Orange SA (ORAN) 2015 Q4 法說會逐字稿

So good morning, everyone. Welcome to this presentation of our 2015 results. As usual, I will talk a little bit about the highlights of this year that has been a year of turnaround for Orange. And then I will ask Ramon to give you more details and information about our results.

So let's see maybe the overview of 2015. 2015 has been clearly a very important, critical year for our Company, first with the announcement of our new strategic plan, Essentials2020; it was in last March. We also acquired Jazztel in Spain. We now consolidate Meditel, our Moroccan operation. We have launched in 2015 the sale of Everything Everywhere that has been fully completed early this year. So clearly, with a lot of dimensions, this 2015 year has been a year of turnaround.

I would like to also highlight the performance of the stock, with a total shareholder return of about 14% in 2015. We have over-performed the sector and the market benchmark by more or less 5 points each. So that is the reason why I am very happy to see in front of you that our strategy, which is focused, as you know, as to deliver the best possible customer experience all over the world, brings now some results. And I think that our 2015 achievements are a nice evidence of the fact that this strategy is relevant.

So let's overview the main figures. As I mentioned, this year has been a year of turnaround and the first turnaround is on the topline on the revenue. We are at EUR40.2b which is almost stable year on year and a slight growth of 0.3% excluding regulatory impacts. We have recorded in the fourth quarter of 2015 the second consecutive quarter of growth, net growth, in the topline.

The second nice achievement is about EBITDA which is at EUR12.4b, slightly above our guidance and with a slight growth, 0.1%, compared to 2014, 30.9% of EBITDA margin. This means that in fact we have been able to stabilize or even to return to growth both in revenue and EBITDA a year ahead of our midterm plan.

We clearly have been able to reach those results thanks to a very active policy of CapEx investment mainly in our networks. We have invested EUR6.5b last year. It's a 9.3% year-on-year growth. We are at 16.1% of our revenues dedicated on CapEx. It is clearly thanks to this that we are now able to differentiate from our competitors, based on the quality of our networks and services.

The customer base rose to 263m customers. It is an increase of almost 6m customers year on year.

Our guidance, EBITDA guidance, has been overachieved at EUR12.4b. Let me remind you that it is the first time since 2009 that full-year EBITDA slightly increases. The EBITDA margin is at 30.9%. It's 0.1% ahead of 2014. What is, I think, important to see is that if you compare this achievement in terms of EBITDA with a comparable perimeter as with 2014, we are ahead. And if you include the new acquisitions, Jazztel and Meditel, we are also ahead. And this is also, I think, a very good result and news that we can share altogether this morning.

The contribution of our acquisitions, Jazztel and Meditel, especially Jazztel, are significantly better than expected. We have been able to deliver more synergies than we announced to the market and we are very, very happy about the integration of Jazztel in Spain.

In terms of balance sheet, we closed the year with net debt to EBITDA ratio of 2.01, meaning that we are clearly perfectly on track with the midterm target which is around 2, meaning that we have been able to deliver those results by keeping a very strong balance sheet, clearly one of the strongest of the industry. And as you know, we have new operations in the beginning of this year that will even give us more flexibility, especially with the closing of EE, with some additional cash, EUR4.5b, and 4% of British Telecom.

As far as the dividend is concerned, of course this set of results enables us to confirm the EUR0.60 dividend per share that has been decided previously, meaning that we will pay EUR0.40 in June and this -- the Board has confirmed of course this decision.

In 2015 we have been very active in managing our footprint with, as you know, our vision and our priorities, which is first to be convergent everywhere where it is necessary to be convergent in Europe. Acquisition of Jazztel in Spain. I have mentioned this. We are very happy about this strategic more and the execution of the integration between Orange Spain and Jazztel.

We have also decided to acquire some operations in Africa and the Middle East, Burkina Faso, Sierra Leone from Airtel, Cellcom Liberia and recently the acquisition of Tigo in the Democratic Republic of Congo, which will lead us to implement the consolidation in this country which is also very value-creative.

We have consolidated Meditel from the second half of 2015. We have completed the disposal of Everything Everywhere and launched the disposal of Telkom Kenya and Orange Armenia, meaning that we are very active in the management of our portfolio, looking for value creation out of our operations.

Our plan Essentials2020 has been launched in March. As you know, it is organized around five priorities, five levels, offering enriched connectivity; reinventing the customer relationship which is so critical in our industry; building a company model that is both digital and caring for our employees; supporting the digital transformation of our business customers, this is for the B2B division; and diversifying by capitalizing on our assets, mobile banking, Internet of Things.

Maybe we can see the first outcome of this plan in this short video that I suggest you to watch with me.

(Video playing).

Well, let's focus now quickly on our 2015 investments. To reach this -- our objective to offer the best quality network and services we invested in future growth through CapEx, spectrum but also selective contents and innovation. So the CapEx overall has increased by 9.3% at EUR6.5b last year.

Out of this, two-thirds of this CapEx is dedicated to our networks. And more than half of CapEx increase has been dedicated and linked to fiber deployment. Orange is today the European telco which is the most active in fiber rollout all over Europe.

But we also continued our 4G expansion. We are now over 80% of 4G coverage in France and we have added five new countries in Africa and the Middle East to our 4G network.

We also continued to enrich our offers with attractive contents and, for instance, we purchased broadcasting rights, we think, at reasonable cost in Spain for the soccer championships and also for the Champions League for 2015 and 2016 season. This has been clearly a very strong support to develop our IPTV customer base in this country but also in Europe.

We have decided also to roll out an IoT network based on the LoRa technology. It is part of our strategy to become a strong player in the IoT ecosystem which is in fact being built today.

We have also been very active and very successful spectrum acquisition. As you know, this is the raw material of our industry, in the mobile part. And in quite a number of countries, starting with France clearly, we have been able to consolidate, to strengthen, to enrich our spectrum portfolio in those countries.

But we have also been active in investments in the digital innovation ecosystem by investing in series of interesting startups. You have a few examples here. Let me mentioned, for instance. Actility, which is a very promising young company, startup, dealing with the IoT area based on, once again, on the LoRa technology which is the choice that we made.

I will now say a few words about the commercial performance across the Group, with a few illustrative figures of what we've been able to achieve last year, starting with 4G customer base, doubled, doubled in one year. And we are now a strong leader in 4G in France, in Spain, in Belgium where we have 99% of coverage. And clearly 4G is the driver of our recovery and back to growth in the mobile service area.

We have accelerated a lot in fiber rollout both by connecting more homes, we have more than doubled the number of connectable homes in Europe, but also by increasing, in fact it's -- we multiply by three our customer base in fiber offers. We are now in this beginning of 2016 around 2m customers. And as you know, we have recently recorded 1m fiber customers, so we are clearly in a very strong acceleration trend in fiber.

In Africa and the Middle East still some growth in the mobile customer base. We have today one African out of 10 with customer of Orange.

And in the enterprise segment the two domains where we decided to really invest and we consider as our strategic priorities, security, cyber-security, and cloud-based services, we have achieved double-digit growth in 2015.

So in a word, I would say that those results, set of results, in 2015 are very promising and we see this as clearly an evidence that our strategy is delivering, being back to growth both in topline and in EBITDA last year, once again, one year ahead of midterm plan.

I will now ask Ramon to give you full details about those results.

Thank you, Stephane. Good morning. So we are going to turn to slide 13 where you can see that we had a very encouraging fourth quarter. It's the second quarter in a row with positive growth in revenues and EBITDA. And over the full year, revenues almost stabilized at minus 0.1% compared to minus 2.5% in 2014.

This improvement, you can see, has been driven by better trends in France, in Europe, in the enterprise segment and is also supported by a solid performance in Africa and the Middle East, with plus 5% of growth.

If you look at product lines, the main drivers of this very good performance were both the continuously improving trend in mobile services and the ongoing growth of fixed broadband services mostly in France and in Spain.

This better trend in revenues contributes to the EBITDA growth as illustrated in the next slide. In Q4, the EBITDA increased for the second quarter in a row, with plus EUR43m. For the full year EBITDA grew by EUR10m. So we reached, as Stephane said, our objective of stabilization one year in advance compared to what we had announced in March with the Essentials2020 plan.

This performance is the result of both a strong improvement in revenues and of ongoing efforts on our cost base. The graph on the top right provides some details on the full-year EBITDA evolution. You can see that, first, the revenue decrease was limited to EUR47m. It was minus EUR1b in 2014.

Second, our total costs were down by EUR57m. Direct costs were up by EUR62m, but this is sustaining our activity with more interconnection, more content, more connectivity, and this is partly mitigated by a strong reduction in commission. This is an effort we have engaged in which is delivering results.

Second we continued to reduce indirect costs, which were down by close to EUR120m, mostly driven by an decrease in general expenses and in Group headcount, down by close to 4% year on year.

In 2015, our Chrysalid program, which has been renamed Explore2020, already enabled significant gross savings, EUR953m, in line with our renewed EUR3b ambition of gross savings between 2015 and 2018. Our previous plan was a real success and with this renewed Explore2020 we will continue our efforts to identify how much operational efficiency we can get within the Group.

I will give some examples further down the road on, for instance, digitalization of our customer relations, which now account for more than 20% of our commercial transactions in France, which is a strong increase. It's 4 points more in 2015.

Let's turn now to investment. Stephane already discussed our CapEx efforts. And it's clear that this commercial performance is very much supported by the increase in our investments, which reached EUR6.5b in 2015, a CapEx to sales ratio of 16.1%. We increased our investments in 2015 by EUR552m and this effort has been mainly focused in France, which accounts for more than half of this increase.

We accelerated obviously our investments in fiber and as a result, we have now more than 5m connectable homes in France, which is 1.4m more since the beginning of the year. In Spain, following the Jazztel acquisition, we reached close to 7m connectable homes with fiber and our target is to reach 10m by the end of this year 2016. In Poland also we added more than 400,000 households which are eligible to VDSL for a total base of 4.7m customers.

So in mobile we have also made a lot of progress. Orange continues to be the leader in France with 4G with over 80% coverage of the population. This is 6 points more in 2015. And this performance is also seen in other European countries. In Spain, for instance, we reach 85% of the population and this goes up to 99% in Belgium.

All our countries in Africa and the Middle East have now access to 3G and we have six countries benefiting from 4G services, with an important effort in terms of mobile sites. We increased their number by 6% this year, more than 1,275 extra sites to cover the population.

Also in terms of investment we have done some real estate investments and we have deployed 21 smart stores in 2015 in six countries.

This performance has led to a consolidated net income increase of around EUR1.7B and we reached EUR3b in 2015, with a net income Group share multiplied by almost 3 at EUR2.6b.

This very good result is coming from three elements. First, obviously a better reported EBITDA which is reflecting the improved underlying trend in our activities. Second, lower taxes compared to 2014 where we were impacted by taxes linked to the sale of Orange Dominicana and also the impairment of deferred tax assets in Spain. And the third element, the increase of net income from discontinued activities in the context of the EE disposal.

You can see also that in 2015 the increase in depreciation and amortization level reflects the change of perimeter, following the consolidation of Jazztel and Meditel, which is partly offset by lower impairments and financial expenses.

Turning to the net debt evolution, you see that excluding acquisitions we reduced our net debt by EUR850m in 2015, reaching EUR25.2b during this past year. And including acquisitions, this is essentially Jazztel, the net debt reached EUR26.6b. Let me remind you that we had put EUR2.9b under escrow in 2014 in order to finance the acquisition of Jazztel and therefore the net impact of the EUR4b enterprise value of Jazztel was around EUR1.1b at the end of 2015.

As a result, in December 2015 our net debt to EBITDA ratio was at 2.01 compared to 2.09 at the end of 2014 and this is fully in line with our guidance of a ratio around 2 in the medium term.

Our liquidity position also remains very strong at EUR12b, including EUR5.5b of net cash.

Let's now look at our traditional business review by main segment, starting with France. France had a good fourth quarter, confirming the improvement of revenues trend, which were close to stability in the fourth quarter. If you exclude the regulatory impact, the Q4 total revenue was even growing by 0.3%.

Fixed broadband revenue growth accelerated in the last quarter at 3.2%. It's obviously driven by the fiber customer base growth. The convergent offers discount continued to slightly impact the broadband ARPU, but it was largely compensated by an improvement in the retail customer mix. Thanks also to the PSTN price increase in March 2015, the decrease in fixed narrow-band revenue has slowed down at minus 9.7% in Q4.

The fixed wholesale revenue stabilized. In the last quarter it was even plus 0.1%. That's thanks to fiber B2B accesses and backbone transmission services growth which helped to compensate the impact of unbundling retroactive adjustment.

Mobile revenues, including services and equipment, grew by 0.5% during the year. This is supported by an increase in the contract customer base and also sustained equipment sales, including during the Christmas period despite a very strong competition.

Mobile service revenues evolution in this fourth quarter was also positively impacted by a phasing effect in the booking of the national roaming agreement that negatively affected the Q4 of 2014 which was the comparable basis. And despite the end of the back book re-pricing, there were still some adverse factors, mostly SIM-only penetration which is growing, I will come back to this, and also a change in special numbers billing. So these factors will continue to have some impact in 2016.

EBITDA in France was back to growth in 2015. We had close to EUR100m growth in the second half, EUR99m. And we also have an improvement in the EBITDA margin in France, which is notable. Revenue loss slowdown associated with the ongoing efforts on costs enabled this return to EBITDA growth.

In France, total savings in terms of costs in 2015 reached EUR233m. Direct costs slightly decreased, thanks to a better location offer, acquisition and retention costs and also a reduction in distribution costs. Indirect costs continued to fall, driven not only by a labor costs decrease but also by network optimization and by the increase in digitalization of customer relations.

If you look at the commercial performance and first mobile, well, you can see that despite a very competitive environment, our mobile customer base grew at a strong pace with 4m additional 4G customers year on year, which was also supported by our convergence strategy. We have 46% of the consumer voice contracts on open offers at the end of 2015.

The low-end segment was still under pressure, but the high-end offers performed very well, which is contributing and proving the success of our value strategy.

SIM-only offers continued to be predominant in our acquisitions. We have now 52% of our customer base, which is on a SIM-only offer basis. And last but not least, you can see that in Q4 we had, again, an improvement in our churn rate which is now at 13.4%, which is the lowest level since 2010.

On fixed broadband, again, a record quarter in terms of net adds, fully supported by our fiber strategy, with 133,000 fiber net adds, of which more than half are new Orange customers. All in all, the broadband customer base increased by 3.7% year on year, with the fiber penetration increasing to 19%. This is 4 points more during 2015 and you know that our objective is to reach 25% in 2018, so we are well on track.

83% of our eligible Orange customers have already migrated to fiber, 83%. Fiber combined with convergence continued to be a strong tool to conquer and upsell customers. 76% of our new convergent customers were either new mobile and/or new fixed customers. It's the highest level ever. And in addition we increased by 4 points the share of our premium customers.

Let's now look at Spain, which is, as you know, the second main country and more and more important. In Spain, in Q4 we see the revenue trend continuing to improve, with a decrease limited to 0.7%. It was close to minus 4% in the first half of the year.

Mobile service revenues were back to growth at plus 0.7% in Q4 and this is driven by an increase in the data usage and growth in the contract customer base. And in terms of fixed broadband, revenues kept growing at a very strong pace in the fourth quarter. It's close to plus 7%, 6.6%.

This better trend in revenue combined with the very successful integration of Jazztel led to an increase in EBITDA of 6.2% year on year in the second half versus minus 9% in the first part of the year, with an EBITDA margin improving by close to 2 points during this same period.

The investment effort is ongoing also in Spain. CapEx were increasing by 5.3% in 2015. And this is reflecting the acceleration of our investment in fiber, which now covers close to 7m customers in Spain, 7m households.

In Q4, the commercial performance was very strong, fueled by very high broadband. As of the fourth quarter we have more than 20% of our broadband customer which is on fiber and we have more than one-third of our mobile clients on 4G. So, all these figures are contributing to a very nice turnaround in Spain.

We also multiplied by close to 3 our TV customer base and this is driven by the success of football offers. As you know, we have participated in November at the tender on football rights and this is a very strong component of our policy in Spain.

Turning to Poland, in Poland, revenue trend in mobile services is improving. It was improving for the second quarter in a row, with momentum continued to build up in fixed very high broadband, with net additions growing, including from fiber activities.

Mobile service revenues eroded by less than 2% in Q4. So it is still a negative figure, but it was more than 5% in Q2. So there is a clear improvement. And we had net contracts on mobile which were improving for the third quarter in a row to 274,000 customers.

The competition in Poland is quite tough on fixed, especially from cable, so fixed revenues were still under pressure, minus 8.5% in Q4. So in order to improve the situation here we are pressing ahead, first, with our convergence strategy. We have now 35% of our broadband base which is on convergent offers. And also we have in Poland also a very high broadband strategy, with an investment plan in fiber. We have now 15% of our base on VDSL or FTTH.

Let's look at Belgium. In Belgium we have revenues going up in the fourth quarter for the second quarter in a row. We have a base which is accelerating. It was 2.3% in the fourth quarter compared to 0.6% in the third quarter. We had a very strong contract-net-adds performance in B2C, with close to plus 30,000 net adds, excluding M2M, in the fourth quarter. And we have also an ARPU which is growing in Belgium, second quarter in a row, [always] plus 3.6%, very good performance, and also churn still going down in Belgium.

So this is a very positive momentum. We are going to build on this momentum. Mobistar is now ready to launch its convergent offers through regulated access to cable and Mobistar is also ready to embark on a new stage in its life under the Orange brand.

In our Central European countries we also had very good news in 2015, with positive revenue growth in 2015. In Q4, revenue growth in this sub-segment was a solid 2.9%, and this is essentially driven by Romania which is representing 60% of the total segment and which posted very strong growth of 7.4% in the full year.

In this part of Europe we also moved forward in our convergence strategy. In Romania, we have signed an agreement with Telekom Romania to get access to fixed services. And following this agreement, in all our European countries we will be fully convergent in 2016.

In Africa, in Africa you can see that we still had a very good performance in 2015, more than 5% increase in revenues. In Q4, the performance in revenues was slightly lower than in previous quarters, mainly due to a strong Q4 in 2014. This is driven by a very good performance, notably in Ivory Coast, in Egypt, in the Democratic Republic of Congo, Mali, Guinea.

In Q4, we also have seen a cleaning of user database. This happens from time to time and it resulted from -- it resulted in a reduction of the number of customers in some countries, mainly Morocco, Cameroon and Mali. But despite this cleaning of the database, our mobile base has been up by 4.4m customers in 2015, which is a growth of more than 4%.

And Stephane talked about the acquisition in four countries, which is going to bring us 13m new customers and around EUR450m additional revenues.

Last but not least, before turning back to Stephane for the guidance for 2016, the enterprise segment where revenues were at minus 0.4% in the fourth quarter, which is better than the yearly trend of minus 0.9%. And this improvement is supported by favorable trends in some activities, strong growth in IT services, and as a result we have EBITDA stabilization.

So we can see that data services continued to improve, supported by a volume increase of IPVPN accesses outside France, lighter price pressure. And also in a market which is evolving towards more and more services, cloud and security is continuing to grow and to be a driver for OBS revenues. It was plus 7% and 14% in Q4, a bit less than the yearly performance of 10% and 24%, but there is here the impact of the calendar offer large contract deliveries.

Stephane, for 2016.

Well, 2015 has been a year of turnarounds. I will say that 2016 will be a year of consolidation. I am not saying of the consolidation. And we have clearly a main target, which is to consolidation -- to consolidate, sorry, our return to growth, first by delivering an EBITDA this year in 2016 above 2015 in comparable basis. So we are fully dedicated to keep this positive trend in EBITDA generation and our target is clearly to have an EBITDA this year above 2015.

We want to keep a strong balance sheet with net debt to EBITDA around 2, which is our medium-term target. We want to confirm and to sustain our payout policy by delivering a dividend of EUR0.60 out of our results, with a first interim payment of EUR0.20 in December of this year. This level is clearly the right balance between the recovery trends of the Company, but still the necessity to invest and to dedicate resources to our CapEx.

And then in terms of M&A, we will still try to explore the opportunities that are really right in our strategy, convergence in Europe, expansion in Africa and the Middle East, being very selective and clearly 100% focused on our existing footprints. We don't have any kind of plan or project outside our footprint.

We have also, as you know, a big project in preparation in the Company, which is our Orange Bank that we want to launch early next year.

So this is overall what we want to deliver this year. EBITDA growing, increasing, strong balance sheet, attractive and sustained dividend and very selective M&A policy.

We are now ready with Ramon but also the other members of the executive committee to answer any question that you might have.

Thank you. Hi. Nicolas Cote-Colisson from HSBC. I've got two questions, first on France, the second one on Africa. On France, there's a clear pressure to develop fiber in the less dense area. It's also a place where the local authorities are building their own networks. So I was wondering how you can reconcile the interests of all the stakeholders when you build in these regions. And also if you can provide us with an indication of what is left to be built in the very dense area. So that's for France.

And regarding Africa, should we still think about an IPO of the business if markets ever recover or do you have other plans for your African holding. And last on Africa, I was wondering from a cash flow point of view, I can see how you stream up the cash from Sonatel through dividends but I was wondering how you get the cash from other countries back to Orange SA. Thank you.

Okay. So I will first maybe ask Pierre to make an update on the fiber rollout mechanisms, especially in the less dense areas with the local authorities. Pierre.

Yes. So regarding these areas, we are talking about a zone of 12m households. So it's an area in which our market share in copper is really strong today. But we're looking forward to a period in which new actors are going to be active in this region. There are a lot of competitions open, about 70, 75 projects coming from different departments in agglomeration and different communities putting their efforts together in this part of the country.

And we have decided to tackle this issue, because we want to be present obviously in those areas in the future. So we are increasing now the amount of monies that we are ready to invest in building the networks or being clients of the networks.

We found out actually that some of our competitors are investing in those areas. We cannot allow ourselves to be absent. So we are increasing our efforts and this is going to be, I think, quite fruitful in the future.

We are also looking to other solutions like having other solutions to bring high bandwidth to those rural areas. We know that the cost of bringing fiber to the last isolated farm is going to be extremely high. Everybody knows this today. It's a very political target. Actually, it's rather fiber to the politician than fiber to the house. So it's something that everybody talks about in France.

And we want to find out about those solutions. There are -- some of them we are using now, like (inaudible) which is adding bandwidth on copper networks. And we are also trying to do this by building collect -- networks of collecting fiber that is going to be reusable for the FTTH in the future.

All right. Maybe Ramon for the future of our African holding, Ramon and Marc.

Yes. Maybe a few words and with Marc on the potential IPO of the [OMA], a new holding company, we have always said that this was not the near-term project. I think we are all very much focused, and I'm talking -- looking at Marc and Bruno, on integrating successfully the four countries that -- well, the three new countries and the new operation in DRC that we are going to close in the next months.

And we have signed these deals with Airtel in Burkina Faso and Sierra Leone, which we are going to operate and manage from our operations in Senegal and Cote d'Ivoire. And we are going to focus in Liberia and on Tigo integration in DRC.

So this is the main challenge. We have growth in Africa. We are developing Orange Money. We gave the figures. It's now EUR80m of revenues with Orange Money we had in 2015 and we are planning to keep augmenting this figure.

So the real priority is to be successful in managing these new operations in 2016. I would say that looking at the future of the shareholders is something that is not an urgent matter. First, we have to do what we have done in Spain with Jazztel, a big success in terms of integration.

In terms of dividends, we don't have cash pooling in Africa. We have profits coming through dividends or reimbursements of loans that we could have given to our subsidiaries there.

I don't know, Marc, if you want to add something.

Regarding dividend collection, we never face any specific difficulties to -- I don't know where you are, sorry. We never face any difficulties to collect the dividend. I will be with Bruno tomorrow in Sonatel to chair the Board the Directors. We have no issue. We'll vote the dividend that will be approved at the General Assembly April 14. We never face any difficulties.

But I have to say also that we never face any specific difficulties to collect dividends in any countries, because we have specific protection rules and it's a normal way of managing this business.

Vincent Maulay from Oddo. First question on contents. It seems that you are more open-minded to move from a pure distribution business model. And if it's the case what about the reasons you could buy some contents and be successful after a deep reduction of the content cost at Orange?

And the second question on fiber. Are you pleased with ARPU and churn evolution for the clients after the 12-month discount promotion period?

Okay. Regarding contents, what we have decided is clearly to review our strategy and our options regarding content. As a matter of fact, the landscape is moving. There are new players coming into the game. We see also the sports rights, especially soccer rights, being more and more expensive and with a lot of competition around this.

So what we want to do is clearly to review completely our strategy and options. We have decided to spend -- to organize a seminar of the executive committee, which will be dedicated to the content strategy. It doesn't mean that we are going to invest or to buy such or such player. It also means that we are very pragmatic and in fact our main concern is to secure the sourcing of critical contents for our customers. So we are clearly still considering ourselves as mainly a distributor of contents, certainly not an editor or a producer of contents, even though we still have our pay TV channel, OCS, which clearly is, I think, a nice story and delivers attractive results.

But we have no intention to move into the contents edition or content production sector, but we are still -- we pay a lot of attention to, once again, secure the sourcing of the key contents everywhere in a context where we have to put more money to contents to reach this target.

Regarding the fiber figures, ARPU and churn, I'd ask maybe Fabienne to provide you some answers.

So we already sell fiber with a gap of EUR5 from -- compared to other cell offers, so it's a good result for us. The churn is not worse behind the promotion, so we are confident. And the (inaudible) I can maybe explain, it's 57% of our customer fiber make the choice of premium of fiber. So we are very confident in the strategy on fiber.

Thank you. It's Andrew Lee from Goldman Sachs. I thought your M&A criteria is really clear. Last time we met though you talked about pan-European consolidation and you basically laid out, I think, a quite clear argument there that you need all IP and a single European regulator for it to make sense. Given those two things are still a long way off, I wonder if you could just give us an update on your thoughts on pan-European interests.

And just secondly on the indirect costs, you took them by EUR120m this year on an underlying basis. Should we be thinking about a similar level of opportunity in 2016?

And then just lastly on CapEx, the CapEx looks like it's a bit -- it's running at higher run rates than we may have expected at the CMD. Is that just bringing forward your CapEx plans in terms of timing, an acceleration of that timing, in the near term or have you raised your expectations for total CapEx over the three years? Thank you.

All right. So I let maybe Ramon answer on the indirect cost and CapEx. And I try to give you some remarks and comments on the European landscape.

First, what I see in Europe is still consolidation, mainly based on convergence, fixed to mobile. And for instance, the today announcement of Vodafone and Liberty Global in the Netherlands is one more evidence that the game is around convergence between fixed and mobile. I definitely think that the players that are mobile-only or to some extent fixed-only will have strong difficulties in the future, if they want to be competitive in European markets.

So our first target in Europe is still clearly to be convergent everywhere where it is meaningful. And, as you know, in Spain, in Belgium, in a few days we are going to launch, I think, a very competitive, very attractive fixed offer and convergent offer based on cable, as this has been mentioned. We are natively convergent in Poland. And we are going to be convergent in the other countries, Romania, Slovakia especially.

Now when it comes to pan-European moves or consolidation, well, I think that in the long term the prospects of viewing a more integrated space in terms of regulation and competition approach in European Union is still a prospect. As you know, it takes time, a lot of time, to have new rules, new regulations. There are projects in Brussels between the Commission and the Parliament.

What I think is that there is a political will, at least in France and Germany, to try to make progress towards this single space in Europe, but I do think that we will have to wait for a number of years before seeing something concrete to that regard. But this is still the prospect.

Then there is the technology aspect with the move of incumbents or former incumbents towards all-IP networks and also to some extent the convergence between fixed and mobile technologies that are going to provide altogether higher bandwidth and based on full IPTV -- IP, sorry, networks. So this is a clear now reality in our technology.

To be honest, I don't think that those elements, the technology and the prospect of having a new frame in Europe, are near enough and close enough and strong enough to justify big moves between the big European players. As I have said, I think, regularly previously, I think that these kind of pan-European deals are very complicated, are not delivering value creation clearly, are not based on an equity story which is simple, clear and easily understandable by anyone. We are facing mainly political deals or political approach and, to be honest, I think that politics is not the best friend of business, as you know.

So that is why I remain very cautious. I am not saying that we won't see anything in the future. But I do think that for still a number of months the priority will be to strengthen the business, to invest in the networks, to consolidate when we can consolidate and be convergent. I don't think that the time has come to see big pan-European combinations.

In terms of indirect costs evolution, we had said in March 2015 when we launched Essentials2020 that our target was to reduce the ratio of indirect costs to sales by 2 points between 2015 and 2018. We stick to this ambition. And so we are going to continue our efforts to work on this cost base.

Of course, which is -- the good news is that the perspective in terms of revenue growth is better. We are in advance compared to our plan. As Stephane said, EBITDA is at its low point one year before our initial expectation. And in terms of growth in revenues, we are close to stability already in 2015.

So we will continue to work on costs, whether direct or indirect. The dynamics in different regions will not always be exactly the same. For instance, in Africa you will have an evolution, which will be more costs-driven. In liaison we have also the inflationary pressure, taxes which are not on the decreasing mode.

But all this is going to remain under control. In terms of Group indirect costs effort it will remain in the same order of magnitude. So Explore2020, the Chrysalid program, is going also to be there to drive operational efficiency in all the areas of the Group. So we are well on track with what we had in mind when we talked last year.

Looking at CapEx, you are right to say that we are investing more than what we had initially anticipated, slightly more. We -- but we still are on the same perspective, which is basically to reach the peak around 2017. And then it will slowly go down. We may in 2016 invest a wee bit more than what is currently the consensus. I think the consensus must be somewhere around EUR6.7b. We invested EUR6.5b in 2015.

The important element is that this is really delivering great results. And it's investing in the network. It's investing in customer experience. And you have seen the commercial impacts of these investments in 2015. When you say, for instance, in France that you are going to have 4G in high-speed trains, in highways, in ski stations for those who will have the pleasure to go there, well, people know that Orange will deliver this and they will come to us. So it's a good investment, delivering results.

Okay. We'll take a question from London maybe by telephone.

Frederic Boulan, BofA.

Hi. Good morning, gentlemen. First question on Bouygues Telecom, if I may. If you could explain the rationale of potentially using shares -- issuing shares to Bouygues. Bouygues stock is trading at a low valuation and this is the target, and your current leverage which, as you pointed out, is very much under control. Why not pay cash and let Bouygues acquire a stake in Orange with the proceeds if they want to?

And secondly, in terms of dividend commitment, if you could confirm that your EUR0.60 dividend will be maintained in any scenario with Bouygues Telecom, including an increase in your share count. Thank you very much.

Okay. So this is an opportunity for me to update very quickly that Bouygues Telecom affair. Well, as we made it, I think, very clear, early this year we have decided to explore with Bouygues the conditions of a possible combination between Bouygues Telecom and Orange. When I say combination I mean acquisition, but of course clearly this acquisition implies that a wider discussion could be organized with the two other players in the market. I think everyone is aware of that.

What I can say is that those discussions are still ongoing. As I think everyone can realize, it is a relatively complex process, but the discussions keep going. There is a good momentum. I don't want to mention any kind of time constraint or schedule or agenda for those discussions. But as I have already mentioned, I think that we must go as quickly as possible to be able to make a decision, yes or no, depending on what is the possible deal.

And we will decide ourselves based on a few very simple and clear parameters. The first is to create value for our shareholders, including of course the cash versus equity aspects of the deal. So to me it is clearly one of the dimensions of a value creation approach for our shareholders.

The second is to have human resource treatments, let's say, of the deal and of the integration that will be as good and even as exemplary as possible for all the Bouygues Telecom employees and of course for Orange employees. But it's clearly -- it concerns firstly Bouygues Telecom employees. And it is also because, I think, about them that I think we have clearly an obligation to go quickly. We cannot let those -- this company in this kind of uncertainty on the future very long.

And the third condition is about the execution of such a complex operation. We want to be, I would say, reasonably strong in the execution risk, execution process, of such an operation. So, once again, ongoing discussions and a matter of a few additional weeks probably to be able to make a decision.

Now you mentioned the cash versus equity aspect. It is one of a lot of, let's say, aspects of this deal. And what I can say is that we have not made any kind of decision regarding this aspect. I think that I can say that our purpose is to present a nice and attractive operation for our shareholders, creating value, re-rating maybe the stock. That is the purpose.

I think all of us are perfectly aware of the sensitivity of the cash versus equity dimension. So it is part, of course, of the technicalities of the deal, possible deal, would-be deal, but, once again, the purpose is to have the best possible value-creative operation for our existing shareholders. This is one of the aspects. It is not the only one. But we have clearly this in mind.

Regarding now the dividend, well, I think that it's quite clear that the return to a slight growth in revenues and EBITDA, I think, is a nice achievement of 2015, and once again we are very happy about that. We think that it is too recent and still too fragile to decide something regarding the dividend. So we think that we need a few more quarters to be sure that we are back to this positive trend before reviewing eventually our payout policy.

So it means several quarters, consecutive quarters, of growth in EBITDA before maybe reviewing our dividend level. Once again, we are one year ahead of our plan, so maybe the prospect of seeing a move on the dividend might be closer than previously expected. But we are still in this recovery trend, I would say early recovery trend and we clearly want to be stronger and ensure that the dynamic in terms of revenues and EBITDA will be confirmed in the next quarters before deciding a move, a positive move of course, on the dividend.

And just to clarify my question, so can you confirm that the EUR0.60 commitment will be there in any scenario, including a higher number of shares.

Yes. Yes. I confirm. I confirm this clearly. We will deliver EUR0.60 a share in any kind of scenario, including if there is a capital increase.

Excellent. Thank you very much.

Nawar Cristini, JPMorgan.

Thank you very much. Nawar Cristini from JPMorgan. Thank you for taking my questions. So my first question is related to the ongoing consolidation talks. In particular in terms of market repair it would be good to get your thoughts about how you view market repair post that potential deal. What are the areas where you see the most attractive opportunities? And in the case of the mobile market, how do you think about competitive dynamics with an improved proposition at Iliad thanks to the [natural] spectrum?

And my second question is on the B2B market. There are a number of moving parts, with Numericable-SFR still working on the integration, with Bouygues which is small in that market that is pushing harder on the -- thanks to the 4G offering. It would be helpful to walk us through the competitive dynamics there and also to tell us more about any impacts that we should see following the antitrust authority fine that was issued in December. Thank you very much.

Okay. So regarding your first question, I don't see any market repair. I think -- I hope that it is perfectly clear for you. I don't see any market repair. This operation is not based on a market repair approach. You can have your own estimates of market repair. Everyone can have its own calculation or opinion about the matter. But Orange is not looking to any kind of market repair through this consolidation, possible consolidation.

We are looking for optimizing our CapEx. We are looking for optimizing the fixed cost related to networks, fixed and mobile and optimizing also the fiber rollout plan. We think that the French market, given the size of the country, will be more efficient for everyone, for the consumers, for the enterprises, for the local authorities, based on three strong players instead of four players, among which a number of them will have some difficulties to become clearly convergent in the mid-term. So that is what we think.

We think that this move is, first, meaningful and good and positive for Orange, if we can organize it based on the conditions that I said. And that's it. And the purpose is clearly not to have any kind of market repair.

Now the competitive dynamics, I think you had a question about to about Iliad. And if I understood well, your point is, given the spectrum purchase but also the possible purchase of the Bouygues network by Iliad, what will be the competitive dynamics of Iliad in France.

Well, I would say what is the normal prospect for Iliad is to have a fully autonomous network on day, based on their own deployments of the network or maybe the opportunity to purchase another network. But one day -- I think, it was clearly the purpose of creating a license for a new MNO in France. One day Iliad will have a fully autonomous network.

So, we are talking about, in fact, for them, the opportunity to accelerate this network independence, if I may say so. But it is not something which is so significant in terms of market dynamics, to me. And so I don't see any kind of impact or direct impact coming from this. I think it is -- it's a matter of timing. It is a matter of maybe optimizing also their CapEx in terms of networks, and that's it.

Basically we are clearly targeted as delivering the best network in France, mobile, tele, for the fifth consecutive year we are number one, and we intend -- we plan and we intend to stay clearly in number one in mobile. And we still, clearly, also target to stay at the number one in fiber rollout. This is our policy, our target. And I don't expect any big change in market dynamics linked to the network capacity coming from any kind of player, including after a possible consolidation.

Regarding now the enterprise, I think, unit. It was your third question. Maybe I'll ask Thierry, who's the Head of OBS, to provide comments.

It's true to say that we benefited from the positive situation in France, but it's true to say as well that we grew the business outside of France within the legacy, with our legacy offers, mainly driven by the data and PLS networks.

What the customers they value very much within the B2B ecosystem, it's the confidence within the services and it's mainly driven by the quality of service, mainly driven by the quality of our assets, and in France we are ahead of any competitor, both within the mobile 4G networks and within the fixed area.

And the second element which is very much valued by the B2B customers is the relationship, the confidence within the teams when it comes to being very by the customers when there is an issue, a problem, either on the network or on the service, and I think that, yes, clearly we benefited from the relatively weak position of our main competitors in France, as SFR-Numericable, given the energy they gave to their reorganization.

Okay, thank you very much.

We'll take maybe one question here in Paris. If there is any? One question by phone?

Dimitri Kallianiotis, Redburn.

Good morning. Thank you for taking my questions. Dimitri Kallianiotis from Redburn. Just three questions. The first one, to come back on the CapEx point for 2016, you mentioned an increase compared to last year. I was just wondering in terms of could you give us a little bit of just indication what sort of level? Are we talking about EUR7b? And also what does that imply in terms of your expectations? Do you expect, basically, again, to be doing most of the fiber rollout or you expect your competitors as well to co-invest with you?

My second question is regarding consolidation. Previously, when you were asked you talked about a 50-50 percentage chance of the deal happening. I was just wondering, now that you've had more time to talk with your -- with all the involved parties, I mean, has that changed or you still think it's a 50-50 deal?

And my last question is regarding distribution network. You've started to do some restructuring, and I was just wondering, in terms of longer term what sort of impact? Should we expect distribution costs to come down? And also your number, your total number of shops, thank you.

Okay, so regarding CapEx 2016, Ramon?

Yes. In CapEx 2016 it should be less than EUR7b, so once again, EUR6.5b in 2015. Our expectation is to do more but not as much as going to EUR7b. So maybe I -- this should be enough to answer to your question.

In terms of co-financing in fiber, it is true to say that we have seen significantly less co-financing in 2015 than what being expected. We have compensated with -- through our own investments. We are also, by the way, seeing a reduction in the costs of developing fiber, so in 2016 it is probable that the same type of dynamics will occur, and we will continue to do our job, very much encouraged, as we have said, by the success we are seeing in the rollout of fiber in France, where the rate of conversion from a connectible to a connected is increasing, where the ARPU, Fabienne gave the figures, is better than ADSL customers, etc. So we will continue to do our job.

Regarding distribution policy and the management of the different networks, maybe, Fabienne, some elements, please?

Yes, currently the distribution is reducing. We adapt our distribution to the digital behavior of the consumer confirmation. So we will pursue in 2016 in the same way and the cost will be in the same way, so they will reduce too.

Well, now, regarding the chances of success of this French consolidation, what I would say is that, well, in my opinion, the previous attempts had low chances of success. We were probably more in the range of 10% versus 90% of chances of success.

I think that at 50-50 it's certainly the best ever attempted operation, but we are still at 50-50. So meaning that it is a difficult process. It is a complex equation. It implies that several players come to an overall agreement on the subject, and so my estimate is still on the 50-50 chance of a deal.

Thank you.

Stephane Beyazian, Raymond James.

Thank you. Three questions, if I may. The first one, regarding Spain, the trends and the margin of 2015, the second half of the year were pretty strong. Can you comment on the synergies of the margin extension that is potentially left in Spain, and therefore if we should see further positive momentum in 2016?

My second question is regarding banking. Can you comment a little bit more on your partnership with Groupama? I mean, to what extent is this accelerating or adding, let's say, to your target, which, if I'm correct, is EUR400m of revenues from banking, I think in 2018? And if you can put really more color on what's going to be the strategy in terms of branding and potential balance sheet that you could commit in this activity?

And finally, just a small question on cash flows for 2016. Thank you for the clarification on CapEx. Could you also clarify what sort of cash taxes and any potential restructuring or specific items that could impact in 2016? Thank you very much.

Thank you, Stephane, so I will ask (inaudible) to answer on Spain.

Yes, good morning. So first layers of synergies that have been achieved in 2015 is the convergence of the networks, the fact that you have been able to connect Orange customers on the Jazztel network and vice versa. So this is the first level.

Now we should have, in 2016, and later in 2017, some cost synergies that will be now embedded into the business. So these are the second and third layers of synergies, so which means that we will still have synergies to come, and if you refer to the announcement we made in September 2014, on the level of synergies, we'll be clearly above.

Regarding the bank, well, as you know, we are actively preparing this, the launch of Orange Bank for the beginning of next year. It was a very important step for us to enter into those exclusive talks with Groupama around Groupama Banque. Groupama Banque will provide us the engine and the core banking system that we need to be in a capacity to launch this offer next year.

We are currently working, first, to complete the agreement with Groupama around Groupama Banque. It's a matter of a few more weeks. We are also working very hard in terms of marketing, in terms of internal organization between Orange France and the bank, in order to be 100% ready to launch this in the beginning of 2017, so I will not today give more details about what will be the offer itself, but what I can say is that we want 100% digital and mobile designs, natively designed, offer.

We want it to be disruptive in terms of users, in terms of price, in terms of distribution, and we want to really take the maximum advantage of our assets, mainly the customer relationship, and the shops, and the call centers, in order to be as efficient and as relevant as possible, regarding this new development. And it was once again perfectly relevant regarding this strategy to look for a partner in order to go faster towards the launch of the bank, and Groupama, around Groupama Banque is the nice, is the perfect partner for us. That is the reason why we made this first step agreement.

Regarding now the cash flow and especially taxes, Ramon?

Well, on cash flow, on operational cash flow we had a EUR5.9b figure in 2015, which is a slight decrease compared to 2014, because of this effort made on investment. So we should have, in 2016, still a very solid operational cash flow probably because of this effort in terms of investment, building for the future, strengthening EBITDA, maybe a figure which should be slightly below the 2015 figure, but very close.

So, we are going to continue, as you have seen, to build on the very good results we had in 2015 and at the same time preparing for the future. We all know, we have seen this in March that we are going through a period of two to three years where we have -- and all our peers are doing the same thing at the same time, by the way, an extra investment effort. This is building our strength for the future.

In terms of taxes you have seen in the slides we have distributed that we have, in terms of corporate taxes, slightly -- a slight increase due to an increased profitability, but nothing which is extremely noticeable.

Okay, we have time for a last question, from Paris. If there is one?

Okay, so, thank you very much. Have a nice day.