Orange SA (ORAN) 2014 Q3 法說會逐字稿

Good morning ladies and gentlemen and welcome to Orange's third-quarter 2014 results conference call. The call will be hosted by Ramon Fernandez, Deputy CEO and Chief Financial and Strategy, with members of Orange's executive committee for the Q&A session that will start after the presentation. Thank you and let me hand over to Ramon Fernandez. Please go ahead.

Good morning everyone. Thank you for attending this conference call dedicated to Orange Q3 2014 results. I am here this morning with several of the ComEx members who will help me answering your questions at the end of my presentation. So let's start, and you will have the slides with you, with our key figures for the quarter.

First, Q3 results confirm the improving trend we have already seen during H1. We have stabilized this quarter again our EBITDA margin rate and this is thanks to the slowdown of our revenue decrease -- we have a minus 2.3% for the quarter -- but also thanks to the ongoing indirect cost reduction, now amounting to EUR333m since the beginning of the year. You will remember that our initial guidance was to have minus EUR250m. We have revised this upwards to more than EUR300m for the year and now we are already at EUR333m for the first 9 months.

Our commercial performance remains strong. We have 3.3m new customers at Group level during the quarter, with solid results across all geographies. And our CapEx is slightly growing compared to last year. I still would like to remind you that we accelerated our 4G CapEx in France at the end of 2013, meaning that we confirm a stable level of investment for 2014 compared to 2013.

So, turning to slide 5, you can see that our commercial performance was once again very solid and this is the result of our strong investment in very high broadband.

If you look at mobile, well, in Africa and the Middle East we have a mobile base, which grew by 11% year on year and we now have 94.3m customers. In Europe we continue to extend our 4G population coverage. We are over 70% in France, we are over 75% in the UK, then we have also good performance in Spain, Poland, Belgium and Romania. The third quarter was a very good quarter in 4G. In France we acquired 0.7m additional customers. In the UK it's 1.4m. In Spain 0.4m.

Now it's not only mobile we have these good performance but, turning to FTTH, in France we reached 3.3m homes connectible with fiber, with a target of 3.7m homes connectible at the end of the year. And we achieved a record high quarter in fiber net adds, with plus 65,000 new customers. In Spain we are at 0.8m homes connectible, with 26,000 fiber customers at the end of Q3.

Last point on this slide, the move to convergence is very well advanced in France and in Spain at respectively 43% and 77% of the broadband base. And this enables us to significantly reduce our churn rate by respectively 3 points and more than 5 points.

Turning to slide 6, you can see that our total revenue of EUR9.8b for Q3 confirms an improving trend, with a year-on-year revolution of minus 2.3%. This is to be compared to minus 3.6% for the first half and this is mainly driven by the good commercial performance of previous semesters and the lower regulatory impact, especially in Spain. Excluding regulation, Q3 sees a decrease by minus 1.4%. So this is of course the best performance we have seen for quite a while.

Looking at the main elements driving our revenues, I will look at mobile services, mobile equipment, fixed services and also the enterprise segment.

If you look at mobile services, you can see that revenues decreased by minus 5.1% in Q3 compared to minus 7.3% in H1. This improved trend is mainly led by France, benefiting from a better sales mix and also a lower impact of repricing and regulation, and we can also see this improving trend in other countries, such as Spain, Belgium and Slovakia. Mobile services revenues are also helped by a steady growth in Africa and the Middle East. I will come back later to this part of the world where the performances are really very good.

We also performed well in mobile equipment sales and the performance here is also mainly driven by France with, among others, the commercial success of the iPhone 6, which was announced in September in Poland, who is still benefiting from the installment plans which started in Q2 of this year. Good performance also in Spain.

Fixed services revenue trend also improved when you compare to previous quarters, with near stability in Q3 at minus 0.4% year on year. This is to be compared to minus 2.7% in Q3 2013. The performance, the trend in this quarter was driven by the performance in broadband services, plus 2.6%, with strong growth in Spain, over plus 15%. And also, even if it's only a slightly positive, but a positive increase in France, plus 0.9%, thanks to a 2.1% increase in the customer base.

Lastly, if you look at the enterprise segment, you can see that we have here a better evolution with a performance which is driven notably by strong growth of IT and integration services.

So all in all this improved trend in revenues contributed to the stabilization of our EBITDA margin that we can look at on slide 7. Once again in terms of EBITDA you have the benefit of a slower revenue decrease and of continuous efforts on cost cutting. This quarter EBITDA, our EBITDA margin reached 33.1%. This is stable year on year for the third quarter in a row. In value terms it is a EUR77m erosion, which is significantly less than the minus EUR252m we had seen in Q3 2013.

Looking at the graphic on the top right hand side, you have some details on the EBITDA evolution in this quarter. I would put your focus maybe on revenues, who were down by EUR226m, which is twice less than a year ago. We are comparing to minus EUR428m so better performance clearly.

And, second, when you look at cost reduction you can see first that indirect costs decreased by EUR119m. This is minus 2.8% year on year and this has been significantly helped by the 3.1% drop in labor OpEx driven by a 3.7% decrease in the average full-time equivalent employees. And for the remaining EUR54m of indirect cost savings, it's good to see that all cost natures are decreasing except operational taxes.

This good performance in indirect cost savings gave us the flexibility to invest further in targeted commercial initiatives to support our commercial performances and this is I think a very important element also. So direct costs decreased only by EUR30m this quarter, but this is a result of this choice to support the commercial performance.

And overall total cost reduction offset 69%, so close to 70%, of the revenue decrease of the last 9 months, which is better than we had seen before.

Turning to CapEx and investment on slide 8, you see that for the first nine months of 2014 CapEx amounted to EUR3.8b. This is up 2.9% year on year and this is an improvement by 0.8% to 15% (sic ? see slide 8 "13%") of our revenues. This is a clear demonstration that we are keeping up with our efforts in terms of investment despite pressure on revenues. And this helps us to advance our network differentiation versus our competitors. It's a critical asset for us and we are building on this.

Within networks, who represent 59% of our CapEx, a growing proportion -- it's 27% -- was dedicated to the very high broadband, fixed and mobile. This figure was only 18% over the first nine months of 2013 so we are really focusing our efforts on investment, network, very high broadband.

So this is the general picture. Now I will turn to our various segments, first of course turning to France. In France we have a revenue trend which is better. It started in the first half of the year, but it's continuing in the third quarter. We have a decrease in revenue which is limited to 3.1% after minus 4.2% in Q2 and minus 5% in Q1. It was also minus 5.6% in Q3 so there is clearly progressive trend here in terms of revenues and this is related both to mobile and fixed revenues so it's important to see that it's a general move.

If you look at the mobile services revenues, you have a minus 7.4% this quarter, which reflects a better customer mix, which is driven by the largest share of premium offers. Premium offers represent now 60% of the contract customer base. We also see a growing appetite for 4G for which we expect to have around 3.3m customers before year end, after 2.7m now, so very rapid expansion. We also see a healthier trend of our mobile ARPU since 86% of the contract base is now post-April-2013 offer.

And lastly there is an increased penetration of convergence offers, reflecting -- or reflected in the continuous decrease of our churn rate.

So all these elements concur to have a positive impact on what's happening in mobile services revenues.

If you look at fixed services, here you have a decrease of only 0.6% compared to minus 2.6% in Q3 2013. Broadband revenues are slightly up, by 0.9%, thanks to a 2.1% year-on-year increase in the customer base, which offsets the price effect of the growing penetration of convergent offers, which represent now 43% of the broadband base. So convergence is now 43% of our broadband base. Wholesale revenues increased, mostly due to unbundling accesses expansion but also to fiber infrastructure rollout.

And last point on fixed services, the PSTN revenues decrease is limited, if I may say so, to EUR100m this quarter. This is the lowest figure we have seen since 2007 if you exclude the impact of the 2013 subscription price increase. Another indication is that the number of PSTN lines lost was the lowest for many years.

Turning to KPIs for France, slide 11, and first turning to mobile KPIs, you can see that we are clearly leading the 4G race, with more than 6,600 sites activated. And this contributes of course to the dynamism of our contract customer base, which grew by 220,000 in Q3, with robust sales, and the churn, which is back to its 2010 levels. And this leads us to the figure I quoted already of 2.7m 4G customers end of September and the fact that we expect to reach 3.3m at year end.

I also recall that since early 2013 our premium offers include the opportunity to get a second SIM card for use in another device, like a tablet. And that excluding this effect of the second SIM card we have contract net adds 59% higher than during the first 9 months of 2013, so a very strong performance. This is reflected in larger volumes of customers acquired and a better mix of net adds, with 64% of sales on premium offers. So I said that we have a base with premium offers which is now 60% of the contract customer base. In terms of net adds it's 64%.

These good results can also be seen on the fixed activities. This is slide number 12, where we can see that convergence and fiber confirm their role as key value drivers.

Fiber proves very effective I must say as a retention but also as an acquisition tool. The continuous growth of fiber was visible this quarter with a new record of 65,000 FTTH net adds, reaching 481,000 customers. And this contributed to an estimated broadband share of Conquest around 30% for the quarter. So 30% share of Conquest on broadband is quite a good result. And it's also good to see on this slide that 57% of fiber growth was fueled by the acquisition of new customers, so more than half, while the rest came from migrations from our DSL base.

Fiber is also supporting growing convergence. 44% of the fiber base is now convergent and this is very significant. It's a growth of 13 points compared to Q3 2013 and the adoption rate of convergence is higher and growing faster in our FTTH base than for the average broadband base. Our fixed convergent offers -- so I'm talking about Open, Open Pro and Sosh plus Livebox -- now accounts 4.4m customers and represents 43% of our broadband base. It was only 33% last year.

And, as you know, convergence brings a substantial benefit in terms of retention, but also it supports our acquisition engine. I will here give a figure, which you can see on the slide, which is that 48% of our new Open customers are either a new fixed or a new mobile customer, and 21% of these Open customers are even completely new to Orange.

Turning to Spain, as announced at the end of Q2, the trend in overall revenue is improving, at minus 6.1% in Q3. It was 8.6% in Q2. And here also improvement was visible both in mobile and in fixed. Maybe I will not go into too much details and we will turn back to precise figures if you have questions. You have all the information on the slide, but you can see that in mobile services you have an erosion which is of 11.8%. It was more than 18% in Q2. And on fixed-services revenues you have an improvement of more than 12% year on year on Q3, which is much more rapid than in Q2, where it was 7.7%. And convergence in Spain has reached 77% of our base, which is quite strong.

This of course leads to a solid commercial growth in Q3. We have 192,000 contract net adds, better than in Q2. And we also have 64,000 fixed broadband net adds, once again better than in Q2.

In Poland, slide 14, you have also an interesting progress in turning around operations here, with solid commercial activity in mobile and fixed, and also an improving revenue trend. So, as in Spain, I would say you have good commercial performance, with a growth in mobile customers, plus 3%, even 3.1% in Q3, 130,000 net adds this quarter.

Fixed broadband customer eroded slightly at minus 0.5% quarter on quarter, but the evolution in Poland on the fixed broadband is interesting. For instance, you may have seen that the Polish Regulator authorized in early October a partial deregulation of the fixed broadband market and this will grant us some pricing flexibility to effectively compete in this market. So all in all we have revenue erosion here in Poland limited to minus 3.6%. It was minus 5.4% in Q2.

Turning to the rest of the world, which is mixing, as you know, rest of Europe and Africa and the Middle East, and we will change this in the future. We will communicate in 2015 on Africa/Middle East as a separate segment. I think it will be better in terms of communication.

But we still of course have information and in Africa and the Middle East we have very good performance with the mobile customer base increasing by 11% year on year, we have a 6% revenue growth and Orange Money, for instance, is now counting 12m customers, generating volume of transactions of EUR4b for 2014, which is twice more than last year. So maybe we'll come back to this region later on, but a very strong performance here in Africa/Middle East.

In the other European countries, here we have revenues still going down by 8%, but it's better than in H1 when we had the minus 10%. And trends are improving especially in Belgium, Slovakia and Moldova.

On the enterprise segment, slide 16, we have revenue trend which is also improving. It's still negative, but less negative than at the beginning of the year, minus 1.7% in Q3 versus 2.7% in the first half of the year and minus 5.3% for the full year 2013. And this is driven by the good performance of IT services. Voice is still decreasing, but at a reduced pace. Data services continue to grow in volumes and we have really good, positive results in IT services, with a revenue growth of 7.5%, especially thanks to new services like security, cloud, video conferencing. So this is also very encouraging.

One word on EE before closing with our guidance for 2014. EE has a very, very good performance and if you exclude the impact of regulation it's revenue was stable year on year, supported by continued postpaid growth. The value mix further improved in Q3. We have here in the UK a net increase of 119,000 postpaid mobile customers and EE is now the largest 4G European operator, with a total customer base of 5.6m customers in 4G. So very good performance also of EE.

I will finish with slide 19, which is dedicated to our 2014 guidance, which is, as you see, unchanged on all its elements, so very clear. I would only add one thing compared to what you have here on the slide, which is that concerning the net debt/EBITDA ratio, the target is maintained with no impact from the EUR3b hybrid bond issuance we did in September because we have put the proceeds under escrow for the voluntary tender-offer process which is to be launched in Spain for the acquisition of Jazztel. So this is fully neutralized.

Okay, I think I will stop here. Thank you for your attention and with my colleagues we are ready to answer to your questions.

(Operator Instructions). Stephane Schlatter, Societe Generale.

Thank you very much. Good morning everyone. I have three questions please. First one, indirect cost savings will be much higher than the full-year guidance so can we expect the EBITDA margin not to be stable, but to be slightly up in Q4?

Question number two regarding France. The French parliament voted a reduction in social charges paid by companies for salaries up to 1.6 times the minimum wage and the removal of the [7SSS]. So could you please give us expected impact for Orange in 2015 and in 2016?

And finally, regarding rest of the world, could you please give us some colors about press articles indicating an IPO of African assets is under review? Thank you very much.

So in terms of the better performance we have in terms of indirect cost savings and the possible impact on EBITDA margin, first I would like to recall that traditionally the EBITDA margin is lower in the fourth quarter of the year. It's a constant feature because of Christmas sales. And so all in all I would say that the EBITDA margin will be in line with what we have said in our guidance, which is basically that in terms of margin rate we will have stabilization. So this is confirmed and in terms of absolute numbers we confirm what we say, which is between 12% and 12.5%.

So what is good to see is that cost savings are very much on track with what we have said and even better, as we saw when we commented the first half of the year results. Up to now we have a total of EUR660m of cost reduction all in all so we are very confident with the EBITDA 2014 consensus that we have seen. There is really no issue there.

In terms of the African and Middle East operations -- and I will take the second question last -- in terms of Africa and Middle East, maybe to clarify some information we have seen in the press or in other places, first recall that our footprint in this region includes around 20 countries, accounting for roughly 10% of the Group revenues, with an average growth above 5%. I said it was 6% in the third quarter. So it's really important and it's really an engine for growth for Orange. So you know that we say that we are a pan-European and pan-African Group and we care very much about this. This is the core of our strategy.

What we are doing is that in order to increase the visibility of a growth potential and also to be able to benefit from all opportunities in the region we have started to work on the evolution of the holding structure of our activities in Africa and the Middle East. You'll probably know that for the time being our entities in the region are held in a number of different entities, different structures and we want to put everybody under a single hat. It will be much more visible and probably it will help everybody to have a better view of the value which is in these activities.

So there will be a single holding structure and, as I said, we will also accompany this with an evolution in our communication. We will have a segment dedicated to Africa and the Middle East, and not mixing in a big rest-of-the-world segment as some smaller European countries and all the African and Middle East countries. So this is what we are doing now, putting all our assets together under a single, dedicated holding. This is very consistent with our pan-African strategy and in fact the technical work is well advanced and I think we should be able to implement this in 2015.

Now this does not pre-judge our future steps and what we will do with this holding. Of course we can imagine to build on partnerships. We can imagine a possible IPO on a part of the capital at a later stage, but this is not the point now. The point now is to have the structure and to be able to work on this basis to keep growing and improving our performance in this region of the world.

Now the second question is something which is being worked on now. We will not be able today to provide specific information for 2015 because, as you said, it has just been passed in the French parliament and so the specific modalities of implementation of this new law needs to be specified. So we will turn back to this with specific figures as soon as they are specified.

Frederic Boulan, Merrill Lynch.

Hi there. Good morning. Frederic Boulan, Bank of America, Merrill Lynch. Three questions if I may. Firstly, more of a personal question. As a recent new joiner in the organization, if you can share with us your first insights and impressions on what needs to be changed or improved in the medium term and the main challenges you think Orange faces.

Secondly, probably more questions for Delphine if she's around, but where are you on the migration of the base to post-April 2013 Origami repricing and if we can expect ARPU next year to be stable as 4G gains traction or if repricing will remain a bigger force?

And lastly, we're getting into budgeting season for next year. Can you share with us whether the Group expect the flattish revenues you are starting to deliver and stable margins to translate into also stable growing EBITDA next year, if I could just tell, and if you could mitigate the lower contribution from the Iliad roaming revenues with other areas of growth? Thank you very much.

So Delphine is with us and will take the second question. So the first question of course I hesitate because it could take us a full day to exchange on first impressions because of course it has been fascinating to be in this job since early September, after spending most of July in the Group, looking at the issues, talking with my colleagues.

I think it's great to arrive in the Group at a time when we see that the situation is clearly improving. I think it is striking to see that despite very strong competitive pressure the commercial performance is really excellent in this third quarter. And it's true first in France, which is of course for us absolutely critical, but it's also true in other countries where, in Europe, we face many challenges but the situation is improving, and in Africa and the Middle East we have also a very good situation.

I think the Jazztel move is also very important for us because it demonstrates that we have capacity to move. And the strategic impact of this operation I think is very important and I think is also very well understood. It was clear when we toured with Stephane Richard and the team in many road shows to explain the deal. I think it's very well understood and I think it's a testimony that Orange may be a big company, but it's also able to move fast and to reach out and grab opportunities when they are there, but still being cautious of course on what we do.

So there are many, many issues we could discuss, but all in all I would say that it's fascinating and great impressions, fantastic company, excellent commercial performance and so looking ahead it's very encouraging.

So there was a question on the EBITDA evolution etc. So this we will turn back for 2015. For now what we are confirming is clearly the guidance for 2014 and we are very comfortable once again with what the consensus is seeing. So this is the topic of the day.

In terms of looking ahead, well, it's an issue that we will discuss at a later stage, but of course we will maintain our efforts both in terms of having better revenues and of being on track on cost reduction. But it's not only cost reduction. It's also working on the core business, building on the quality of our network, which I think makes a difference. And I think it will be more and more understood that having, for instance, on 4G, the best network brings new customers. And fiber is also a very important element where we are far ahead from our competitors.

So I would now give the floor to Delphine.

So I answer the question on the ARPU for 2015. First of all, it's true to say that we see a real slowing down in the ARPU decrease this year thanks to many things. First of all, good commercial performance and a better mix within the offers than expected and also the fact that the major part of our base is repriced with post-2013 offers. 86% of our base is already repriced. So we see a real decrease in -- a real slowing down in the decrease of the operating revenue on the mobile part.

But on the other hand we are still pushing hard on convergent offers, Open of course, because it's really core in our strategy. It has a huge impact on churn, first of all, and of course there a reprice concerning Open. And so we expect the re-price to slow down, but to have a better ARPU decrease than this year, but still an ARPU decrease next year. And, besides, we don't know what our competitors are going to do. So of course tariffs are very, very low in France, but I cannot speak for our competitors.

Right. Thank you very much.

Andrew Lee, Goldman Sachs.

Yes, good morning everyone. Just a couple of questions. Firstly, on French fixed, was the promotional activity or pricing promotions greater or lower in French broadband this quarter versus last quarter? I just wondered if you could add a bit of color on what's driving your strongest net add share performance in two years over and above the fiber that you mentioned.

And then secondly on convergence in the UK, is EE launching a TV service enough to compete in any increasingly convergent market or do you think you need to own fixed assets too? What more can you do here and can you comment on press speculation about more of an IPO of EE? Thank you.

So maybe in order to have a variation in voices for you, we will start with Gervais on the UK and then turn to Delphine on the fixed French market. Gervais?

So EE is already convergent. Everybody might remember that in 2009 just at the time of the merger between Orange and T-Mobile we transformed our unbundling business -- we had a DSL business -- into a long-term agreement with BT. We have outsourced our fixed network to BT. So we benefit from the wholesale agreement with BT where we can resell the VDSL offer of BT. And this agreement allows us to continue to progress in selling fixed broadband,

And, by the way, if I take the figures of all the mobile operators, we are the only one to have, I would say, sensible results in terms of fixed broadband activity for consumers. Some others have for B2B, like Vodafone after they bought Cable & Wireless, but if I take the consumer market, we are playing into that market today.

Second point, BT up to now has not started a convergent business for consumers. They have prepared the field for that with the MVNO agreement they have signed with us, but they first decide to tackle the B2B market and then maybe later on the consumer market.

What's important in the UK is that -- and there your question is very valid -- is that convergence is also with content and TV. And this is, by the way, the very big move of BT to enter into the content distribution and sometimes content rights ownership. And the move of EE is to, as a mobile operator, to show that the future consumption of TV is also on mobile. And I think when you are a leader in mobile this is part of your strategy to demonstrate that your network, your products, your services on mobile are key also to distribute content for the future.

So EE is positioning the different pieces to be a convergent operator without today having the -- taking the next step, which is to do more by looking at potential combination with fixed players. I think this is a second step, a second battle that will probably occur in our view in 2015. We'll see what happens in terms of potential combinations between the fixed operators and the mobile operators, keeping in mind that as of today nobody is convergent in terms of owning the two assets into the same company.

Maybe to add one thing on EE ownership because this was the second part of your question and there has been many, many speculation about this, for us for the time being, which means in the short run, the best option is clearly for value creation to keep the current ownership structure. So nothing to expect in the very short term. Of course longer term is another topic and here, we have said this constantly, there is nothing new; all options should remain open.

So this is what I would just like to add on this question and now I'm turning to Delphine.

So on our fixed market our commercial performance is mainly driven by Open, both on ADSL and fiber, and especially in very dense areas it's fiber that drives our net adds. Besides, we are also really very efficient on the churn, which is reducing as well on the fixed market.

So it's true to say that we are making some promotions, but very differently from the past because we have now the tools to target specific areas. We can make some promotion in some types of shops for instance, but not all across the country. So we have now the agility to of course use promotion, especially to compete with Bouygues with its EUR19 triple-play offers, but not so many promotion not all the time and in very specific and targeted areas.

Thanks. Thanks very much. Can I just ask a follow up, just on Gervais' comment on looking at potential combinations of fixed operators from 2015 onwards? Can you just add some color on that? What do you mean? JVs. Potential acquisitions. How should we read that?

I think today to tell you the truth nobody has been coming to us from the fixed players to say I am looking for combination, neither the big incumbents, nor the big cable operators, nor the smaller guys. So I don't think it's on their agenda today. My feeling is that their agenda today is more how to ensure that they have a stake of the content rights. I think you (inaudible) how the battle is, but for me the battle today is still who will own what in terms of content rights.

The second point, and you have seen that with what happens with Phones4U, I think for the mobile player this is how to restructure the distribution. But because there are a few steps to be undertaken before coming to the next step so this why we think it's something which is in the air but not started yet. So a little difficult to answer to your question today.

Okay. Thanks very much.

Vincent Maulay, Oddo.

Hi. Good morning. Two questions on France. The first one is a quick follow-up on the fixed side and the service revenue trend. So when I listen to your answer on the past question it seems that despite some discount offer to some customers for typically the fiber at EUR19.99 per month, it seems that you are still comfortable on the fact that the service revenue trend will be consistent with the nine months or typically roughly minus 0.7%?

The second question on the iPhone 6 halo effect on Orange. So typically are you able to streamline some commercial cost to capitalize on your quality networks or actually when I listen to your guidance you will dedicate still a chunky budget to the commercial cost in Q4?

I will turn to Delphine.

Okay. So on the fixed trends for end of the year we are still on a good trend, on a decreasing trend, minus 3.4%, around minus 3.4% on the overall revenues for France after minus 3.1% in Q3.

On the iPhone 6, yes, we see iPhone 6 as a big success and, besides, we have a lot of iPhone customers in our base because at the launch of the first iPhone we had the exclusivity. So it's very key for us to be efficient on iPhone 6 because it's key to retain our heavy-data-user customers. So we, because of our good EBITDA control in France, we have the opportunity to dedicate a little bit more commercial cost for the end of the year to continue on a very, very good commercial trend on the mobile part and especially on the iPhone 6 business.

Okay. Thanks.

Nicolas Cote-Colisson, HSBC.

Hello. Thank you. I was wondering how many of the 3.2m homes passed by fiber are already wholesaled.

And also could you share with us progress on co-investment, and in particular if you can feel any impact from the SFR-Numericable merger introducing some slowdown in the co-investment process? Thank you.

So regarding the rollout of fiber and the passed homes, I don't think we're disclosing yet the number of wholesaled, if you want, homes which have been addressed by others. In many cases we are in the process of exclusivity of the commercialization because we have passed and connected so many more homes than our competitors. In other cases we are starting the commercialization of others.

As you know we have now 3.3m connectible, homes which is a 42% increase on a year-on-year basis. And the transformation rate is also growing. Since we've left the center of the cities, we of course have witnessed a better commercial success. When we deploy fiber networks we witness also a EUR3 increase in the revenue per user so it's a good reason for us to continue.

But then moving on to the other side of your question, it is the, let's say, the unknown factor for the future, is Numericable going to completely follow on SFR's investment commitments in FTTH? This is something that is pretty well -- pretty much discussed today I think between Numericable and the competition authorities in France and even the government probably because everybody expects them to be true I would say to the commitments made to the company they're acquiring.

The jury is out. It's not clear yet. Everybody sees the reasons why they would probably rather want to transform passed cable homes into clients, but also there are some reasons for which they would probably have to take certain commitments regarding FTTH. This is what we can say as of today I think.

And if I may, would it change the pace at which you are rolling out fiber? Let's say if SFR-Numericable decides to pull out of some of the co-investment scheme, would you still keep the same kind of target you have in mind?

I think first of all we need to really see what they commit to. Then also you need to bear in mind that when there is wholesaled FTTH network the revenues we get are higher than the revenues that we get from normal traditional copper unbundling. So we're going to be looking very carefully also into the commitments made by Free, who still is dedicated to investing in FTTH. And even Bouygues in the future might want to take away a lot of the monies they were giving to SFR and invest in our networks. So those factors also have to be taken into consideration. But overall I'm afraid we cannot really say as of today what's going to happen in the next six months.

Okay. Thank you.

Dimitri Kallianiotis, Redburn.

Hello. Thank you for taking my questions. Just actually going back to the point on wholesale revenues, you've given some useful more details on the growth, which remains very strong in Q3 at plus 8%. I just want to ask you what are your expectations going forward. And I know a lot of it also depends, as you say, on SFR and the other -- and your competitors, but should we expect this growth to continue to be as strong basically?

My second question was regarding the enterprise division, which reported only a decline of minus 1.7% which clearly was much better than what we've seen before. And again I just want to ask you what was driving this improvement and if we should expect that improvement to continue. Thank you.

Okay. So thanks for this question on the wholesale revenues. So in Q3 the revenues are once again up by 7.5%. So it's EUR70m above last year's performance for the same period. First of all, we continue seeing an increase in the number of unbundled lines, if you want. Unbundling still is a very active thing in France today. Recently Bouygues has asked for more NRAs to be unbundled so it's a continuous activity and the tariff is good.

And also we might, as I previously mentioned, we might see in the coming weeks -- I cannot really be more specific than that -- but more, I would say, business brought to us by Bouygues because I think basically you all know that they really want to take away as much as they can from SFR without really being able to say today because there are certain commercial processes ongoing. So that's one thing. We've seen also a positive price impact coming from the increase of the unbundling tariff earlier this year in February so that has brought other revenues.

So overall those are elements to which we can add next year probably the revenues coming from the [RIPs], which are the investments, if you want, or commercialization that we make with the local connectivities in France, cities, townships, and this is going to grow also. So there is a nice future for wholesale revenues in this country.

This is Ramon again. It was Pierre Louette, of course. Everybody recognized him.

On the enterprise question, what is driving this improvement in revenue trend and can we be a bit more specific maybe, so it's clear in the title you have seen in slide 16 that the improvement we have at minus 1.7% in Q3 versus minus 2.7% in H1 and minus more than 5% in the full year 2013 is very much driven by the good performance of IT services -- maybe I can give a bit more flavor on this -- since the end of 2013 but also lower price pressure and a favorable comparable basis after a weak Q3 2013. So here it is clear that this improvement is also partly due to the fact that the basis that we are looking at in Q3 2013 was favorable.

If you look at the various elements you can see then that voice continued to decrease, but at a reduced pace and this is thanks to stable traffic in legacy and also to the positive trend of voice-on-IP revenues. And this is true both in France and international operations.

In data services, looking at the slide you can see that we had continued growth in volumes in Q3. And we also see here lower price pressure in IP VPN and lower broadcasting losses so this is also contributing to this evolution.

And lastly going back to IT services, IT services is 27% of the total enterprise segment, so it's very significant. And here the performance is very good because you have revenue growth of 7.5% which is accelerating. It was 5% in H1 and it was negative in H2 2013. And this is very much supported -- I think I said it -- by new services like security, cloud, video conferencing. And here the figures are more than 10%, close to 20%, so in these three elements, security, cloud, video, it's very rapid. You have extremely rapid growth which is contributing to this evolution.

But, once again, let's not forget that the basis in 2013 is helping us.

Thank you.

Nawar Cristini, Nomura.

Morning. Nawar Cristini at Nomura. Thank you very much for taking my questions. I have a couple of them. So firstly on Iliad roaming revenues, could you give us an indication of the trends there? In particular, are you seeing those revenues starting to come down and also any indications on the expectations for next year will be helpful?

Secondly, could you update us on your thoughts on consolidation in France? And are you still confident that the market will consolidate over time and what role are you playing -- are you planning to play there?

And lastly, just coming back to the cost savings, to the indirect cost savings, is the EUR100m run rate per quarter that we've seen so far a reflection of what we should expect to be the level going forward? Thank you very much.

So maybe on Iliad I will turn to Pierre, but maybe first I can say something -- and Delphine will also comment on this -- on cost savings and then consolidation in France.

I think on consolidation in France we are still of the view that it would be a benefit for all if we had some consolidation in France. But we are not one suffering the most from the absence of consolidation. So we will be still very attentive to possible initiatives from various sectors, but we have the very good performances that we are commenting today so we are not going to lead on this. We will be looking at evolutions.

Maybe we can turn to the Iliad question before turning to the third question.

So regarding the roaming revenues from Iliad, we are looking at a stability this year compared to last year. It's going to be really in the same area as it was last year. And 2015 should be a year in which we gradually see the beginning of a decrease in the revenues originating from the roaming agreement, which is I think -- which all of you expect actually.

And maybe it's not going to be as fast as we expected actually also because Iliad tends to still have a great use of our network, which is maybe a bit over the proportion of the population that they're supposed to theoretically cover with their own network. So we still witness that kind of phenomenon for reasons that are questionable, but still bring more revenues to us than we might have expected in the past. That's I think what we can say on next year.

In terms of cost savings I think your expectation that there is roughly, let's say roughly, around EUR100m per quarter in terms of indirect cost savings is roughly correct. Then there can be some differences quarter to quarter, but the dynamic in 2014 is around this figure. And we are going of course to maintain our efforts in this direction. So this is for indirect cost savings, once again a total of EUR333m at this stage. Of course the fourth quarter will also contribute to this effort.

Now you have also to bear in mind that in terms of direct costs, as I said in the presentation, we are also supporting our very good commercial performance by some support. We are not increasing the level of support per device, for instance, but because we have more volumes, because we have a better mix and because there are opportunities to seize, we will support this by some support.

Thank you very much.

Giovanni Montalti, UBS.

Good morning. Thank you. Just a quick question. Should consolidation materialize, would you be open to consider going forward [negotiating] agreement with Iliad?

And also a quick follow-up on the previous question. Is EUR100m cost savings for indirect costs a good reference point also for 2015? Thank you.

So on 2015 I will refrain from commenting the future efforts. Obviously we will maintain our efforts in terms of indirect costs reduction, but it is very premature to quote any kind of figure for next year. We will have many occasions to do this.

On consolidation, really I have nothing much to add to what I said. I think it is known that Orange is ready to discuss with all her stakeholders. The door has always been open to discuss. We have heard this morning the head of Iliad making some comments on this so we shall see. Once again we are not on the demanding side. We still believe that consolidation would be good for the French market, but we will wait and see who is interested in moving forward and then we will be ready to discuss with whoever is interested.

Thank you.

[Sam Dillon], RBC.

Yes, good morning guys. It's Sam Dillon here from RBC. A quick question on multi-SIMs in France. Your additions on the contract side in the quarter around 32,000, which, albeit being healthy, is a little bit lower than the recent run rate. Will you do anything in particular to try and accelerate the number of multi-SIMs you're selling and incentivize customers to take that?

And a question on French mobile ARPU, if I may. If in the event that pricing doesn't materially move in France over the next year or two, and with the Iliad roaming revenues coming off, where do you expect currently mobile ARPU in France to bottom? Thank you.

On multi-SIM, yes, we wanted to disclose the difference between pure contracts and multi-SIM to be very clear that we are very effective on -- efficient on pure commercial efficiency on contracts. But, yes, it's true to say that we are going to accelerate on multi-SIM because we are really focusing on households and as we see that the number of connected devices are increasing in the households we need to be able to propose to our customers multi equipment, like Open, for instance, and multi-SIM for tablets that are growing.

On ARPU, it's difficult to be more precise than what I said previously on the ARPU trend for next year. I'm quite confident in the fact that we are going to decrease the ARPU at a lower pace, but I cannot be more precise.

No problem. Thank you very much guys.

Jerry Dellis, Jefferies.

Yes, good morning everybody. Thank you for taking my questions. Three questions please. Firstly, I'd be interested in to what extent your stronger commercial performance this quarter was a function of perhaps the rather weak situation of SFR currently.

Then secondly, thinking about the fourth quarter trends, I think in the fourth quarter last year there was quite a strong lift in commercial and content costs, which was presumably associated with the launch of 4G in France in October of last year. So given perhaps that slightly easier comp for commercial and content costs going into the fourth quarter this year, is it your intention to push even harder commercially, which would result in obviously a rather stable margin, or perhaps is there some flexibility to ease back a little bit and deliver a better margin performance in the fourth quarter?

And then the final question please is you mentioned I think that Bouygues has been asking for more unbundling capacity. I'd just be interested in how much capacity they've been asking for. Thank you.

On the SFR question, it's on one hand they've been really, really aggressive on promotions on Q3. We see them less aggressive in October and maybe in November because closing is not too, is not long now. And definitely it's a good opportunity for us to regain more customers because of course it's difficult for them and also because they have definitely a poor network and it's now all over in the press. And the quality of network is the key element for customers when choosing an operator.

On the -- that's why also, because we see an opportunity on SFR customers, that we want to dedicate more commercial costs on this Q4. I don't think it's going -- nevertheless we are not going to spend so much money on Q4 compared to last year. It's really controlled. We have a strict control on commercial costs, deciding every week whether we're going to push or not on specific devices, for instance. So even if we see an opportunity with more commercial costs to gain more customers and of course a better revenue next year, we are still really controlling commercial costs compared to last year.

Louis Citroen, Arete Research.

Good morning. Thanks for taking my question. I have a question on fiber rollout and more specifically what are your thoughts regarding fiber-to-the-building or fiber to the door of the apartment, and using copper G.Fast as a way to potentially accelerate FFTH availability in France. Are there any plans and, if so, when might we hear about it?

And maybe a second question on the UFC Que Choisir study which was released two days ago, if you could comment on that and maybe more specifically on the results with the -- regarding the Iliad customers on the Orange network. Thank you very much.

Okay. So first question regarding the new techniques of bringing high connectivity to the homes in many ways, we are exploring all of those possibilities. We have an experience which is already working now in Poland which is RFoG. It's called RFoG. It's a technique which gives access to fiber and cable in an easier way than it was conceived previously. We are going to be using the coax circuit. We're going to be looking also into FFTDP, as you know, a way to take electricity, actually, from the homes without destroying too much of the homes' equipments. So it's an easier way to give access to high bandwidth to people.

So all of those things are going on now but above all, and it's a question that you haven't raised, but above all what's going to be very important for us is to see what kind of retail and wholesale prices cable will offer to customers in France, to customers in the B2C and in the B2B fashion also. So that's probably even more important to us. I would add to that the fact that we have been able to obtain a commitment of the builders of new buildings to completely embark pre-equipments for fiber in their new buildings, which is actually extremely important in order to facilitate the access to the FTTH networks in the future.

Second question, I really wanted to address that actually. I'm happy that one of you raises it. There was a study published a couple of days by UFC Que Choisir, which used to be one of the strong promoters of Free in the past I would say. Apparently they have also come up with the realization that Free's network was very, very much behind everybody else in France, with the exception of SFR, which we have said previously is in a quite difficult situation too.

We were a bit surprised, I would say, and amused to a certain extent, by the declarations made by Xavier Niel who tries to separate his network, our network in ways that are not acceptable. But we need to stress here that Orange completely respects the commitments made within the roaming agreement and we deliver to exactly what Free buys. Orange doesn't put in place any discrimination mechanisms when it comes to roaming agreement, but we give to Free the data capacity they want, and they subscribe and they buy.

So we're not opposed to evolutions of the roaming agreement to a certain extent. We're not opposed to those evolutions when they are linked to the evolution of the usage that people have of data. What we are not going to enter in is the use of our contract as a capacity contract. It has never been meant like that. It's even written like probably in the first page of the contract it is not a capacity agreement. They are supposed to build their own networks, to roll out their networks and to have a network that efficiently is able to provide a service to their customers. They're not supposed to forever live in our own networks.

So, again, I think we see that as a statement which tries to cover up for certain shortcomings when it comes to their own production and network. We see that as a sign of (inaudible) on Xavier Niel's behalf. He will very probably reach the theoretical 75% coverage earlier than next year, but that's very theoretical. As UFC has seen and as the customers know, there is a big step from theory to a good service. When it comes to Orange, we are number one in all sectors and that's our traditional and favorite position.

Thank you very much.

Russell Waller, New Street Research.

Yes, thank you. It was just a follow up on the wholesale revenues. Just wondering, if I look in 2012, for example, when wholesale revenues were negative but there were much larger numbers of unbundled net-adds than there are today and yet wholesale revenues are materially positive, and I was just trying to reconcile those two; there's obviously something else going on.

And then going forward I've thought about wholesale revenues declining as the unbundlers move to their own -- sorry, the customers to their own fiber networks. And I was wondering, you said that you saw the outlook of wholesale revenues as positive in France and again I was trying to just reconcile those two thoughts. Thank you.

Just a quick one on the evolution year after year, overall we see a trend of increase of our wholesale revenues division in France and this year I think we're going to beat our records in terms of wholesale revenues. There was maybe a period of time in which the number of unbundling activities on copper were starting to slow down. What we see today is that there is still a lot of activity when it comes to unbundling because everybody has realized with the example of Bouygues suffering so much on the market that you need to fund a part of the mobile wars with fixed activities. And I think Bouygues comes back to that and even Free, Iliad comes back to that.

So there is unbundling going on so that sustains I think the revenues from the fixed part of wholesale. And on the mobile part, as we have said previously, there is no decrease in the revenues coming from Iliad. So those two elements combined bring evidence for the sustained growth of our wholesale revenues overall.

Okay. Thank you.

Okay. I think we have no more questions. Thank you. Thank you very much for attending this call. And if you have any further questions of course you can put them through and we will give you the best answers we can. Thank you very much and have a good day.