#Essentiels2020. Focus on FTTH. March 2016

Transcription

1 #Essentiels2020 Focus on FTTH March 2016

2 disclaimer This presentation contains forward-looking statements about Orange. Although we believe these statements are based on reasonable assumptions, they are subject to numerous risks and uncertainties, including matters not yet known to us or not currently considered material by us, and there can be no assurance that anticipated events will occur or that the objectives set out will actually be achieved. Important factors that could cause actual results to differ from the results anticipated in the forward-looking statements include, among others: the success of Orange s strategy, particularly with respect to customer relation when facing competition with OTT players, Orange s ability to withstand intense competition in mature markets, its ability to capture growth opportunities in new markets and the risks specific to those markets, the poor economic conditions prevailing in particular in France and in Europe and in certain other markets in which Orange operates, the effectiveness of Orange s action plans for human resources, and the success of Orange s other strategic, operational and financial initiatives, risks related to information and communications technology systems generally, in particular technical failures of networks, fiscal and regulatory constraints and changes, and the results of litigation regarding regulations, competition and other matters, the success of Orange's French and international investments, joint ventures and strategic partnerships in situations in which it may or may not have control of the enterprise, and in countries presenting additional risk, Orange's credit ratings, its ability to access capital markets and the state of capital markets in general, exchange rate or interest rate fluctuations, and asset impairments. More detailed information on the potential risks that could affect our financial results will be found in the Registration Document filed with the French Autorité des Marchés Financiers (AMF) on April 29, 2014 and in the annual report on Form 20-F to be filed with the U.S. Securities and Exchange Commission on April 30, Forwardlooking statements speak only as of the date they are made. Other than as required by law (in particular pursuant to sections and seq. of the General Regulations of the AMF), Orange does not undertake any obligation to update them in light of new information or future developments. 2

3 Section one Focus on FTTH

4 Different technology lifetimes copper fiber 2G 3G 4G 5G 4

5 Group Capex over Total CAPEX CAPEX as % of revenues network investments over ~16% 15bn

6 Group FTTH investments over Total CAPEX network investments over bn 15bn in FTTH 6

7 Section two France

8 #FY2015 FTTH in 5.1m FTTH connectable homes +39% +9% 5.1m 4.3m 4.6m 3.6m 3.9m 2.6m 2.7m 3.0m 3.3m Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q % France +15% 960 Connectable homes in private investment area 20m 12m 5.1m 2022 c.60% of total homes 2018 c.35% of total homes 2015 c.15% of total homes 19% 9% 1m FTTH customers (Jan. 2016) FTTH adoption rate FTTH customers as % of total FTTH connectable homes FTTH penetration in our BB base FTTH customers as % of BB customer base 83% FTTH migration rate Orange FTTH eligible customers already migrated to fiber Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q points yoy +3.5 points yoy +7.0 points yoy

9 Very dense area 6m households Homes passed: Homes connectable: Connected customer: Shared section: vertical shaft connecting point 3 Orange optical network node shared access 2 1 above 12 dwelling units Less dense area 14m households connecting point Orange optical network node shared access

10 Very dense areas: competition based on infrastructure 6m households Homes passed: Homes connectable: Connected customer: Shared section: vertical shaft connecting point 3 Orange optical network node shared access Optical Node shared access Shared access connecting point 1 above 12 dwelling units Connecting point end point Each operator rolls out its own network. Possible commercial agreements can be made, with no legal requirement One network builder, n co-financing operators Project cost divided by the number of operators Project cost includes remuneration paid to the builder for execution risks Recurrent cost : c.1-2 /cust./month Alternatives to co-financing: line rental (4.76 to /cust./month) Built by the commercial operator or outsourced to the network builder In case of churn, work is re-billed to the new operator based on 20 year amortization period 10

11 Less dense areas 14m households Homes passed: Homes connectable: Connected customer: Shared section: connecting point Orange optical network node shared access Optical Node shared access Shared access connecting point Connecting point end point Each operator rolls out its own network. When the shared point serves less than 1K homes, there are wholesale offers with regulated fares In other cases, commercial agreements can be made, with no legal requirement One network builder, n co-financing operators by tranches of 5% Project cost includes remuneration paid to the builder for execution risks Recurrent cost : c.5 /cust./month Alternatives to co-financing: line rental (15.53 /cust./month) Built by the commercial operator or outsourced to the network builder In case of churn, work is re-billed to the new operator based on 20 year amortization period 11

12 FTTH value creation for Orange FTTH ADSL +5 in in % in 2014 >60% in 2018 Market share win-back in very dense areas thanks to fiber ARPU uplift of FTTH vs. ADSL customers Share of convergent BB customers 12

13 Increasing share of customer connection capex starting 2017 customer connection CAPEX construction & others CAPEX today 2017 tomorrow 13

14 Increasing wholesale revenues until 2018 supported by fiber roll-out co-financing wholesale revenue ULL wholesale revenue today 2018 tomorrow 14

15 Expected IRR of FTTH Capex per year of deployment always above WACC FTTH IRR Country WACC year of deployment 15

16 Section three Spain

17 #FY2015 Fiber in Spain m Fiber passed homes 3.6m Q m Q % 4.4m Q m Q m Q4 15 Homes passed 809k Fiber customers 208 Q Q1 15 x4 421 Q Q3 15 Q m 10m 2020 c.56% of total homes* 2016 c.39% of total homes 12% FTTH adoption rate FTTH customers as % of total FTTH connectable homes +6 points yoy 6.8m 2015 c.26% of total homes 22% FTTH penetration in our BB base FTTH customers as % of BB customer base +19 points yoy * c.80% of Spanish cities with >20K inhabitants

18 Spain: fiber regulatory environment Current FTTH access conditions: single national offer Regulator s new decision: geographic segmentation Zone 0 High FTTH competition Zone 2 Low ADSL competition Zone 1 High ADSL competition NEBA (bitstream FTTH offer) Bitstream offer (access + backhaul) at provincial level Capped at 30Mbps Tariff: one-off + recurrent (access and transport fees) Not regulated: ~ 66 cities Only addressable with own FTTH Accounts for c. 30% of building units in Spain NEBA (bitstream) + VULA (unbundling) Speed limit of 30 Mbps removed (from May 2016) Lower regulated tariff, based on economic replicability VULA + Transitory NEBA (until March 2018) Speed limit of 30 Mbps removed (from May 2016) Lower regulated tariff, based on economic replicability NOW Sept 2016 Sept 2017 March 2018

19 Section four Poland

20 #FY2015 VHBB in Poland Connectable homes in private investment area 3.5m 1.5m 0.7m m FTTH connectable homes 0.3m VBBH customers (end of 2015) 78k Q k Q k Q k fibre customers at year end 106k Q % 232k Q % New customers % of FTTH customers that are new Orange customers +74% 193k Q k Q k 716k Q k Q3 15 Q4 15

21 Consumer market: to win we go local Big cities 35% of households OPL market share Fixed Broadband Mobile Voice possible upsell for fixed BB Strategic approach Regaining footprint in fixed broadband thanks to FTTH rollout and convergence Targeted technology mix (illustrative) FTTH VDSL Medium&Small cities 33% of households Pushing convergence offers to strengthen fixed broadband base balanced mixed of FTTH, VDSL, LTE and hybrid Rural 32% of households possible upsell for mobile Increasing mobile voice market share while protecting fixed BB base through convergence and improved connectivity LTE, hybrid VDSL