Orange SA (ORAN) 2012 Q3 法說會逐字稿

Well, good morning, everyone. I am pleased to welcome you in our new headquarters here in Paris, but also in London. During the next hours I will give you some updates on our business and financial situation. Gervais will then present in more details our result for the third quarter 2012. And we will also provide you with our views on the next two years, 2013 and 2014. We will be there, of course, to answer your questions with the executive committee with me this morning.

I would like first to emphasize our results for the past two years and first deliver you a very simple message, relax. We will not announce any profit warning this morning. In 2011 our operating cash flow guidance has been met. And in 2012 we are in a position to very clearly confirm this morning our commitment to deliver an operating cash flow close to EUR8b.

I would like to begin with a few comments, remarks, explanations on how we have managed despite the very, very challenging environment, those results. Here are the good figures, EUR9b of operating cash flow last year, close to EUR8b confirmed for 2012.

And now I would like to enter briefly on a few points to give you some explanation about how we have been able to manage this. In fact, I would like first to begin with what we have made in terms of top line, top line preservation by saying you that we have been very, very focused on top line preservation. And the first, of course, theatre of this battle has been the French mobile market, where I think we can say that we have resisted very well to the arrival of the fourth entrant.

After a challenging first quarter our customer base is back to growth from end of Q2. And we even have important net adds in Q3, with more than 300,000 new customers. And we have also a decreasing churn on contracts. This has been made possible thanks to a very responsive and pragmatic commercial reaction, especially with Open and Sosh. But also thanks to the decision, very strategic decision and good for the company and its shareholder, I think, to sign the roaming agreement with the fourth entrant. This agreement has provided what we expected from it, I mean a substantial offset of our retail losses.

We have also taken a very hands-on approach on -- to PSTN line erosion. And I am pleased to announce this morning that in Q3 we have been able to reduce very substantially the pace of losses in lines with the lowest ever level of line losses in PSTN.

Regarding the rest of the world, Spain is continuing to outperform the market, despite the very tough economic environment; increasing its market share and profitability, we have plus 2 points of EBITDA margin between 2009 and 2011 in Spain.

Our Enterprise division is also sustaining its core business, while showing strong momentum on its cloud ambitions. With today over 350 computing -- cloud computing customers in France and nearly double-digit growth in emerging market revenues.

And last, but not least, the Africa and Middle East region is clearly delivering a good contribution to our top-line growth with a good performance overall, driven by Ivory Coast, plus 19.7% and Egypt which is back to growth.

The second area of focus for the management has been cost management. And it starts with commercial cost optimization. We have worked very hardly on commercial cost optimizations and this has contributed to around EUR150m savings over the first nine months of 2012. This is also clearly a consequence of the massive adoption of SIM-only model in some markets like France.

The Chrysalid cost containment program is delivering, with EUR780m cumulated savings since the launch of the program, which is above our expectations. Labor costs, labor costs have also been contained with a moderate 2.2% average salary increase in France, in line with inflation. And this is clearly lower than what we can say in a big part of the big French companies. And, in the same time, we have been able to maintain a good social climate with a satisfaction rate among our employees in France which is at the very high level of 87%. Our senior part-time program has been very successful, with close to 7,000 employees entering into the program. It is 70% of the basis.

In the same time we have clearly invested and we have maintained this level of investment in line with our commitments because we think that it is absolutely crucial to keep our ambition in terms of quality of service, and the ambition to also differentiate in the market according to quality of service. And we want clearly also to take an early leadership in very high broadband in both fixed and mobile.

First, I want to remind that the French regulator ARCEP ranks our mobile network as number one in 2011, and that this network has been able to absorb the traffic from the fourth entrant. We have also obtained, this is just a reminder, very good results in the 4G spectrum auctions, of course in France, but also in other countries of Europe like Spain for instance.

In, as far as 4G is concerned, we are going to launch, as you know through EE first in Europe 4G services in the UK. In France large-scale trials will be launched in several major cities, we are already in Marseille, south of France. I will open, in a few days, three more big cities in France. But we are also under rollout of 4G in other European countries like Belgium, Spain, Luxembourg or Moldavia. Moldavia is the most advanced European country as far as LTE is concerned.

We have clearly taken the lead for FTTH deployment in France, accelerating our investments with very good commercial results. And, for instance, we are today gaining market share in the very -- in broadband markets in Paris and the Parisian region. This is the first time for years that we are in an increasing customer basis in Paris and the suburbs.

And eventually we have also worked and we have been focusing on exploring new territories for growth. This is first -- this has been made through a very disciplined and efficient portfolio management. I want to remind you that we have disposed some mature assets, like our Swiss operation, which has been sold at a very attractive 6.5 multiple this year.

But in the same time we have exercised our call option in Egypt, bringing our shareholding in ECMS from 36% to 94%. So clearly we can show the move a little less exposure to mature markets. And when we have, I think, nice opportunities we try to increase our exposure to emerging markets. And I want to remind that Egypt with 33m customers is today our largest mobile market in the world.

The second point is that we have accelerated also in exploring new territories of growth. I just will pick one or two examples. The first is cloud services -- cloud based services, especially in the B2B division. We have clearly accelerated also the rhythm in the development of cloud-based offers for small- and medium-sized businesses.

In the M2M we have developed integrated solutions for vertical industries like energy, water, the car industry or public transportation. And at last we have also executed what had been announced in terms of new content strategy, by exiting completely from the Orange Sport pay TV channel, as you know, but also by accompanying the development of Dailymotion, which is today the world's second largest online video site.

I now -- now I'm going to ask Gervais to give you more details about our Q3 results.

So let's start with a few highlights on Q3 performance, we are on Q3 announcement, even if we have added a little more information than just Q3. First and foremost, and it has already been said by Stephane, our third-quarter performance is in line with our full-year guidance. And really we can confirm today again our full-year guidance for operating cash flow near to EUR8b.

And when we look across our main countries, commercial indicators are well oriented, I would say with the exception of Poland. If we take France, we have stabilized our mobile market share, we have regained mobile customers. If we look at Spain we continue to perform well. And Stephane just mentioned, amongst the African and Middle East footprint the situation of Egypt where we have a good recover including in commercial activities in this third quarter of the year.

For financials you will see that as expected our revenue trend has deteriorated this quarter by about minus 3.5%. Most of the slowdown is a result of increasing regulatory effects, about EUR270m, following new international roaming rules in Europe. We are facing, as I mentioned, some difficulties in Poland, while in Spain even if we continue to strongly outperform the market, deterioration of the macroeconomic landscape is putting downward pressure on consumer usage.

At EBITDA level we posted a limited decrease in our margin at 33.9%, minus 1.4 with stable level of OpEx year over year; stable level of OpEx which is for us a first step of strong achievement to stabilize our cost base.

If you look at the key financials; revenue, around one-third of the revenue decrease was driven by the increased regulatory impact. Excluding this effect, Group revenues remain down by 1.1%. The erosion of our top line was to a certain extent mitigated by the sustained good growth in Spain and by emerging markets. We must also notice, and it has been said, that the national roaming agreement with Iliad has been also a strong mitigater to revenue evolution in France in terms of mobile revenues.

EBITDA is down by 7.3%, while margin stands at 33.9%. Group has realized some net OpEx savings in Q3 thanks to good control on labor costs and savings on commercial cost and content. And the level of operating cash flow for the first nine months is clearly in line with expectations.

A few words on the debt situation. We continue to enjoy a strong balance sheet and this has enabled us to issue a new EUR500m 10.5 years bond, at the lowest ever rate achieved at 2.5%, which is amongst the best financing conditions in the sector for this maturity. Our strong liquidity position of around EUR15b guarantees our ability to face the coming years of bond repayments, while continuing to refinance under attractive conditions. In this context the Group considers, and this is not new, that it is key to maintain a strong credit profile and confirms its already announced objective of return to a net debt to EBITDA ratio close to 2 by year-end 2014. Keeping in mind that we will be around 2.2 at year-end 2012, and also near 2.2 at the end of 2013 today with the forecast we have in mind.

Regarding the top line, Group revenues are down by 1.1% year over year excluding regulation. In France, the top-line erosion is only slightly more significant than it was in H1, as gradual penetration of new prices in mobile consumer base is partly compensated by the hedge of the roaming agreement with Iliad.

The negative home revenue trend is slightly better in Q3 than it was in H1 as a result of our PSTN retention strategy. In Spain revenue trends deteriorated following the macroeconomic pressure. Usage are decreasing in voice and SMS. For instance, out of bundle are now representing 15% of mobile consumer revenues, whereas they were representing 20% two years ago. And this is a trend in the industry.

In Poland we are suffering from new unlimited offers on mobile B2B and B2C segments, while pressure continues on fixed line activity. In the rest of the world, revenues are increasing, especially in Africa and Middle East which achieved a plus 2%. In European countries the trend is linked with the macroeconomic situation more difficult, and also with the pressure on international roaming prices.

For the Enterprise division the situation is improving. The underlying revenue trend is better in Q3 than it was in Q2 and Q1, with a good resilience from our network activities. This has really led for us to much more emphasized control on direct and indirect costs to protect our EBITDA. Q3 EBITDA has been protected by strict control of direct and indirect costs. Pressure on EBITDA comes mainly from the pressure on revenues, while our cost structure has remained flat for this quarter.

For commercial and content costs, as it was said by Stephane over the period, but we continue in this third quarter. We pursue the tight monitoring started over the last four quarters -- five quarters, to achieve EUR75m savings over Q3 2011. Those savings illustrate the rebalance between high handset subsidies for high-value customers that we tried to continue and less pressure on retention costs for low end of the market. It also explains the situation where you see that high retention cost in Spain and France, where we grew the customer base, unfortunately less growth of customer base in Poland.

We are also taking full advantage of the SIM-only penetration. And this is why we have reinforced our SIM-only offers in France with Sosh and launched a SIM-only offer, a low price offer with Amena in Spain.

Labor costs increased by EUR67m year over year with EUR30m related to the retirement costs for civil servants after the decision made by the European Commission against us. Which means that the real increase is only half of what appears, which becomes 1.8% in terms of increase year over year, so below inflation for the first time.

Group continues to face adverse factors linked with energy, real estate, but is working also on these costs to improve for the future.

Just one page on countries, to try and not to spend too much time, these are the French results, which Delphine will be able to answer to all your questions afterwards. But just as to give you a snapshot of the situation, we observe an increasing regulation weight on revenues, EUR160m regulation impact in Q3, mainly linked by the -- with the international roaming, especially data roaming traffic cut. Just to mention that we have not observed any positive elasticity to the cut-off price, DISA did at European level. If we exclude that, revenues are stable on both mobile and fixed segments.

Mobile service revenues are quite stable, minus 1%. Year over year decrease in the customer base is partially offset by the increase of network usage and the national roaming agreement is producing its full effect in this first -- in this third quarter of the year. The success of convergent offers and the solid performance in sales of equipment also partially offset some of the revenue pressure linked with regulation.

Our tariff strategy on the PSTN operations contributed into slowing down the declining trend in fixed line revenues. Broadband revenues partially offset the PSTN decline, thanks to nearly 4% growth in the customer base, fuelled mainly by the quadruple-play offer, Open.

If you look a little more into detail in the mobile performance, the positive commercial momentum posted for contract customers in Q2 has been amplified with 320,000 contract net adds in Q3 2012. This was achieved thanks to our major revamped offers, Origami in June, Sosh in August, but also to the develop -- linked with the development of the M2M offers on the French market.

iPhone 5 launch has been a real success and shows that subsidized model is still attractive, about 85% of the sales have been made through subsidized offers, with 135,000 sales at mid-October, which is really an improvement.

I would also like to highlight the stability of the prepaid customer base, which under market conditions is the most exposed to churn with the low-price SIM-only offers already existing on the market today. The mobile customer base is growing again, and we are finally succeeding in this stabilizing and protecting our retail market share this quarter.

Re-price is under control with 8% decline of the ARPU, out of which 5 points come from regulatory effects and about 3 points come from the re-pricing linked with the new prices on the French market.

As regard fixed line activities, [our per share] KPIs are fairly encouraging on the PSTN side, with the trend in line loss which has continued to slow down. The retail fixed line erosion fell to a net encouraging 192,000 level over the quarter, following 257,000 lines lost in Q2 and 267,000 lines lost in Q1.

In spite of the aggressive promotion from competitors this quarter, DSL net adds have been maintained in Q3, plus 68,000 net adds in Q3 compared to 65,000 net adds in Q2. The market share of DSL net adds is clearly to be expected above 22%. This will not be the 30% we were expecting, but we'll come back on that. We think we have a few good news to amplify that next year.

Broadband ARPU is slightly increasing, driven by the content component and the improving mix, especially with now the addition of fiber. Those figures don't include fiber, but if we add fiber to the total this improves the global picture.

I hand over to Stephane for 2013 and 2014.

So, let's talk now about our prospects and how we see the next months, the next two years. I will talk about our views on 2013 and provide you some elements for the future, of course while remaining cautious, because there are so many uncertainties in our environment that we must still be cautious.

I would like to begin with what looks like good news. The good news is that, and no one should forget this, we are in the middle of the digital revolution. And even though we have some difficulties to find some growth in our own business, there is a lot of growth around us.

You have here a few figures that are quite spectacular. 100% is the growth rate of mobile data traffic; this is a worldwide figure between 2011 and 2012. The mobile video traffic has been multiplied by 25, or will have been multiplied by 25 between 2011 and 2016. In Africa, we have today 650m mobile lines, which is 50% more than the total of Europe.

We will have 24b objects, things, connected to the network by 2020 and 10b by 2016. And in France today 63% of our sales are made with smartphones. The proportion of smartphones in our customer base reaches now 50%. Of course this is the source of additional revenues for us.

Despite, of course, this tremendous growth that everyone can see today emerging in the digital ecosystem, and in the digital economy, we face and we will have to face in the next months a quite challenging environment and it starts with macroeconomic prospects.

You have here two, I think, very interesting lines. The green line is the IMF outlook as it was made in October 2010 for Europe. And the red, the red one is the same forecast for the same area, but in October 2012. And it shows very clearly that in 2012, 2013, 2014 to some extent, we will have to manage with a depressed macroeconomic environment, but also clearly with competition and regulatory pressure.

So, we do not expect any major improvements coming from our macroeconomic environment. And this slowdown which is now a reality in Europe is also true to, fortunately a lesser extent, in other parts of the world, in the Africa and Middle East region, where we have a slightly lower forecast in terms of GDP growth.

In the same time we will have also to face with a still adverse regulation. And this is probably something that we had underestimated two years ago. We thought maybe a little bit naively that in a very tough economic climate the decision makers, especially in Europe, would probably take into account the economic realities and implement a little more helpful, let's say regulation, in our industry. This is not the case, this has not been the case and we don't expect that it will be the case in the future.

As you can see here in 2012, with the MTR regulation in Europe and the new roaming regulation being enforced, we will have probably a peak in terms of regulation impacts on our revenues and margin. And we can also think that the public debt crisis in Europe could lead to some temptations, let's say, to increase even the fiscal burden on companies generally speaking in our industry. And for instance in France in 2012 we will have to pay EUR150m at least in cash more than expected in terms of additional taxes.

The only good news and you can see this on the right part of this chart, is that once the MTR are zero they cannot decrease any more. So I think that we are close to the end of the cycle, but it's not for tomorrow.

In the same time we have, and this is especially true in France, a very peculiar situation with fierce competition, especially in the mobile market, and the results of the fourth mobile player entrant in the market. And clearly this event was to any extent much more powerful than expected, especially because in terms of prices, prices of the new offers. We have seen the fourth mobile player with prices, let's say at least EUR5 lower than was expected by anyone in the worst case scenario. And we face in France a very unique situation, I think, in the telecom history, seeing a new player in the mobile market -- entering in the market with very aggressive prices. But also, with a very strong customer basis in fixed line operations, which, of course, gives him a very strong two lever on the market.

You have here just two estimates, one which is relatively optimistic, and the other one which is probably, I hope, too pessimistic that try to assess what will be the destruction of value in the mobile -- in the whole telecom market of France between 2010 and 2015. And you can see that we reach very, very substantial numbers.

And the result of that is a very spectacular reality and situation that in my view no one has really realized yet, which is the fact that today when you look at -- and this is the next slide -- when you look at the prices of telecoms and you compare the French market with six -- among let's say six big countries, this is a very fresh study made by Arthur D. Little, it has not been published yet, but I think that it will have kind of a great impact on public opinion when everyone will show those figures.

When you try to compare exactly what you can get for an average consumption of mobile communication, voice, SMS, MMS and access to data on the left and a fixed kind of standard offer on the right, you can see that today France is probably the cheapest market in the world, in the world in terms of telecom prices. This probably explains also the importance of adjustments that all the existing players have to cope with today in the market. And it raises some questions, okay. Is it acceptable? Is it sustainable in the long-term basis to have prices in France that are today on the comparable basis half of UK prices, that are the third of Spanish prices or the fourth, the quarter of American prices?

I think that's also the situation is to be taken into account when we look at the future in terms of price evolution of our services in France. And to be honest and frank with you I think that given this situation that has been created by the policy led by the decision makers, the public decision makers in the last years and especially with the fourth entrant's policy, I think that there is no room to decrease prices of telecom services in this country.

The good news is that we are getting better and better in monetizing the data traffic that is increasing very much, as mentioned earlier. As you know it's one of our big challenges to be able to better monetize those data usages. And we start getting some very interesting results to that extent. I will just pick two or three examples.

On our Sosh customers, the SIM-only web-only customers in France, we have recently re-priced our standard offer from EUR25 to EUR20. This was a consequence, of course, of the price situation in France. But we offered our customers to stay at EUR25 if they want to access the H+ which is as you know the standard between 3G and 4G, with a much more attractive, also customer experience in the mobile network. And in fact 80% of them, 80% of the Sosh customers preferred not to take advantage of the price reduction to have the access to H+.

Today, and when I say today, it's in Q3 2012, so today in the market, we have more than 80% of our Origami sales, contract sales, that are high end offers, over 49%, which clearly shows that there is some appetite in our customers -- among our customers for quality of service and for also a more abundant access to data.

In the fixed world we still have a good, very good momentum on the quadruple-play offers. And we see growing ARPU, especially thanks to services such as still pay TV of course, but also video on demand. And another good news is also that we have better prospects in growing ARPU with FTTH. Today we have EUR5 price differential between traditional DSL quadruple play and fiber offers for consumers. And, as I mentioned earlier we gain today market share and customers thanks to FTTH.

A few words now on our new territories for growth, this is something that we are actively working on, and it deals with both geography and services and innovation. If I start with innovation, you have here a few examples of what we are doing today. The cloud computing, as you know, is one of our big priorities, especially for the B2B division, since we target EUR500m of revenues by 2015.

As you probably know in September we launched Cloudwatt, which is the JV with Thales and Caisse des Depots et Consignations with also some public financing. This will help us and accelerate for us the creation of the data centers and data processing means that we need to provide cloud-based services to both enterprises but also personal services.

In M2M we target 10m SIM cards by 2015. And today we see 43% growth of SIM cards activated in 2012. So we are in the good way and in a good path also to reach our target.

In mobile payment and NFC, as you know we are already a major player in the m-payments in Africa, with nearly 5m customers, users of Orange money services in 11 countries in Africa and the Middle East. And what we want to do now is to leverage this expertise in Europe. We have started with Poland where we have launched last week, Orange Cash, which is m-payment service.

I think that in those fields we have really strong assets and an attractive position, even in the global competition, with over-the-top players. Because we can offer trust and probably better, because of the proximity with our customers, we can have -- we can offer security, security in the transactions. But we can also provide and this is very important, openers. Openers meaning that those services would be available, depend less on your operator on -- or on your device.

In a few weeks' time, November 21 exactly, I will present during I think, I hope a nice event in Paris, to which all of you will be invited, the innovations of the Group. And the innovations that we will sell, we will offer to our customers in the very, very near future.

The second part of this exploration for growth, or seek for growth, is dealing with our geographic footprint. And clearly the direction has not changed. We still want to take any kind of opportunities to increase our exposure to high-growth markets, because they provide us with organic growth. You can see that, without doing anything in terms of M&A, the part of our revenues coming from Africa and the Middle East will be up by 3 points in the geographic mix, by 2014. And we will also consolidate some of the operations that we entered in, like in Monaco or in Iraq.

In the same time, and this is the next slide, we keep a very sustained and high level of investment. And especially this investment is very much focused on very high broadband. We clearly want to take an early leadership, as early as possible in very high broadband, because we think that it is a key to differentiate ourselves from the competition in all our markets, mobile and fixed.

Regarding FTTH we have started, I could even say accelerated, fiber deployment in France. We are today in 229 cities, of which 112 in dense, or very dense areas and we are in line, we are in line with our EUR2b investment plan by 2015, with a target of bringing fiber access to 10m households in France by 2020.

We are starting deployment in Spain. I can see, by the way, that in Spain where colleagues from Telefonica are accelerating very much also in the fiber rollout. I think for the same kind of reasons as we do here in France. In Spain we have decided also to target 1.5m homes to provide them with a fiber access, because we see this clearly as the very important tool for us to be better in the broadband market.

In the same time we are deploying 4G throughout our European footprint. I mentioned earlier that we have opened the service in Marseilles this year. We will open very soon in Lyons, in Nantes, in Lille, but also in certain areas of Paris, because this is a good news, we have reached an agreement with the city of Paris and we will be able to roll out 4G now very rapidly in Paris. In fact, 3,000 LTE sites will be deployed by the end of 2013 in France and we target the commercial launch in the first semester of 2013. We target 85% of coverage in France in 2016.

Of course, in the same time we are deploying 3G throughout our African footprint, with 14 of our 21 countries that are already covered. We will still work on optimizing our CapEx, especially in seeking RAN sharing everywhere, when it is possible, accessible, in good conditions for us.

In France, we will have to move. We will have to move from what we could call cross containment to certainly something that looks like cost reduction, with very higher ambitions of savings by 2014, in the range of EUR800m. I would like to give you a few, maybe more details about the workforce and labor situation in France, because I know that it is very usually an area of, let's say, questioning or even concern among our investors.

I have recently announced the decision of recruiting 4,000 people in the next three years. And everybody should keep in mind that this program must be compared with the departures that we will have in the same period of time, the next three years.

We estimate that around 11,000 people will leave the company, to go in retirement or for any kind of other reasons in the same time, which means that the net workforce, internal workforce in the company, will decrease by at least 7,000 in the next three years. And this decision that has been made combined with a still very moderate and rigorous wage policy, will lead clearly to a stabilization of our labor OpEx in France, which will be clearly the first time for years that the labor costs in France will be flat.

In the same time also, of course, we are following the Chrysalid plan with the new ambition of delivering faster and higher savings. We see them at EUR3b by 2015. It is EUR500m above our initial target. And last I want to remind you that we will still implement very sharp management of our commercial costs and you know how important it is.

Resulting from all those elements is the guidance that we want to provide on next year and the prospect afterwards. For 2013, as I mentioned, we expect still some pressure on our top line and operating cash flow. And thanks to all the actions that we combine, cost management but also everything regarding top-line preservation, I will come back to this later on, we believe that we will be able to deliver an operating cash flow above EUR7b next year.

And clearly we expect that 2013 will be the low point, the lowest point, in operating cash flow generation. And we are very confident in our capacity to have a rebound of our operating cash flow after 2013, meaning in 2014.

Why are we believing this in a so uncertain environment? We believe this first because this is based on our cost management and cost reduction actions. As I mentioned earlier, we have decided clearly to increase accelerate a range of actions everywhere and especially in France, to be in advance in our efficiency plans. And this will provide results earlier and especially in 2014. But also, we think that there are some objective parameter elements in our environment that should help us to reach this target of stabilizing operating cash flow in -- after 2013.

The first is the situation of the mobile market in France. We think that there is no room to enter into a further price war in the mobile market in France. First because we are at a very low level, I showed you this earlier. Second, because the players are today very weak.

And the third element, which is maybe the most important, is because it is clearly not in the fourth entrant's interest to feed this price war because the new player in the mobile market has today a few millions of customers. I don't know what it will announce for the end of this year. And clearly any kind of price decrease in the future will have the same impact as the impact that we suffer from today, which is the repricing of its bases. So to some extent, because it has been successful in recruiting probably more quickly than expected, some customers, I think it is clearly also an objective reason to think that there is little temptation for anyone in the market today to further decrease the prices.

And we think that it is quite likely to have a stable or stabilized price situation in the mobile market, once the repricing effect, of course, is over. And it will be over at the end of 2013. So we have a big shock, 2012, 2013, and you can see that a very substantial part of the decrease in top line and EBITDA comes from the French mobile market, which is, in my view, a totally specific situation in the telecom world today. But this will be over at the end of 2013, once the repricing effect is over and afterwards I think that there is some evidence that this mobile French market should come to a more stable situation.

Regarding the investments, as I mentioned, we want to clearly preserve the necessary level of investment in order to be, once again, the leader in promoting very high broadband. And these, I think, are the main elements that can lighten and explain our views on next year results of the company. Once again an operating cash flow above EUR7b and an operating cash flow expected above 2013 in 2014. I will now give back the floor to Gervais.

I think Stephane has said the basis of how we are projecting 2013 and to a certain extent, even if it is more difficult, 2014. But again, with a strong conviction that even if economic situation doesn't increase, or doesn't improve that much in 2014, there are a few facts, small facts for us. Some in our hands, some, as we see on the markets, of the analysis we have the potential and possible attitude, possible behavior of others that should lead to the stabilization we described.

And to start with the French market, maybe a few additional comments. Where, regarding revenues as Stephane described, on top of carefully but also actively managing the repricing, trying to convince our customer base that even if the new reference prices as it appear is for a naked price, of a limited EUR20, there are additional services on top of the EUR20. And managing this progression, sorry, price, which is what we are doing.

On top of that, we consider that we cannot exclude ourselves from the SIM-only segment, which is why we are facing -- fighting face to face on the SIM-only segment for those customers who choose eventually to move to a SIM-only offer and there are a few ones. Probably more than what we initially expected a year ago.

And at the same time, another area which is an opportunity for value, even if at the beginning it appears as a price discount, this is the bundle, the family offer, where there is probably a discount first but then the possibility to deliver additional services to our customers. And on top of that, the monetization of new services on new networks with the higher speed and higher volume of service provided by LTE and fiber.

Several initiatives have been launched by our French operations. On the SIM-only offer with Sosh and on the subsidized segment, with on the convergent offers with Open and with a specific marketing mix to deliver services with additional speed on LTE offer.

2013 will be, as it was said, the year of the launch of LTE commercial services and with a specific attention on the output and monetization. Those initiatives combined with the action put in 2012 make us confident to tightly control the mobile repricing effect. As a result, we expect to be close to put an end to the revenue decline in France in 2014.

This will be combined with a strong and continued effort on controlling costs, mainly focused on commercial cost. SIM-only move generates savings but on top of that we better allocate subsidies, especially for retention. We also make savings on purchasing of handsets. Now some of the big handset manufacturers are within the buying framework.

And the Chrysalid framework aims to gradually offset a portion of the mechanical effect of some cost drivers in our industry, energy, real estate, cost of operating the networks. And in France, Chrysalid will help us to stabilize the indirect cost base. So the combination of the improved revenue trend and of the EUR800m cost reduction mentioned by Stephane should help us preparing EBITDA stabilization in 2014.

A few words on the Chrysalid. So Chrysalid is a framework. It is not a program by itself; it is a framework of several programs, aiming at improving our personal efficiency. Our objective was initially to save EUR2.5b in 2015 versus the 2011 cost base. A major portion of this being OpEx.

Today we are activating this framework and Pierre Louette will comment to you and answer to your questions on the different programs we have. And we are amplifying Chrysalid, because we have to face more adverse condition and we think that Chrysalid, which is already delivering more today, will be able to deliver more in the next two years.

We are already ahead of our schedule and with EUR1.8b savings that we originally planned to reach -- sorry, we were initially planning to reach EUR1.5b saving at the end of 2013 and we now expect EUR1.8b savings at the end of 2013. And we are revising our ambitions upwards for 2015 at EUR3b, instead of EUR2.5b.

Network operations represent 44% of the savings versus 29% in the previous framework. Customer management represents 20% of the savings. Additionally, we are reinforcing Chrysalid on the CapEx domain. We need to free up resources from current activity to get more resources for very high broadband. And in order to do so, we are strongly pushing in all countries network sharing solutions. It was already the case in conquests for most European countries. Since last year we are deploying network sharing solutions, including Towerco, across AMEA, which will deliver additional economies.

In Spain, market is characterized by three trends. Intense competition, which has put -- has a negative pressure on mobile ARPU. Proliferation of local offers, strong competition on convergence offers. Acceleration of mobile internet growth with smartphone and tablets, and increasing very high broadband penetration a speed above 20mb per second.

In this context, our mission remains clear. We have been successful in the past. We continue to be successful today. We want to keep outperforming the market and to become the convergent alternative operator preference by 2015, while further improving our profitability.

We have three levers in hand. Accelerating the convergence, we have been quite successful into doing that and I think we managed quite well the positioning of the two business lines, between fixed and mobile. To continue to increase loyalty. We have one of the lowest churns of the market in Spain, including on the Spanish market but also comparing to other European countries. And we maintain a solid commercial strategy in the mobile business, with a segmented, subsidized approach and the development of amena.com as a low-price brand. We are also preparing the future with fiber investment, as mentioned by Stephane a minute ago.

In spite of a very difficult economic environment, we are confident that Spain will continue to grow its EBITDA margin over 2013 and 2014 and we have done since that for the last three years.

Regarding Poland, situation is a little more difficult for us. The Polish telecom market has been strongly impacted by regulation and launch of unlimited offers including affecting the B2B customers, while at the same time it suffered from a deteriorated macroeconomic environment. Poland has been growing quite fast until last year and this year it is not as good as it was.

This situation is, however, under control. Orange Poland has trigged several switch or levers to face the challenge. Mobile data growth and I think, again, we are in a good position to capture mobile data growth. We have maintained our number one value share market position in the mobile market. And we are now even improving our marketing segmentation to boost data usage.

Migration to convergence offer. Convergence offer is a key element in Poland to better safeguard the fixed assets, which are more challenged by migration to mobile, mobile cannibalization and cable, than they are in other countries. And at the same time, we will also, in order to improve our positioning on B2B, develop quicker ICT services as we do with the Enterprise division in France and in other countries of the Group.

All this, together with the continuation of a strict control on costs, which is also even a decrease of the cost base year after year, will help us to continue to maintain our EBITDA margin rate. Just remind you that even if Poland has been suffering, its EBITDA margin rate for third quarter is at 38%, more or less the same than it was a year ago.

And we will also expect a reduction in CapEx because we have now finalized our big investment in broadband, as agreed with the regulator. You remember that we had a commitment to build a million additional DSL lines in -- for the last three years. That is now over and we are coming back to a normal, or normalized rate of CapEx to sales. Where we were at 16%, we will come down to 13%, between 13% and 14%.

In other European countries, Belgium, Slovakia, Romania, Moldavia and also Dominican Republic, which everybody knows belongs to Europe, but this is a country where we could not classify it with Africa and it is managed by our European division. We have margins under pressure to fierce competition and difficult macroeconomic environment. That's especially the case for [Europe], Dominican Republic and Moldova a little out of the picture.

Again, we believe that most of the countries we will have a better situation. Tougher regulation probably in 2013. Stephane mentioned some of the decisions that could be taken in Eastern European countries like Slovakia on the termination rates. Pressure should decrease, probably, in 2013 and beyond.

At the same time, trends to more data revenues are also there, like in other European countries. And we have in our portfolio, new businesses, including convergent offer with light fixed solutions. We have decided not to invest massively into fixed line businesses in those countries which are mainly mobile, but we are with partnerships with -- by buying some elements, by having TV platforms on light solutions, we are really trying to expand because we consider that to bring to our customers a mobile offer plus fixed offer, especially for convergence of content distribution is key in to the success for the future. At the same time, we continue to optimize costs and for sure not to be late into launching LTE in all the countries where it can be launched.

Africa, Middle East region. Strong economic growth potential with about three to four points difference in GDP with the rest of the footprint. Over recent years we have continued to develop our presence and we have now a promising country mix and a cluster approach.

In some countries, penetration rate remains slow, like Democratic Republic of Congo, Cameroon, Madagascar, Niger, or Guinea Conakry. This leaves still a huge potential for growth of the customer base. I just remind you, and this is on the slide, that our mobile growth is 7.5%, which never forget that you are also managing fixed businesses where pressure is sometimes even more than what it is in Europe.

In other countries where penetration is already high, revenues will be driven by booming demand on mobile data. And based on all these positive factors, combined with the successful retention tool with Orange Money, already nearly 5m customers in 11 countries, we anticipate our mobile revenues to continue to grow faster than the market.

In the meantime, we will continue to focus on efficiency of operations. We are not planning cost decrease, we need to continue to expand, to grow, but we want to be more efficient and sharing more and more some of the tools we can share in this region. There is already a [social] in place in Ivory Coast to share IT, to share some of the network intelligence. We will continue to develop that.

My last point is on Enterprise division, where we confirm the transformation of our revenue mix to our [more] services and a growing exposure to emerging markets. Revenue within emerging markets we have today a CERN growth of 10% and we plan to double our revenues between 2010 and 2015.

Regarding IT services, for around communication, IT market growth will sustain growth in our activities, including cloud computing, Stephane mention Cloudwatt, the partnership we have in France. Services will present more than one-third of our revenues in the Enterprise division in 2015. These two growth levers will help improving the revenue trend from 2014, while in networks legacy decline will be offset starting in 2015, by growth from major and growing networks.

On cost and efficiency, we will continue reinforce Chrysalid program but also partnership with other players, to share the cost of our network operation, especially outside of France. Thank you. Now, I leave the floor to Stephane to conclude.

Now, a final and quick word on our cash policy. And then of course we will be there to answer all your questions.

As far as the use of cash is concerned, the first point that I would like to emphasize is that it is still very critical for us to keep a strong balance sheet and secure our access to the debt market. We are still living through a risky and uncertain financial environment and we want to be very clear about our will to remain as close as possible to the debt net to EBITDA ratio of 2 and this is our mid-term guidance and target. Especially by year-end 2014, we want to stay, to converge around this level of 2 as far as debt net to EBITDA ratio is concerned.

Because this is the key objective of our financial policy, because we want to preserve our capacity to invest specially in the next generation network, because we have also decided, and I think -- I hope it is clear this morning, to implement a very ambitious and active policy in terms of cost management and even cost reduction, we have decided to set the dividend level at EUR0.8 per share for 2012. But also in the same time, to provide a visibility for next year, 2013, by giving this guidance of at least EUR0.8 per share.

I am not sure that there are so many companies that can pledge to a dividend level for next year and we have decided and the whole Board has decided to do it. I must also tell you with a very clear and strong support of the State, which is, as you know, still our first shareholder.

We think that this dividend policy is still attractive when you look at the yield it provides on the share. And we think that it is the sensible level when you take into account all the parameters of the situation. This is the level that shows that we take into account and respect our shareholders community. But in the same time, we want to keep all the lever -- the levers in our hands to correctly manage this length of our top line and EBITDA after the shock of the fourth entrant's rival in the French market.

Of course, we will still be very careful, very selective, in terms of M&A. I hope that there is no fears on that field. But if you see in the same picture the balance sheet, very strong guidance and targets, the dividend commitment, you can see that there is no -- a lot of margin, room for maneuver in terms of M&A. So of course, by necessity also, we will have to be very, very, very cautious and selective.

This is the end of this, let's say, long introduction. Now we are ready to answer your question. I have nearly all the executive committee in this room, so I hope that we will have plenty of questions. And we will start with Mr. Boulan, maybe.

Hi. It's Frederic Boulan from Nomura. I've been asked to stand. So two questions. Firstly, a question on restructuring and maybe, I don't know if Pierre Louette wants to step in. But if you could give us some clear examples of how you're rebasing the cost base, and specifically in the fixed segment, which we haven't really discussed. But there's been an annual EBITDA reduction of about EUR0.5b last year. This year we are looking for a similar level. Do you expect this will stabilize? What is your underlying assumption for 2013, when you expect the overall EBITDA to improve at the Group level?

And secondly, on LTE, you seem to view this as a differentiating factor versus competition. Should we imply therefore that it is not something you are planning to open to Iliad? So you are not planning to extend 2G and 3G roaming with Iliad? So if you could clarify yourselves on that? Thank you very much.

I suggest maybe that Pierre gives you maybe some more details about all the actions to rebase the cost -- the cost basis across the board, not only in France. Maybe some additional comments from Delphine in order to give more information about the fixed business, because this was the second part of your question, how can you -- how can we preserve the top line but also the EBITDA? And maybe Pierre, you can also talk about the 4G non-discussions with Iliad?

Thanks. Maybe I will start with the last one. It's going to be really short since it is a non-discussion actually. So we are not really discussing 4G addition, I would say to the national roaming agreement. It's not discussed today. It's not an open discussion, I would say. We are in an ongoing process to continuously add new elements to our original roaming agreement. So this is something that goes on and on actually, according to the evolution of the situation, according to the evolution of the traffic that Free has and that we carry on our own network. So this is actually not really a discussion for today.

Regarding the other things, you were mentioning cost restructuring and cost reduction overall. So just a few more words on the Chrysalid program that has been launched. And that has, as Gervais and Stephane mentioned, has been a success above our expectations, I would say. It is typically one of those programs which has been conceived in a completely bottom up fashion. And that is, I think, the way you should -- and we should handle those programs in the future also.

It has been -- the figures, the targets have been designed by the people within the business units, within the countries and actually they have run the program and they have done better than what they had originally said. So we have a very limited team in a central way within the Group that coordinates and fosters the exchanges, the changes of experiences and also the techniques that we can share within the Group. But it's really handled and driven in a very good way by the people themselves.

So to give you a few more examples, maybe on several things which have been done. As you remember, Chrysalid was aimed at developing efforts in the networks area, customer intervention area, distribution area. And in all of those areas, we have achieved a few, I would say, successes, which are very interesting. If you take the Spanish example, in the customer relationship segment, there has been a lowering of the call rate to 15%.

So how do you, lower that rate, at the same time have more clients, which is the situation in Spain? There has been a good effort of call avoidance, with a lot of self-diagnosis tools, self-care development, improvement of the quality of the response. So you don't have repeated calls from people, which have been already calling previously. So what we call the lowering of the reiteration of calls. This is very important when you want to avoid cost.

E-billing has been developed too. This is going to help us achieve about EUR30m of savings in a year. This is just the Spanish example, just for call and customer relationship.

In Poland, in the network area, the improvement of the operations and the fiber networks and also the decommissioning of public phones, renegotiation of maintenance contracts. This is producing a savings in a great way.

In France it's even much more impressive and I think under the leadership of Delphine and her teams, the improvements in the Chrysalid program have been very impressive, actually. And I think above everybody's expectations. It's also in the customer relationship segment, with the lowering of the the call rate. 15% are expected in 2012, which is a very good and very impressive figure. So a lot of tools, again, help avoiding calls. The same tools actually that have been mentioned for Poland.

And in the network segment in France also, lowering the number of client intervention helps us raise about EUR80m also savings in the year. So out of those examples I am giving, during the same direction, we are talking about transforming the way we do some processes. We are transforming the way we interact with the clients and this helps lowering the cost base, I think in a very efficient way.

So that was for Chrysalid maybe a long answer, but I wanted to give you a few examples. And Delphine on the --

Yes. On the fixed markets, sorry for my voice. First of all we are controlling the PSTN decrease, thanks to our new optimal offers, including unlimited fixed calls and also unlimited calls for mobile. At the same time, we are increasing broadband penetration and value.

Already the average revenue on broadband is increasing, despite the fact that VOIP is now -- or calls towards mobiles are included in all the tariff plans. And we expect that to increase thanks to, of course, our [constant] strategy. Also the fact that we are launching a new box next year and at the same time, the premium offer.

We already can observe that on fiber the ARPU of fiber customer is on the higher range of ADSL customers. And as long as we are going to multiply by two of the number of fiber customers, we expect it to have -- to improve also broadband revenue.

So nowadays we are decreasing the difference between the decrease of PSTN revenue and the increase of broadband revenue. And we expect this difference to be almost around zero by -- in two years.

On the EBITDA on the fixed market, first of all, our new boxes are very efficient of -- on quality of service. This year, for instance, we have reduced by almost 20% the calls to our customer -- to our technical customer care on the fixed market.

We are also of course working on new processes to reduce the cost of the fixed processes. And also, because we have a new organization in France, since last year, we are working on a really tight local management of our efficiency and that's why we are completely on track on our Chrysalid program, even better in 2012. And we expect our Chrysalid program to deliver more than expected last year. So we are quite confident in the fact that we are going to be able to improve the fixed EBITDA ratio. Thank you.

Thanks

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Thank you. Stephane Beyazian, Raymond James. Three questions if I may. The first one is, let's say, regarding the gain you had in contract mobile customers in the third quarter. Is it possible to perhaps, I don't know, from Miss Ernotte to have a, let's say, an idea of what were the most successful commercial initiatives or plans. And whether the iPhone 5 was a factor in that sort of positive development in the third quarter?

Just one question is regarding 4G and specifically 4G pricing. Is it possible to share with us some of the first, let's say, tests that you have done in term of usage, in term of customer spending? I guess my question is to try to understand to what extent the customer demand is so strong that you will be able to put a specific pricing for 4G in the current environment. And that finally 4G will not be a sort of free upgrade for all existing customer in order to justify the current, let's say prices, versus some of your competitors.

And the third question, is it possible to have an update on the, let's say, the revenues you expect from the Iliad roaming equipment. Whether there is any chance, any more upgrade, versus what you were already expecting some couple of months ago? Thank you.

Okay. So maybe, Delphine, on the first two questions?

So on the French mobile market, what has been successful to regain contracts, positive contract net adds in Q3. First of all we have done our Origami offer, our core offer in June and doing that we established the fact that unlimited calls, unlimited SMS was quite a standard, and differentiate our offers mainly through data plans. And this move was very efficient and our net contract net adds are positive, have been positive since June.

We have also revamped our Sosh offers in late August and that helps us to be efficient on the low cost market. We targeted 600 customers by the end of the year and we are already at 540 plus customers. So I think we are going to meet our target and do better.

And the third point was Q4 is Open. Open is very successful. (inaudible) an Open useful also of course about online, mobile line and in half of the case a second mobile line. So Open is also very efficient to regain a mobile market share.

We have now 2.5m Open customers, of which 500,000, double SIM Open (spoken in French), I don't know how to say it in English but mobile customers. It's 200 -- 2m, sorry, 2m million customers, plus 500 SIM customers. 4G?

Yes, 4G, Delphine. No real results so far?

Well, the customer experience on 4G is really thrilling. We can say that and our customers, our owners, I'm pleased are testing 4G nowadays. In Marseille for instance, we can say that. Imagine that with 4G you have exactly the same experience you have nowadays, with a very, very good ADSL connection at home. So it's the real gap in user experience.

How are we going to price 4G? It's a real question. I have no proof to say, well, it's going to be a huge price. But what I can tell you is that we are pricing H+ nowadays with Sosh. It is EUR5 for H+, plus 1 giga data. And it works. 80% of the customers decided to say on the higher tariff plan on Sosh to benefit from H+. So the appetite for speed, we can observe it on Sosh and I'm sure we're going to observe it on 4G.

And when -- and I have also conviction, when you are using 4G I am sure you will be unable to go back to 3G. It's like luxury, when you are very, very beautiful hotel for instance, you'll never go to a (inaudible) hotel any more. It's the same for 4G. It's such a gap. Nobody will go back to 3G.

Anyway, you have a very interesting example in the second most competitive market in Europe, which is the UK. And by the way, as we have a lot of friends in London, maybe I can ask Benoit to give some details about the first 4G offers in the UK, with a price premium. And maybe we will then take a question from London.

I just want to say a very quick word about the roaming revenues in terms of prospect, because this was your last question. Seeing that, as you know, we don't want to make public any kind of figures regarding this contract, I can just confirm that we will be significantly higher than the EUR1b over a three-year period of time that was mentioned in the beginning. And by the way, Iliad president confirmed that it will be much higher than this EUR1b a few days ago in one of his announcement. Benoit?

Yes. Thank you, Stephane. Yes, just to say that we will announced -- we have announced and we will launch next week on October 30, our offering on 4G in the UK, in 10 cities, among which London. You have seen in the offers that we will put on the market, that we have been able to price the offers in different ways, to valorize and to monetize speed and volumes. And we have been able, so far, to somehow have an uplift of pricing between 10% to 20% versus our 3G offering. So we do think that we will be able to monetize 4G and to get more value out of 4G, versus what we currently have on 3G.

Thank you. Do you have a question in the attendees? Yes? Please?

Yes, hi there. Sorry, this is Nick Lyall, from UBS. Morning. Could I ask firstly on that 320,000 contract subs edition in France? Does that include an M2M contribution as well? It seems to in your slides, but could I clarify that first?

And secondly, on the guidance, do you want to change your subs growth and ARPU mix that you've talked about for France for 2012? And could you give us any clues about your assumptions for 2013 as well, when you talk about that?

And the final one was, why the dividend change now? You talked in Q2 about the 40% to 45% distribution by Q3, that's changed pretty significantly for this year. So could you discuss the timing please? Thank you.

Okay, maybe on the first -- on the first questions. The M2M contribution, Delphine?

Yes, on the 300,000 net adds, it's half mobile consumer net adds and half M2M in Q3.

And the second question was about ARPU. We expect the ARPU to be -- to decrease by 10% in 2012. And the same number in 2013 on the mobile.

Thank you. Your second question was about the assumptions, I think, on the ARPU, right? On 2013 and (inaudible) okay. So I now will ask maybe Gervais to explain you what we did take into account to -- and that what led us to this decision regarding the dividend.

Two points on that. You're right, we had already changed our guidance, by the way it was in February, we said we would deliver between 40% and 45% of the operating cash flow. It was announced in February.

In fact, what we have been considering are three things. One, first to preserve the cash outflow this year. This means that if you see what has been the cash outflow this year between the dividend portion paid in June and the interim dividend paid in September, we have delivered also [140]. We didn't want to change because we thought that this was really due with the cash delivered last year and was linked with the cash delivered last year.

Then we have been after, on top of what we have been doing on the debt, just remind you that on the debt we have, on top of the pressure on the operating cash flow, we have two additional elements that we will further describe, if you want, in more details in the one on one will be the occasion to speak about that.

One, we are spending additional spectrum. In fact, if you compare to what we had in conquests in 2015, in May 2011, we will spend about EUR1b more in three years, in terms of additional spectrum. EUR1b more. And then on top of that, we have a few additional negative items. I just want to mention the civil servant issue in France.

On top of that there are also additional tax. And if I take all the sum of that, the additional pressure on a yearly basis on the cash flow is between EUR300m and EUR500m. And we thought that instead of saying, okay let's pay the dividend as expected for 2012, maybe better to try to see whether we can commit on one year more on a fixed amount. Because we were also challenged by maybe not you but some of your peers on the fact we are giving a variable guidance with all the uncertainties with the fact that it is variable. So we have prefered to come back to a floor.

Now the floor I think is clear for everybody. If we can do more and this is what needs at least, if you can do more, we deliver a little more. More is not much more. We are not probably in a situation where there is far above to expect, but this was our thinking.

Also keeping in mind that the -- this is something we said at the beginning of the year, that we want to keep our ability to decrease the debt in absolute values even if we are not matching exactly sort of debt decrease with the EBITDA pressure, which means that we will increase our net debt to EBITDA ratio at the end of this year and at the end of next year.

Maybe we will take one more question from London and then back to Paris.

Good morning. This is Dimitri Kallianiotis from Citi. Two question, please. The first one is, the CEO of Vodafone made some comments about MVNOs in Europe, just saying that some operators are giving far too generous wholesale rights to MVNOs. And I wanted to get your view, in particular with 4G.

You've got two very disruptive players on your network, Free Mobile in France, also now Telenet in Belgium. I wanted to get your view if you think it's possible to expect wholesale revenues, for instance, to go up in particular with 4G? If you can charge operators using your network more for 4G than 3G?

And my last question is on the roaming deal with Iliad. I understand you can't give absolute numbers or anything like that but will it be possible for you to give us some indication on the phasing? And by that, I mean do you expect the run revenues in 2013 to be much below what you are getting in 2012 and maybe also for 2014? Thank you.

Maybe Pierre can give some elements on the trends in wholesale revenues. And maybe what you can say, Pierre, about the phasing of roaming.

Okay. So regarding the wholesale, I don't know how I should look to, maybe in this direction, or this one, I don't know where the guys in London, are exactly at my back. So regarding wholesale revenues overall, let's say in Europe. There is a tendency to see those revenues grow, as you have seen in the figures. In France it's fairly low actually if we include in wholesale the revenues from the roaming agreement.

But even without those revenues, we have witnessed a sort of good resistance, I would say, from the MVNOs on the French market. Their market share is still around, I think 10% in France. It's a bit above that in Spain. So the MVNOs try to resist by working very hard on the marketing offers, working -- and also working with the offers that they receive from the double or triple sourcing that they do actually in the market.

So in France, some MVNOs have been able to play between SFR and us and receive a good rate and keep their business afloat, I would say. So there is good resistance on that one but overall the revenues on our side from the wholesale business have been growing.

And the inclusion, of course, of Free has, I would say not harmed at all the other wholesale revenues that we had. We have a good development, of course, of those revenues, coming from the fixed business, which is still in the impending process in France. So this is still steadily growing one and as I have mentioned, the MVNOs are still growing. So I think that covers most of the answer related to wholesale.

And regarding Free, what I can tell you maybe is that we do not expect a decrease of those revenues in the coming year. Obviously it's going to be -- next year is going to be the first year of a full Free year, if you want. So it's not going to be decreasing. And even for the year after, it should be in the same range. So as Stephane has mentioned, Iliad's founder, Xavier Niel, has given more details on those cost on his side, revenues on our side than we have. And I think he has given a pretty good guidance on those revenues.

Okay. Now, back to Paris?

Yes, thank you. Vincent Maulay from Oddo. Three quick one if I may. The first one on the success of H+ Sosh offer. You not feel more cannibalization of the [Mosa] brand and for example your competitors, were more cautious sticking with 3G+ only for low cost.

The second one on the [decision] with the stakeholder French government. What is your leeway to avoid more hiring people, more than the 4,000 people, compared to La Poste for example? And what kind of levers you have for to benefit from the contrat de generation?

And finally a few other. One, two of them, your goal just Maroc Telecom?

Delphine, on the first question?

Well, we -- the relationship with our French customers is quite different. We have a permanent relationship on the web, so we are very aware of their expectations. They are very digital customers and they expect data as well as speed. That's why we wanted to try with those very digital customers, a higher tariff with more data and speed.

And in fact we didn't expect that to be so successful, because it was really very successful. So also a way to control the reprice of our Sosh space of course. And it was quite a surprise for us to realize that 80% of them decided to spend EUR5 for H+ and 1 giga .So it's a good surprise. It's good news for next year.

Regarding your second question, I met last week Mr. Montebourg and [Mr. Rahn] and also Mr. Moscovici in two separate meetings to present them the situation, the results, the commitments in terms of employment in France, the investment, ambition, the FTTH program and the dividend policy. And I think that I can tell that I received a global support from them, both of them. I think that they understand that the equation that we have to manage is quite difficult. As you know they have publicly said that they are concerned about the situation of the industry. They can see that other players in the market are talking about layoffs and really job reductions. This is not our case. So I think that they can see that we try to share the efforts that are necessary in the current situation and once again they fully agreed on what we proposed. And I don't expect any move from that specific line.

Now maybe we will have the opportunity to be one of the first big companies putting in place the contrat de generation, we will see. In fact we have all the elements since we have a senior population which is important in the Company. As you know the average age of our people in France is 48 meaning -- and we have 30,000 people that are over 55. So clearly we have, I would say, the situation, the demographic situation which is quite favorable to implement the contrat de generation approach. At the same time we will recruit, as I mentioned, 4.000 young people in the next three years. So we will probably put in place the contra-generation once the details will be known of course.

Regarding the Yoigo and the Moroccan situation, Yoigo is now officially I would say on sale. And of course, given our position in the Spanish market, and above all the fact that we are doing very well in the Spanish market, we cannot be out of the process, so we will be part of the process. Today we are in a totally non-binding approach, but we will be part of the process. I think that whatever the solution might be, it will be a good use for us and for the business because I think there is room for consolidation everywhere in Europe, but also in Spain. And if we have one less player in the Spanish market, it will be good for anybody. So we will watch this situation very carefully. We are not prepared to pay, of course, any kind of price for any asset, including Yoigo, and the value of Yoigo is object of debate, clearly, but we will be part of the process.

Regarding Morocco it's a kind of big market where telecoms are on sale, all telecoms are on sale including Maroc Telecom. There is nothing today open in the agenda. There is no discussion. We have no Moroccan file on our desk. If it happens and if there is something, we will watch the situation. I just want to remind you that we are today in Morocco in -- as the strategic partner of Meditel with a 40% stake. So we know a little bit the Moroccan market that we have also, we have today the number two player, the second player in the market. And we are also, by the way, present in one of the countries where Maroc Telecom is, the Mali. And so in any case, if we had something to work on, it would be quite complicated.

I think that we have a lot of questions in London, so maybe I suggest our friends to ask their questions in London.

Thanks very much. It's Andrew Lee from Goldman Sachs. Three questions, firstly on the price effects. You're commenting that the price effect from Iliad will be over by the end of 2013. I wondered if you could just talk about the price premium you think you'll be out versus Iliad by that time or how your ARPU will look by the end of 2013.

And secondly on CapEx in France, you gave guidance of 11% CapEx to sales excluding FTE -- sorry LTE and fiber. But we know your plans for fiber spends out to 2015, over the next three years. So I wondered if you could just give us a bit more color on the LTE spend and maybe tell us what your total CapEx to sales will be in France.

And then just finally on the dividend cuts, just a question, why not cut it even further to give yourselves some more flexibility for investments such as in Maroc Telecom and EM growth investments. Thank you.

Maybe I will try to give you a few answers on the two last questions and will ask Delphine to provide you more elements on the first one.

Regarding the dividend policy, I think that in fact everything lies in a kind of balance between the stakeholders that we need to run the Company. And once again we came to the conclusion that the sensible level which enables us to provide a balanced policy regarding all the stakeholders of the Company is to set the dividend at this level this year.

Some of our shareholders, some of our investors, will find that we have reduced the dividend to hardly because in fact there is no financial urgency, financial necessity to do it right now since, as you can have seen, we have 2012 results that are in line with expectations and so there was no financial necessity to cut the dividend. But we thought that it was necessary in the same time to keep the flexibility to manage our balance sheet, especially the debt situation, not the M&A agenda because the M&A agenda is by essence uncertain.

And in any case if there are M&A opportunities that we see as really strategic for the Company, we will work on them, taking into account our guidance in the balance sheet, meaning that we will have to make some arbitrations, some choices between our assets, if we want to increase maybe our exposure in one part of the world, we will have to reduce it in the other one. But clearly, for us, the key elements of our management is our balance sheet debt situation. And this -- those elements led us to the conclusion that the good level for our dividend this year is EUR0.8. This is a decision; we tried to explain it. And by the way what is very important for us also is to provide a guidance for next year of at least EUR0.8. Once again I think that both elements should be taken into account 2012 and 2013.

Regarding the CapEx maybe just a word on LTE CapEx in France, will be in next year multiplied by 3 in fact, in fact almost 3 compared to what we had budgeted in a few months ago. So LTE CapEx in France, Delphine, maybe on LTE CapEx and on the first question which was the ARPU and the premium --

Well, we do not disclose the LTE CapEx, but what I can tell you is going to build 3,000 new sites in 2013. So it's very -- we are accelerating in 2013 in order to cover 40% of the population by the end of 2014.

What is true is that if you compared what we had budgeted in terms of LTE CapEx in the beginning of 2012 and what we have decided now, there is a big gap, because we have decided to put much more money in LTE deployment next year than we had previously thought to do, more or less twice more. It shows that we clearly want to accelerate and take the leadership on the 4G deployment in France.

On the premium, regarding competition.

So the price effect and how can we say that the price effect will be over by the end early 2014. First of all we expect no big price war next year because tariffs are already very low. We are well-positioned on low price with our new revamping offer of Sosh. And on the premium offers we think also we are quite well-positioned to such that I can tell you that during Q3, 80% of the Origami, which is our core mobile offers, the Origami gross adds were on the higher range of the Origami offer, over EUR39.

And besides, Open, which includes a re-price of course, is also very well-positioned on the market. So we do not expect a very big war. We have offers that are well-positioned. We target to of course fight for our market share, both on the low-price offers and premium offers. And so we expect our ARPU to be [minus 7%] exactly the same effect we expect in 2012 for 2013.

Okay. Maybe a next question in London, your neighbor. Yes, we are listening to you.

Hi, Jakob Bluestone from Credit Suisse. Three questions please. Firstly, you've highlighted that maintaining investment levels is an important priority for you. But obviously over the last year or so the pressure on EBITDA has perhaps been a bit bigger than originally anticipated, given the lower price points in mobile. If you do get further negative surprises on EBITDA, how flexible is that investment level. Is it something you see as fairly set in stone for the long term of the business? Or would you consider slowing the pace of, for example fiber rollout or LTE deployment if you don't see the stabilization coming through in EBITDAs as you're currently modeling.

Secondly, just to return to the question on Yoigo and acquisitions, can you just clarify the new dividend policy? Is that assuming no M&A, or if you were, for example, to make an acquisition, would you look to revise the dividend policy of the EUR0.8 lower?

And then finally I think Gervais kindly offered some tax guidance in the past. If you could maybe give a little bit of guidance for what your expectations are for tax paid. Thank you.

Okay. Regarding the flexibility on CapEx, we definitely consider very high broadband part of CapEx, fiber and LTE, as absolutely -- as a clear priority. But you know it's only a part and I would say even a marginal part of the CapEx to make in France every year. And so, yes, there is some flexibility in the CapEx management -- well, some flexibility.

We have a lot of legal constraints also because we are the incumbent. I'm talking about the French part which is more or less half, a little more than half of the total CapEx of the Group. So there is some limited flexibility on the CapEx because we have a lot of legal duties, especially on the unbundling side. And clearly we want to keep the very high broadband CapEx, fiber and LTE, as a clear priority. Now the fiber rollout plan is a multi-year plan and of course we can also be flexible on the management of the time it will take to roll out the fiber. If we have maybe -- if it takes one more year or two more years, I think this is something we can manage.

The second question, regarding the dividend, yes, the EUR0.8 floor in dividend is independent on M&A. As I mentioned, it doesn't mean that we close any kind of opportunities, M&A opportunities, because it would not be sensible to do that in a time when there could be some opportunities especially in Europe. But we want to be -- to have the discipline to seek those opportunities within the frame, the financial frame that we set to ourselves and to the market, balance sheet and dividend. Dividend is part of this financial frame. Gervais?

Regarding tax it may be a little precise, but in fact we have had an additional EUR200m and EUR300m cash tax this year compared to a year ago. And we will have again about EUR200m additional cash tax in 2013/2014 compared to the previous situation. We should reach in 2013 about EUR1.2b cash tax, I mean just income tax and what is related from income tax. I don't speak about the tax which are included in EBITDA. This is just the income tax cash line, about EUR1.2b cash tax for 2013.

Maybe one question in Paris. Yes.

Morning, Antoine Pradayrol with Exane BNP Paribas. Just two or three very small questions, just to understand. On your broadband market share you said at some point that you did not exactly meet the 30% target for the year. Do you have a target for next year or can you reach this. And if yes, what would change the dynamics next year, maybe the bulk, maybe something else.

Second on the OpEx cutting in France, the EUR800m figure that you gave for 2014, can you give a little bit more color between interconnection costs, commercial costs, other costs please?

And the last one is on CapEx for 2013, just to be sure, what is the -- do you expect flat CapEx really in absolute terms in 2013 compared to 2012 at the Group level or maybe slightly less? Thank you.

Maybe a few words on the broadband market and Delphine could -- will add, certainly, things. Yes, we are a little under what we want to be our mid-term target of Conquest share which is 30%. We are a little under, slightly under, but we are still, I would say, globally in line with this target. Next year we will have a new box, set top box and nice box which will clearly first erase the gap that exists today in terms of box performance in the market. And it will help us definitely as soon as beginning of 2013 in the market, because this new box will not only bridge the gap, but also give us, a certain functionality, usages, a clear advantage and leadership over the competition.

Then there is something else which you should take into account which is the fiber results. And I think that when it comes to the broadband market, we will have now to see not only the DSL Conquest share but the whole broadband market, including fiber. And I think that thanks to the momentum in fiber, we will be clearly able to reach the 30% target which is still our mid-term target. Delphine?

The fact that in the present time the market is agitated, thanks to SFR, with limited offers of course, not the re-price of the core offers. And we know we're not going to meet the 30% because we don't want to follow this price war. Of course we're going to react on the retention side, but we don't want, and as a leader as well, to go on with this price war on the fixed broadband market for this month and the months to go.

By the way, I'm very surprised by what happens even it it's only a one-month initiative from SFR because I have heard from them in the last two or three years that they were losing money on the broadband market. So once again I am very surprised to see some people that are complaining, that are crying all the time, because they are losing money on the broadband market, destroying the prices. It's very, very stunning.

So on OpEx cutting in France, so EUR800m, the EUR800m is about EUR500m commercial costs. In the EUR500m commercial costs, let's say half coming from the subsidized to SIM-only move and half will be linked with our efforts to better optimize the allocation of subsidies, maybe to reduce external indirect distribution. There are a lot of actions we are doing to better balance and have a much better efficiency of our commercial costs.

Second [higher] this is clearly interconnect. And there probably one of the good news is that since we have reached a very high level of unlimited offers, when termination rate are now decreasing we have the benefit of it because it doesn't push to extra consumption. We are not giving more unlimited now. We have already given a lot.

And about EUR150m linked with indirect costs. It looks small but what's very important is that within those EUR150m, this is -- there is even a slight decrease of the labor costs. As I said we are really changing the direction in terms of labor cost evolution for the Company between 2013, 2014.

Regarding CapEx we have said it's more or less flat. Now it's not -- it could be EUR100m more, EUR100m less. We don't want to give a complete, precise guidance.

One more question, maybe in London.

I guess I've got the mic, so Jonathan Dann from Barclays. And I've got two questions. The first one is, in the past you've provided a net M&A guidance, so anything you spent would be offset by assets you sold. Do you think you would be able to provide something similar?

And then secondly you've, I guess, very clearly explained how you can charge a premium for LTE and fiber. But if I got the figures right, you'll only have 85% LTE coverage in 2016 and the fiber investment peaks in 2015. Is there the chance, or are you having a Board-level debate that says actually, like the UK, we should accelerate LTE investment and accelerate fiber to benefit from this price advantage, competitive advantage?

For sure, I think we have always been saying that, but it was not really a guidance. But I can confirm that we are still on the same line with the reinforcement of the line on debt follow-up and the fact that we are committing on the dividend, which has been -- it has been really stated several times this morning by Stephane. This implies that there is a very limited room for M&A except if you are able to be in a net situation where we sell as much as what we buy.

Regarding the LTE, fiber CapEx and the debate over a potential acceleration of those CapEx, I can just tell you that as far as LTE is concerned, we have decided to accelerate. So clearly because we think that there is more additional revenue and a clear premium that we can find and some appetite among our customers, we have decided to put much more money in LTE deployment in order to be earlier than previously expected in terms of coverage. I mentioned the 85%, which is a very high coverage ratio, within 2016. But we will put more money in the first years of this deployment in order to accompany the commercial launch of 4G in France. So, clearly, the answer is yes.

Regarding fiber, it's more difficult because, first, fiber is a much more complex process to invest. It requires a lot of participants, the local authorities. Also in France you have a difference between dense areas where we can do these investments on our own and a lot of places, a lot of areas where we have to enter into public-private partnerships with local authorities, and we are just in the beginning of this.

So, to be honest, I think that the EUR2b CapEx program that we have in fiber is relatively ambitious regarding all those practical elements and I think it would not make a lot of sense to try to put much more money. But it is very important in the current climate, in the current conditions to preserve this, because that could also have a debate on the interest, relevance of putting this money to fiber in a context where we have a lot of pressure on EBITDA. So this debate is clearly over; we will put the money and we will do the CapEx as it has been announced.

Two more questions I think in London.

Good morning. (inaudible) for Legal & General Investment Management. If we could dig a bit more into the FTTH rollout, could you put some numbers on your target for subscribers at maybe end of this year, end of '13? And also tell us how many homes passed you have at the moment and you plan to have at the end of next year? Because the team is spending a lot of money on what seems to be very slow growth at the moment, only 144,000 customers if I read it correctly, and the growth last quarter was 21,000 customers. So yes, it is growing, but just want to see sort of how you -- how the two curves of spend versus gain compare. Thank you.

You're right, it's a slow process, because as I mentioned, first, it takes time to build the network. It requires a lot of also subcontractors. And then there's the whole chain of people and of skills that is necessary.

The second point is that, so far, we have had a transformation rate, meaning the ratio between people that could have the fiber and people that are real customers that was very low, around 10%. And this is also due to the fact that we brought the fiber in areas where the DSL is very good. And so it's not so surprising that a lot of people didn't see the interest for them in fact to also have some works inside the home or their flat to have fiber if in the same time they have a very good DSL. Now we are rolling out fiber in areas where the quality of the DSL is lower. And so there is much more appetite in people that have only, let's say, low bandwidth on the DSL, on the copper, they are very much more attracted by the fiber.

In terms of numbers, what we target is -- maybe, Delphine, you can -- okay, is 160,000 subscribers at the end of this year. It will be, by the way, twice, more or less twice what we had end of 2011. So, end of 2012 we'll be at 160,000. And we will once again multiply it by two next year. This, our operational target, of course it will depend also on our efficiency in convincing, especially in the heart of cities, people, to switch from copper to fiber.

Yes. And we will also double the number of homes connected, FTTH, if you want, to almost 3m at the end of 2013. We will be at 1.5m at the end of this year. So we are still around 10% of rate between house or people having access to fiber and people being subscribers. And we will be around 3m at the end of next year.

Maybe one more question in London?

Yes, hi. Stuart Gordon from Berenberg. Three questions. First of all, on the Origami representing more than 80% of the sales in Origami, could you give us a flavor for what proportion of gross adds Origami is in the quarterly trends?

Secondly, could you give us a flavor for the difference in contribution per customer between somebody that signs up for Sosh and somebody that signs up for Origami?

And lastly, have you and your partners in the UK given any consideration to perhaps raising some capital by IPO-ing the UK business? Thank you.

Delphine, on the first two questions maybe?

I'm not sure of my figures. I'm just --

So we'll start with the third question. Regarding the situation of EE, we are still, as you know, under the JV with Deutsche Telekom. We are quite satisfied with this JV ourselves. We are satisfied with the way EE is doing, is advancing, is launching now the very high broadband in the UK. We are very satisfied with the management of EE, with the results of EE. And everything is open regarding the prospect.

The only thing that I can tell you is that we want to stay within the partnership with Deutsche Telekom and there is absolutely no plan from our part to leave this partnership. Now, of course, if there is some opportunity to maybe open shareholdership of EE in the future, I don't know if it's next year or in the future, we will watch this. It could include an IPO. But no decision has been made at that stage. And once again, what is the most important is to keep a very tight and confident relationship within the shareholders of EE.

Regarding the financing, you know that EE will have to buy 4G spectrum next year in the UK; the auction for other than 1,800 megahertz will be in Q1. And we will raise additional debt and issue new bonds. So it is the way to finance EE in this first step, the rest are being considered after proving the success of 4G launch.

In Q3, the low price market was around 40%, 60% between Origami and Open. And among the 40%, it was quite a great amount of blocked (spoken in French), I don't know how to say it, and 10% of Sosh, average.

I think we have one more question in London.

Thanks. It's Will Milner from Arete. I just want to touch on the political backdrop in France. You mentioned the ministers support the investments you're making and understand the pressure you're under. The initial guidelines that I saw were really just policy guidelines rather than a signal of any concrete change that might affect you. So I wondered if you could just talk about what we might expect or what you could hope to expect in terms of potentially a sort of change in political support or regulation.

And then the second question is, last quarter you said the roaming agreement from Iliad offsets almost half the underlying decline in French mobile, and I just wondered if you could be specific and say if that continued to be the case this quarter. Thank you.

Well, answering your first question, I think I can say that we have clear and full support of the French government on the plan that I presented this morning, including the CapEx side. And clearly, the government is very concerned about the FTTH file because, as you know, it's one of the big, well, priorities of this government, but it was also the case with the previous government to deploy high broadband network and fiber network in France. There is even a target of 20 that had been set by the new president. So, clearly the government is concerned about the means, the financial means that we dedicate to this FTTH program. But I think that what we presented to the team has been clearly agreed and welcomed.

And on the job policy and the employment side, once again we explained the situation. I think it was fully understood. And I don't expect any kind of change or move in the way the government is behaving regarding our company, provided we are of course on line with the main priorities of this government, the employment policy, the investment in network. And you can see this morning that, regarding the financials of the Company and the State as a shareholder, there is a steady policy with full support to the dividend decision that has been made, and including for next year, including for next year, with this notion of a floor of EUR0.8.

So I think these are the elements that I can give you this morning. Now, regarding the roaming, Gervais?

Regarding the roaming agreement, so it will, over the year, will offset a huge part of around 50%. Now it is -- it starts to fade out. This is what we're expecting because we knew, and especially next year it will no longer compensate repricing effect, because even if we are able to keep the roaming agreement stable, we will have again a repricing effect. So this is for the year, it was a little more than 50% in the first half, it will be a little less in the second half, because we have more repricing also in second half than what we had in first half. But we are quite happy with that.

Okay. So maybe one more question in London.

No. One more question in London and then I will ask --

(multiple speakers) from [Arka].

Yes.

The question relates to your -- what seems to be your assertion that prices cannot fall any further in the French market. My understanding is that the network is a sunk cost, the main issue therefore is structural issue between you and your competitors in terms of your direct costs and indirect costs, so, for example, labor costs. Is it not the case that France Telecom has less flexibility there and therefore it would be possible for competitors in that market to push costs down further? If that's true, how can you respond?

Well, it is true to say that we have less flexibility than probably other players in the market. This is due to our history. But it provides also us with some I think advantages in the competition. So it's not only a handicap, but it is true.

Now, I tried to, well, share with you what are my views on the assumptions that we can make on the pricing situation in the French mobile market. And once again, if you remember that we are today at a very, very low level compared to any kind of international market in France, we are almost twice lower for an average offer on mobile market than in the UK. So if you take this into consideration first and then if you take also into consideration that the players in the market, they might have a little more flexibility than we have on the labor cost, but not so much flexibility, and labor cost is only 15% to 20% of the cost, so I think that the margins that they have to lower price is very, very low. And then the fourth entrant that could be the one, the most aggressive, let's say, in terms of prices, as I mentioned, will be now -- will have to also think about its own customers, at the end of this year it will have, I don't know, several million customers. And if he decides to decrease prices, it will have a repricing effect on his own base, very powerful and not very good for his financials.

So, yes, I think that taking into account all those elements leads to an incredible assumption to not to see any more price war in the market in France. And this is regardless of, I would say, cost management in any of the players. I have tried also to explain this morning that we are doing a lot of things in order to reduce our cost basis, including in France and including regarding the labor costs.

Maybe last question in Paris.

Pierre-Antoine Machelon, Eiffel Investment. Two questions please, one on consolidation and one on fiber. On consolidation, you seem to be pretty optimistic on Yoigo finding a buyer be it you or the other one. My question is does the Austrian experience bring somewhat mitigant to this kind consolidation process?

And second, on fiber, I think I heard that you plan to roll out to around 1.5m households. In your opinion, are Telefonica and Jazztel open to let you share their investments, or do you have in mind any other partners open to sharing? If my assumption is right, which is that you would be liking sharing the investment.

Okay. I will give you some personal maybe comments on that, but I will ask Benoit who is still I think in London to provide you with additional answers.

Regarding the fiber, yes, we are very open to share, to co-invest with partners, and we have -- we do not exclude anyone. But clearly, as it is the case in France, by the way, because we have co-investment also agreements in France, we are open to share those investments with other partners. But Benoit will add certainly comments.

Regarding Yoigo, I think that there will be candidates, yes. Now I am not especially optimistic about the conclusion of the process, because I am afraid that there could be some gap, let's say, between the vendor's expectations on the value of the asset and what the market or potential buyers are ready to buy. But this is usual, I would say.

Regarding European Commission, yes, of course, there is a risk to see European Commission interfering in the process. It will depend of course on the buyer also. If the buyer is someone coming from outside, no problem. If there is a consolidation in the market, in Spain, that will be watched and put under scrutiny by the European Commission. And you're right, what we see today in Austria doesn't make us very optimistic about, by the way, any kind of in-market consolidation in European. But let's still have hope on humankind, maybe in Brussels, one day they would realize that it doesn't make sense to oppose a very limited consolidation in some of European markets and they will likely move from this very dogmatic approach to a more pragmatic and industrial-friendly approach.

Benoit?

We can't hear you.

-- rollout in Spain -- okay. Do you hear me?

-- microphone number two?

Is that better now? Okay.

So, just to confirm what you said, when we announced the FTTH rollout in Spain, we said from day one that we would be open to do that rollout with an external partner. We have announced it for 1.5m households but we would certainly be ready to share. We already have some sharing agreement in place in Spain, especially on LAN, so, the access on mobile, but we would certainly be open to do that also with other partners on the FTTH rollout.

More specifically about the Telefonica and Jazztel agreement, we are currently looking at it and we are currently in contact with the regulator to see how we could also get access to that agreement, and especially, more particularly about the vertical access in the building. So that would also help us to deploy our FTTH rollout faster and in a more efficient way because we would then also get access to what Telefonica and Jazztel could also on their side deploy. So we are looking at deploying that in a shared way, and any kind of agreement could certainly accelerate our pace of rollout.

Okay. So I think it is time to leave. I want to thank all of you for your attention and for the interest that you put in our Company. Thank you and have a good day.