of France. In each big towns which earn capital you have our structure with all the stances and things like that.

So obviously, we have to evaluate because the business is not organized like that. On one side, we need to have some representative in front of all the politicians because we need to avoid that they make too much expense in networks which are parallel to ours. So we need to have local people. But we don’t need to have full staff everywhere.

We have to simplify the organization. And when I tell that I will reduce the number of level in the decision-making process from 11 to 6, it means that we will simplify the structure to come to, let’s say, a normal company organization. You can consider it’s a day-to-day business change, but in France Telecom it’s quite different because they have long traditions, so we will have to do this being moved.

And then you can imagine that we will not win anything because all these people that we have in front of us. Of course, I have announced that we will have some reduction of the labor. But we cannot drastically reduce the employment. And so you can believe that we will not have cost reduction behind that. We will simplify it. But not -- we are not sure to have cost reduction.

But in fact, it’s not the proper approach of that because we have the labor cost expense on one side, and the internal expense on the other side, which means that we used to hire external people to be in the shops on Sunday, on Saturday, and during -- to have full attendance in our shops. We hire external people, which cost us a lot. And at the same time, we appreciate it that we have too many people in the support functions.

What we will do will adapt the structure to have more people in the shops, more people in the commercial channels, and we will spare expense on the, what we call, external expense.

So the consequence of that will be that probably the operational margin in France will improve. But it depends on the way we will do the jobs in the reorganization I have mentioned during my presentation. It will be the [whole] transformation. But we are fully focused on that.

I think the advantage of the crisis we had during the Christmas period and the beginning of the year is that now everybody appreciates that we have to move. And with a big organization like France Telecom, it is easier to move when you are in a crisis mode, more or less, than when you are in a smooth move. So I am pretty confident that we will realize this change.

So, excuse me for these comments, but it’s a key issue. We have to be successful in this transformation. And the last factor is that Louis-Pierre is in charge to be successful with this transformation. He has good experience to realize that under other sky, if I may say so.

Okay. Next question.

Bonjour. [Pierre-Antoine Machant], Exane BNP Paribas. I have three questions please. First of all, can we put a figure behind the organic sustainable cash flow that you target for ’07 and ’08? Is that the €7b that you would like to generate in ’06?

Second question is a follow up on the network revenues of Orange France. The question was really on network revenues. So excluding handset sales, those were growing I think close to 7% Q3, excluding negative impact. And they are flat in the Q4. So I understand there’s a 2.5% impact from what was said. But you will have more than 4% drop. Is my analysis fair or not?

And third of all, can you explain what is behind the 7,000 departures a year we will have in ’07 and ’08 in France? I understand there are some moves in administration -- French administration. I was not aware that it could be as high as 7,000. So if you could elaborate on the different drivers we have. Thank you very much.

Okay. So first question. The sustainable -- on the gross -- [inaudible], I do so, but you have -- we, on the gross margin -- this is a question on the gross operating margin that was raised. [Inaudible - speaking in French].

That the 7b is the sustainable cash flow over the last three years. Now you -- over the last three years you have said so.

Now, again, you understand that with the change we have described in the industry, with all we are doing, I think we must remain careful. I think it’s not only the target, but it is also visible, based on the evolution we see today. However, we would like to remain careful on it.

Okay. The second question concerning Orange.

Okay. Let me just repeat what we said earlier. We said it’s actually a 3.5% net revenue growth. 1.5% at ARPU level. 1.5% was the IFRS adjustment that we talked about and 0.5% was the SMS termination rate cut. That was November 1 announcement, effective July.

Also, as Didier Quillot stated earlier, a lot of promotions were put out in the fourth quarter. So that’s what you saw the revenue growth change in the fourth quarter.

Okay. The third point concerning the departures. Olivier can tell also because a marvelous story to tell about that. Tell your story then I will tell my story.

The question is about the breakdown of all the departures. We start from 17,000. 17,000 is a worldwide number. It takes into account a decrease of 16,000 in France, and roughly 1,000 in the rest of the world.

Over the next three years, out of the 22,000, we have different kinds of things. We have the pre-early retirement program which, by the way, ends up at the end of ’06. We have an ability to stay with French administration. We have spin off for where more and more employees of France Telecom exits the Group and it creates a business.

We have also a new program which is named voluntary leaves, where we are currently bargaining with the unions in order to have voluntary leaves program. And then we will -- we are about to implement a new part-time pre-retiring program which will be offered to the people who are, let’s say, at two or three years from retirement.

At this stage we don’t want to disclose any breakdown between those different levels.

The 22,000 you quoted full-time equivalent. So when you talk about pre-retirement part-time program -- okay, if we have three people being in part time or one [inaudible].

Yes.

Okay. Thank you.

Okay. The way, just to be more specific about this program, the way we present it is the following. I will give you the full presentation so that you will be aware that it’s very credible, in fact.

The first issue is that we need new talent. And we rely on 6,000 people because the new business on which we are operating the networks and the services are quite different from the past. And at the end of the game, of course, we have to move to our young people in order to renew the workforce of France Telecom. That’s the first issue.

The second issue is that we will move more than 10,000 people inside France Telecom, who will change jobs inside the organization due to the move I explained to your colleagues a moment ago, which is -- you can consider it a huge number. When you introduce training programs and a lot of things in between to [inaudible] people that they can have advantage in this move, this is a key issue in the realization of the objective in terms of margin in France. We have to move the people where we need them.

Then, I come to the early retirement plan. The early retirement ends at the end of ’06. And we have a lot of people who are very sad about this interruption. I receive letters off people who tell me you are condemning me to work five years more, which is in this world, for me it’s -- I am 53. I am a little bit established when you are 54 to say that you are condemned for five more years. But it’s life. I can understand that.

So, of course, we will not continue to the CFC program because obviously it’s different rules. It’s too expensive. But we will offer some special facilities which will allow people to have some personal way to manage their life after 55.

And then we enter a new game which is I don’t see why, if I open the game for people who are more than 55, this game is not open for normal people who want to deploy new companies, to open business around France Telecom. And this corresponds also to a need because a lot of young people inside the Company, they are pressured. They can make business, not in France Telecom but very near for 12 customers to light up the light bulbs, to change their installation inside their own. They believe that they can create a one-man company. And France Telecom is obviously ready to send the customer in this direction.

And, of course, we will help them to create that with the advice and all the things which are needed for people who start as entrepreneurs outside our walls. And when we make all the statistics, we reach the numbers which Olivier quoted, which is 22,000 people, willing to leave during the three years. And you subtract the 6,000 recruitment, and it makes 17,000.

It’s a clear -- that’s the presentation I make. I am pretty confident it’s a good way to proceed because I can understand the people which have been hired 10 or 20 years ago in a kind of administration, they are entering in a tremendous job in which we are operating the Company with time to market, with reduced reaction, with very short reaction needed. There are no more in administration. So for some of them it’s very difficult to accept it. So now, we try to manage the transition towards new way of occupying their life.

Okay. Excuse me, it was a long answer. But I think it’s very important for the credibility of the process that you can understand that we can do that with the agreement of the people.

Okay. Next, if I may.

Hi. It’s Damien Maltarp from Cazenove. Three questions. The first one, back in June you quoted some data indicating that you thought that the French market in terms of fixed and mobile would grow by about 3% per annum after 2008. Given what we’ve seen over the last few months, can you just update us on your view on overall market growth, perhaps how that’s split between both fixed and mobile?

The second question is on Spanish broadband. In your slides, you talked about a 20% share of conquest. If I look at your actual net additions, you seem to be only adding about 7 or 8% of the net adds -- net broadband adds in the market. That to me suggests there’s probably quite a high churn effect taking place there. Perhaps you could just give some details on that.

Conversely, on Spain as well, it seems that your ARPUs are growing quite rapidly. It looks like you had a €20 in the fourth quarter. Again, these figures just don’t seem to quite add up. So perhaps if you could give some color on those.

And the final one is probably a clarification on accounting of Livebox. My understanding is that you recognize a €3 monthly rental every month, but that’s probably got 100% gross margin connected to it. My understanding is that the Livebox costs are capitalized, and therefore that cost will come through on the depreciation line. Am I right in assuming the gross margin’s 100% on that? Thanks.

Okay. Concerning France, I don’t know if we have the answer concerning what we have said and what is the situation in the market now. I’m sorry, let us think about this question.

Can I talk to the Mobile part?

Yes.

As far as the Mobile part, we expect 2 to 3% growth rate over the planned period, just like we had stated earlier, last year. So that’s pretty consistent for the Mobile part.

Okay. For the Spanish broadband, in fact, the numbers of the -- which concern the Spanish broadband, you know that in Spain, the regulation is, if we can say so, Telefonica-friendly regulation. So at the same time, it’s a difficult market. But we can also use because when you have win customer in this kind of atmosphere, they are more or less civilized.

And concerning the broadband market in Spain, the very good news concerning what is happening now is, in fact, the move we have made with Amena and the fact that we have, let’s say, decided to go in this market the Spanish way. We have nominated the Chairman which is the old -- Amena’s previous chairman, and we have really showed the Spanish market that we will be, in fact, the second Spanish telco. It means that now people consider that we are really member of the family, which, as the report I received recently, shows that we are customer friendly with respect to our Spanish friends.

I don’t know if Gervais, who was in Spain last week, has some feeling about that?

We are positioning ourselves the way Didier Lombard described. Just to recall that the average conquest rate is 20%. But it’s true that our market share is 17%. It has slightly increased. There is some churn, you are right. But not more than what we expected.

Maybe -- I just wanted to add an additional comment on the French market. It is true that the French market is between 2 and 3% in average. But I think for France Telecom, in this maybe we are not completely precise in reiterating it, we have a limit which is linked with the regulation. Because the regulation is a fixed business, we cannot switch with our offers the -- we cannot fight completely to gain the same level of market share to offset what we lose in the traditional voice.

So this means that we fight as much as we can. And we need to fight even more. But there is a kind of arithmetic limit to our ability to be at the same pace of growth of the overall market because of this regulation effect.

Concerning the Livebox, continue of the Livebox, Olivier, do you want to make any comment about that? [Stephane] the same.

We work on the [inaudible]. So it’s okay for us. So what you say is actually completely right. So Livebox are rented for €3 per month. They are capitalized and they are depreciated. Right now, over a three-year period. And, of course, we will review this length if necessary. But at this stage that’s the current accounting treatment.

Thank you.

And it’s a 100% margin, as you say.

Perhaps an extra comment about the French situation. In fact, we believe and the European commission is start to consider it that we are more or less at the end of what we can say described as an asymmetrical way of regulation. And we will enter, I don’t know exactly when, but when all the commission will have gone through all these procedures.

But I think we will enter in more symmetrical way of regulation. At the present time, the situation is exactly what Gervais described, which means that cannot -- we are not allowed, in fact, to reach the maximum potential we have in terms of market share everywhere.

So we are limited by different process, in particular by the fact that some of our tariffs are fixed by the regulator. And usually fix a higher tariff which, in fact, make us not competitive with some of our competitors. But now that our market share has rose significantly, there is no more reason why we continue on this mood. And everybody understand that.

We were in Brussels last week with all the CEOs of the main telcos in Europe. And we had an interesting discussion with [Vivien Reading] and with President [Baroso] about all these issues. It’s a long way, but we have made some progress.

So, oui?

Good afternoon. [Alain Defitte], Fortis Investment. Just going back to your M&A strategy, you said it would be prudent and selective. But at the same time you said that France Telecom is a reactive, increasingly reactive company. Just one question, would there be a nice asset going up for sale in market -- sorry, you would not describe as fast-growing, you would simply not look at it?

And the second part of my question is about the way that type of, let’s say, acquisition would be financed. You used also to give some guidance in terms of size of acquisition. So can you say a word about that?

I will be very clear about all this. First of all, when you look at all the conditions we have issued, and the papers saying that we will use our cash to reimburse the debt to deliver the free cash flow €7b, and so on, and so on. At the end of the day, the remaining amount of cash available to make acquisition is very low, except if we arbitrate some assets against some other assets, which is, of course, solutions.

If we think we have more interesting assets with a fast-growing rate or something like that, we can think to return something. But, as we have done recently, we get rid of some investment which was, let’s say, less efficient than the new investment we had.

So there is not a wide space for new investment in our cash policies. That’s very obvious. So don’t be afraid about that.

The second matter is I was willing to be very clear concerning European investment because you have a lot of people who are playing monopoly with the telcos in Europe. So as far as there is somebody who moves, I receive signals. Usually, it’s on Sunday afternoon. The Sunday Telegraph used to say France Telecom will buy, and then you have Cable & Wireless or - okay.

At the beginning it was funny assumptions. But at the end it becomes to be a little bit startling. I find that a little bit stupid, because if you look at the asset, it doesn’t fit in the definition I give to you because it’s not fast-growing. Perhaps, okay, I will not describe the reason why it’s slow.

But if you look at all the assets available in Europe, I think big assets which mean that more than 1b. None are of the category which we can focus on because they will not give us any extra growth. They will provide us a lot of problems with the integration because don’t forget that even when you are on the paper, when you have a lot of synergies, in fact, when you have to really deliver them, it costs a lot. It’s a question of time and so on and so on. And so it’s not very attractive.

Moreover, in the European areas, with the footprint which we have, we have enough customers to amortize all our expense in terms of R&D, marketing, when we define a product. The question is how many customers will use it in order to make the balance sheet? It’s exactly if I was a car manufacturer, I spend money to develop a new car and I must sell millions of units to amortize the expense. So the European footprint is enough for that.

What is very obvious, and Gervais made a comment about that, is that the revenue pattern of France Telecom is a little -- is changing. A lot of our revenues and of our goals is coming from what we call the ROW, the rest of the world. And obviously this is an area where we can have some opportunities. Very reasonable opportunities.

And at present time the only target we have in mind there is, as I mentioned earlier, well it’s public so I can tell you very frankly, we are candidate for Tunisia Telecom. I am not too sure we will win because it’s a question of price competition. And we are at the beginning of the process.

If you look at this asset, if fits exactly in all the conditions we have in mind. It will not be too expensive or we will lose it. The growth is very quick. We have a lot of relationship with them and so on, and so on, and so on. But I cannot give you a list of more than a very small number of assets which fit in these schematics.

So now we are no more thinking of external growth. We are really fully focused on the operations. We have to be successful in deploying the strategy of the integrated operator.

If we are successful at the end of the game, we will make more than the objective we have given you, more than the €7m which is the minimum which we have committed to deliver. And then, perhaps, we can see the future with a different point of view. But between now and this opportunity, we will have a lot of meetings together. So you have many opportunity to raise questions. Today, to answer, we are fully focused on the operational performance in France and in Europe.

It’s clear? Okay, thank you.

Hello. Bonjour. Frederic Doussard from Oddo Securities.

I don’t see you, but --

I’m here, just in front.

Okay. Sorry.

Quick questions. One regarding the reduction. I understand that it’s too early to give specific guidance on departures. But you mentioned your program, voluntary program, the part-time voluntary program, mobility to the French administration. Is it possible to have an idea of the order of importance of the breakdown? In which segments can we expect the most important of your reduction?

Second question regarding the Enterprise business. You were interested by Telindus. Do you still think that you need to do a small final acquisitions to improve your product and your market shares?

And third question, regarding content, do you already have an idea of the amount you expect to spend in 2006 in content and the evolution you expect after 2006? Thank you.

Thank you. The job reduction, I don’t think we disclosed the split between the different programs, but Olivier.

We don’t disclose the breakdown between the different programs, but the 22,000 is the guidance.

It’s the reason why we believe the 22,000 is fully realistic is exactly the same weight we have achieved during the last three years. And now we have, for example, for the program concerning the move to the administration, it can be the new laws we have obtained, the new regulations we have obtained, is something which is very positive for the interested workers, which is that they are allowed to move, to enter the administration without any disturbance in their capacity to progress in the administration which receives them.

They get some incentives which compensate really for their loss of salaries because usually they are better paid by roughly speaking 10% in France Telecom. So we compensate for this difference. And the administration which receives the workers receives also some subsidies. So now this thing is fully operational and we think that it will be very productive because it’s a plus, plus for everybody.

So we have a lot of candidates. We just have to organize the process so that everybody knows the advantage of the situation.

Concerning those are the figures we have in mind which we will not disclose, we already have a lot of message from internal people from France Telecom and they are ready also to move. We will be very, very careful about the way we will authorize them to have their personal project because we are not willing that they take the money and that after two years they come back to us saying the business is very difficult. You sent me to a trap. We have really to give them all the conditions to be successful.

I have already done that in my past area with [operators] in the industry. And it has been very successful. If you take really precise monitoring -- if you have precise monitoring on the conditions which you leave the people leave the company.

For Telindus, behind that there was several issues. First of all, we had competition issues with our friend of BT. And it could have been very disruptive for us if BT has won this asset. The second issue is, of course, there are a lot of very experienced people inside Telindus.

But I don’t think we will have war with Telindus in the future. We are on the way with -- they need to restructure themselves. As you know, Telindus was in a restructuring program which they have to accomplish. And it will last two years. But at the end of the day I think we can cooperate with them instead to fighting with them. So we are not really sad on the exit of this discussion.

I had a good meeting last week in [Devus] with the CEO of Belgacom. There is no reason why we cannot work together on some issues. And I think it’s a good way because for some products it can be good for us to capitalize on set of customer which doesn’t really belong to France Telecom, but for which their telcos are ready to adopt the same standards. It’s the way we have started GSM story a long time ago. There is no reason why we cannot move the same way with our level, and especially with the Belgian market.

Concerning contents, we will not spend huge amount of money to buy contents. First of all, to be clear, I used to say that to my friends of the content industry. I will not [inaudible] to you in Hollywood. So they are subtracting orders from people who have done that before.

It’s in fact two very different jobs. And so it would be very dangerous for France Telecom to do something which is not its specific job. So we remain on the distribution, on the network, on the delivering of services. But we are not in the job of producing the content. So we have to be very clear on that.

And concerning the cash out of the content, we are in the range of, if I don’t make any mistakes, for 2006 our anticipation is that we will spend approximately €200 to €250m for the content, which is not a big disruption with what we have done earlier. But we will not spend billions. We will spend €0.25b. No more.

Somebody has the mike?

Okay. Jacques De Greling, Ixis Securities. I have four questions if I may? First, I would like to check when the fine from the Conseil de la [Competence] was paid. Was it paid in December?

And second, the tax effect, the tax reduction was mainly due to reassessment of the deferred tax position. Should we expect any similar trends in the coming years?

Third question, could you comment on the trend in fixed line numbers in Spain because there seemed to be quite a decline.

And the fourth question, regarding your guidance, I would like to check which kind of regulation you have included in your guidance regarding SMS termination. Is it the current level of SMS termination growth which is 20%? Or is it the total termination decline which is minus 50%. And do you include any change in the retail prices in SMS? Thank you.

Okay. First answer is very simple. We have to pay the fine before the end of December. And I can tell you it has not been useful for the French budget because as we make appeal this cannot be [conceptualized] in the French budget from Brussels’ point of view. They are waiting that the Appeal Court take its final words.

Concerning the tax -- the deferred tax.

Regarding the tax, there is about €900m of non-recurrent positive effect which is the first recognition of some deferred tax assets, mainly on Amena, with the integration of Amena in the Group. And there was a second reversal of tax asset provisions on Orange and France Telecom S.A. which are one-shot impacts.

So we don’t expect to have such effects on the tax assets in the future. Just to recall that, there is about €7m deferred tax assets in the balance sheet of France Telecom, and about €7m not accounted for in the balance sheet.

Okay. Concerning the Spanish situation, you have got the answer?

Yes. Regarding the Spanish situation, it’s true that the traditional fixed lines are decreasing. But they are replaced by what we call [navigable]. And in terms of total line, we have increased from 870,000 lines at the end of 2004, to 1m and 46 lines at the end of 2005. So again, it’s a switch in the mix.

If you just analyze one piece, one piece especially looking at the remaining, when I said, when I was presenting as well, there is no legacy business in those countries. There were some small legacy fixed line businesses as well which was highly [speaking] in the past.

Okay. So for the assumptions in terms of regulations which we have incorporated in the Mobile business, in fact, I have in mind, perhaps, if Didier can make some extra comment, the situation is much more complex than what you have quoted. We have -- there are a lot of issues which are on the table with the commission in particular. The next -- the last issues which have been published is the roaming, which is we are going in the Soviet-Union type of regulations. The price positions are regulated. Okay. Fine.

And the answer is we have anticipated a part of all the issues you have mentioned that Didier, with the guys who have assembled all the data, knows, as he will be [finding] he don’t realize his numbers.

Your question -- good start. Okay, your question was on the SMS termination rate. So they were first cut 20% November 1 application, July 1 in ’05. After you are speaking about another 30% to go to minus 50 media. We put an assumption which is somewhere between minus 20 and minus 50 for termination rate. And the very small impact on end user retail price because we are not, at least as of today, we have not seen anybody doing stupid war on SMS and user retail price.

And for the rest of the section, we don’t disclose them because if we disclose them, tomorrow [inaudible] will come to us and ask for a reduction. So it’s a pretty game we are in. So it’s a bit difficult to communicate.

Next.

Hello. Yes, [Terry Cotazes]. Societe Generale. Two clarifications please. First on the staff reduction program, could you tell me what are going to be the incremental costs on top of the existing retirement program? How many hundred million of euros are we going to have to account for in the cash flow statement? First.

Second, is there any attrition in the 17,000 net people leaving the Company, or is it all people that you are going to have to pay for them to leave? And what kind of breakdown, over the next three years, do you expect? Is it front loaded with the pre-retirement program and some extra people in ’06, and then lower numbers over the next years?

And the second point was on revenue guidance. You have indicated that you expect over 7% at this point actual growth rate, compared to 7% previously. What has led you to increase the number? Is it a better -- are performance expected or anything else?

And lastly, going back to a point that we’ve just raised on Orange France revenue guidance for 2006 organic. In the context of what you said of, if I’m not wrong, stable market share for Orange France in ’06 which I would say would be for the first time in three years. And second, you indicated market share of net adds MVNOs in Q4 of 30% for ’06. Is that -- did that slip your mind? Did you want to say for the whole year, which would be consistent with what [inaudible] is saying. What kind of growth rate do you expect with these factors please?

Okay, a lot of questions. Concerning the cash flow --

Concerning the cost of the, let’s say, departures versus the next period in terms of cash. You know that, until now, in the cash flow we are continuing to cash out for the current pre-retirement program. In 2005 it was about €900m. This will decrease but continue until 2011, and the cost of the new program, let’s say, of the future departures will not be over, the decrease. So this is that, in terms of cash flow, it will not create new cash expense over the next period. It will slow down only the current decrease of the CFC program which was full year reserved for in ’96.

So, there will be some cost which has been described before by Olivier, but they will be paid out across the period. This is an every year cost okay. This is the first answer.

Concerning the revenue growth of the 7% -- real terms.

I think the 7% -- yes, the 7% in real terms is linked with -- it’s true that with the numbers we have an anomaly in 2006 should grow, more or less, at this level. This is our expectation. But it is also linked with the growth in some of the rest of the world countries we have been describing. I don’t think there is any change regarding the growth on Western Europe.

Didier, for Orange, he knows better the number of SFR in front of you and compactivity of the numbers. So two or three comments. Number one, as it was mentioned by Sanjiv before. The guidance that was given by Sanjiv was 2% to 3% ’06, which is we believe comparable to what some of you told us a few weeks ago. After meeting with SFR we understood that there were around 2% [too here], that was your numbers. So this is not far from we are seeing ’06, for number one.

For number two, in terms of market share, the slide then shown by Didier Lombard or Gervais Pellissier was talking about value market share and not subscribers’ market share. Remind the slide. I don’t remember which [was] it, but we’re talking about value market share. If we can target maintaining value market share, this is because on MVNO, as I said before, we’re seeing an MVNO of with Orange on Tele2 [inaudible]. We strongly believe that our market share on MVNO and on [Warsell VNS] will be above 60%. And, as you well know, that our MVNO are not really MVNO if I can say so. They are Internet service provider with a retail minus structure. This is the reason why we can target maintaining value market share, even if MVNO are taking 17% of net adds in Q4, because on this [17%] the main part will come on our network.

Okay. Last two questions. Please.

Bonjour. [Miles Avenee], ABN Amro. I would like to have your feel about some surging new technologies, more especially the -- I have one in mind, the mobile Voice over Internet protocol. Is that people are dreaming, or could be make an additional challenge to your competitive environment? And maybe the timing, where you think you will be seriously addressing that?

That’s a good question because that’s a good example of one technology which exists. You can experiment in -- even if your mobile today you can have your connection with Skype on your -- I don’t make [inaudible] for Skype but -- my [inaudible] if we prefer on your mobile. But the issue now is that the protocol is complex and the link has a very poor quality. And so, what we have observed is, in fact, the customer doesn’t really adopt this new feature because they are not engineer in fact. And so, at the present time, I don’t think this will be a very practical issue.

For the future, I think, after two or three years, we can obviously have some software which will be more easy to incorporate in the mobile to do the same. But the structure of the cost for our customer is a little bit different from what it was for the fixed lines once Skype was very successful -- about to be very successful, because a large majority of our customer their bundle of tariffs, they have video telephony, they have TVs, they have a lot of resource services. So, in fact, I think this will arrive too late to be really operational, and if this happened then we will fight by doing the same as what we have done, what we will do in a few weeks on the fixed line.

Perhaps you have read, we have made an announcement - not a high level of noise - but, nevertheless we made an announcement saying that we will open a WiFi Voice over IP system on our networks. It will be issued in two months from now. I advise you to test it because then, you have the impression to be in the room of the people you have in front of you, with all the noise. If there is a baby crying somewhere you hear that it’s in the corner of the left of the mic. So it’s a very good feeling - quite different from the normal phone and, of course, we can charge something for that. So, if people move with this new tech you have described, we will soon move at the same time with the WiFi.

Because, Voice over IP is not a drama. The issue is what percentage of the customer you get back at the end of the game. We have been late by two or three months in establishing these new features. A big pressure and Olivier knows that, since two years I am pushing, pushing, pushing, but it’s very difficult to be the CEO of the organization because you know that you have cast shadows for people to follow you. Now it’s easier because I have not so many people around me, so it’s easier to [inaudible] them.

So, the point is not to have Voice over IP in front of you, the point is to offer something better and it will be, again, will be always the same. We can win back on some millions of customer with this Wideband voice over IP. When all our competitors will imitate us, we have to add something and so on, and so on, and so on. The situation will never remain stable. We have to have new service regularly and that’s the reason why George is among us, because he learns that in the industry and now he has to deploy that in the [telecoms] -- the telecom [inaudible]. So the answer is today not a danger. Perhaps it will happen in two years from now, but then we will be ready to answer because we know what is dangerous for us. This is new technologies which we have not anticipate. That’s the reason why we have all our labs worldwide, which are supposed to give us signals -- trigger our signals about the way Chinese, American or whatever are anticipating the future.

Okay. Perhaps, you will be the last so try to ask a good question. [Inaudible].

Okay. Well I have two questions. First of all can you outline the share options and, in terms of payments that you as a management team have, you mentioned that you were [incentified] around the cash flow figure I think, but I don’t know if that’s the only incentive plan you have?

And the second question is, just going back to Amena. What is the plan there for spending on 3G, so that you can actually implement the business everywhere platform across your integrated operations? Is there an additional push for CapEx in Spain? Thanks very much.

Okay. Perhaps we answer the second question concerning Amena? No, you don’t know the answer. Fortunately, Sanjiv knows.

Just to get back on an earlier question on Amena, the guidance we gave last year at the time of acquisition, in terms of revenue, in terms of revenue growth, customers, comms, we are basically stating we expect that to be done in 2006. So I want to make sure that is clear. There was a question earlier.

Now back to the other question. It is, again, it’s IFRS versus Spanish GAAP is what you have to think through. So that’s one.

Number two, on CapEx for 3G, that was in the plan at the acquisition time and there is a significant roll out plan. It is in high teens in percentage of revenue, in terms of CapEx, and that does include the UMTS roll out in ’06. We expect [substantial] part of the population to be covered by the end of ’06 through UMTS.

So more -- around 60% population coverage, 80% --

I would expect more than 60% by the end of the year.

Concerning the incentives of the staff, what we have decided yesterday with the Board is that, previously we had the [inaudible] complex formula with a lot of parameters which we were all the issues on which we were committed. And, in fact, we have simplified the formula, the rules, so that, for me, one half of the incentive is the delivery of the free cash flow at the level, and even at the higher level - the target is higher than the figure we have quoted. And it means that all the members of the staff around me has the same rules and this is also valid for more than 1,000 people in the Group, which will be incentified on that, which means that as we will manage the free cash flow day after day, each time they will spend some euros they know that this will react on their possibility to get the high bonus or not. I think it’s a very powerful way because they are directly -- there is a direct measurement of their performance in front of them.

Okay, so we will end this meeting today. Of course, we will have a lot of road shows with some of you during the following days to cover the points which have not been covered today. As a conclusion I would like to repeat that we are fully committed to realization of the target we have re-issued today in front of you. All the organization now is focused on the operational performance and on the transformation of the Group, because it’s a key factor to build the next year budget. If we don’t reach [too well] the same point we had this year, we have to transform the Company first, of course, in France but also in all the other countries, in simplifying the cost structure and [all the organization] of the Company knows the country where we operator several business and, of course, we will have regular information about the way we make progress on these lines.

Thank you for your attention and also the time you spend with us. So, have a good afternoon. Good night.