registration document France Telecom 2009 - Orange.com

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9 ANALYSIS analysis of the financial position and earnings OF THE GROUP’S FINANCIAL POSITION AND EARNINGS Z NET FINANCIAL DEBT AND ORGANIC CASH FLOW (in millions of euros) Financial years ended December 31 2009 2008 historical basis 2007 historical basis Organic cash flow (1) 8,350 8,016 7,818 Net financial debt (2) 33,941 35,859 37,980 (1) See Section 9.1.5.4 Financial aggregates not defi ned under IFRS and the Financial glossary appendix. (2) See the Financial glossary appendix. For further information on the risks related to the France Telecom Group’s fi nancial debt, see Section 4.1 Operational risks . 9.1.1.2 Summary of 2009 results The France Telecom Group’s revenues totaled 45,944 million euros in 2009, down 3.7% on a historical basis and 1.8% on a comparable basis year-on-year. Excluding regulatory effects, revenues increased by 0.1% on a comparable basis between 2008 and 2009. The number of customers of companies controlled by the France Telecom Group (including Orange in the United Kingdom) increased by 5.7% year-on-year, totaling 192.7 million customers as of December 31, 2009, including 132.6 million mobile telephony customers, up 8.8% year-on-year. The France Telecom Group’s EBITDA totaled 14,794 million euros in 2009. In 2009, EBITDA included a total expense of 1,533 million euros relating to i) the ruling handed down by the European Court of First Instance (ECFI) in respect of the dispute over the special business tax (taxe professionnelle) regime in France prior to 2003 (see Section 9.1.1.4 Key events in 2009), for a total of 964 million euros, and ii) a provision covering the implementation of the “Part-Time Seniors” plan in France following the signing of an agreement bearing on employment for older personnel in November 2009, for a total of 569 million euros (see Section 9.1.1.4 Key events in 2009). Excluding these elements, EBITDA would have amounted to 16,327 million euros in 2009, and the ratio of EBITDA to Group revenues would have been 35.5% in 2009, a 0.5 point reduction compared with 2008 on a comparable basis, attributable mainly to the impact of regulatory measures and new taxes. Capital expenditures on tangible and intangible assets excluding licenses of the France Telecom group totaled 5,304 million euros in 2009, or 11.5% of revenues, versus 6,283 million euros in 2008 on a comparable basis, or 13.4% of revenues. The reduction stemmed in part from the non-renewal of investments totaling 163 million euros made on property assets in 2008, as well as the optimization and adaptation of capital expenditures at business level, particularly in 2G networks, IT and public switched telephone networks (PSTN). Organic cash flow of the France Telecom group totaled 8,350 million euros in 2009, up 4.2% compared with 2008 (8,016 million euros), more than the announced objective. The increase in organic cash fl ow was attributable to an improvement in net fi nance costs, a reduction in income tax paid and a decline in expenditure relating to the acquisition of telecommunication licenses. Net financial debt (see the Financial glossary appendix) of the France Telecom group was 33,941 million euros as of December 31, 2009, down 1,918 million euros compared with December 31, 2008 (35,859 million euros). The ratio of net fi nancial debt to adjusted EBITDA (see Section 9.1.5.4 Financial aggregates not defi ned under IFRS and the Financial glossary appendix) worked out at 1.97 in 2009. Excluding the impact on net fi nancial debt of the public tender offer for ECMS shares for a total of 1,082 million euros (see Section 9.1.1.4 Key events in 2009), the ratio of net fi nancial debt to adjusted EBITDA would have worked out at 1.90 in 2009, in line with the Group’s fi nancial policy. Net income attributable to owners of the parent totaled 2,997 million euros in 2009, compared with 4,069 million euros in 2008. The Board of Directors plans to propose a dividend of 1.40 euros per share for 2009 at the France Telecom Annual Shareholders’ Meeting. Taking into account the interim dividend of 0.60 euros per share paid on September 2, 2009, the balance to be paid is of 0.80 euro per share, and will be paid in cash on June 17, 2010. 9.1.1.3 Impact of regulatory rate changes The regulations governing the operations of the France Telecom Group are described in Section 6.7 Regulations. The impact of cuts to call termination prices and roaming rates in a number of countries between December 31, 2008 and December 31, 2009, especially in France, Poland and Spain, was particularly pronounced in the fi eld of mobile telephony. In 2009, these factors caused mobile telephony revenues to fall by roughly 760 million euros excluding the United Kingdom (approximately 950 million euros including the United Kingdom) and EBITDA to fall by about 335 million euros excluding the United Kingdom (approximately 390 million euros including the United Kingdom). In addition, cuts to regulated rates negatively impacted fi xed-line telephony revenues by approximately 235 million euros and EBITDA by approximately 60 million euros. For further information on regulatory risks, see Section 4.2 Legal R isks. 200 2009 REGISTRATION DOCUMENT / FRANCE TELECOM
analysis of the financial position and earnings 9 ANALYSIS OF THE GROUP’S FINANCIAL POSITION AND EARNINGS 9.1.1.4 Key events in 2009 Changes in rates and new offers ■ In January 2009, Orange and Canal+ signed a multi-annual agreement to allow Orange triple play customers who are not eligible for ADSL TV to subscribe to Canal+ and/or Canalsat, as well as Foot+. Via Astra satellite, Orange triple play customers with satellite TV can now receive these offers directly on a single ADSL/satellite hybrid set-top box provided by Orange. ■ In January 2009, through its subsidiary NordNet, Orange launched a new “Satellite Internet Package” in France for 34.90 euros per month, including the satellite dish. The Satellite Internet Package is a bidirectional broadband connection solution offering all households in Metropolitan France Internet access at broadband speeds. The subscription includes the loan of a satellite dish and a WiFi router. Following the success of France Telecom’s “Broadband for All” plan, which propelled France into fi rst place in Europe, with 98.4% of the population eligible for ADSL, the Satellite Internet Package brought coverage up to 100%. ■ In May 2009, Orange cut the price of its Business Everywhere mobile broadband offer in the United Kingdom. The offer allows small and medium-sized businesses that are already “voice” customers and which opt to subscribe to a Business Everywhere plan to benefi t from a 50% reduction in rates, giving them unlimited mobile broadband Internet access for just 7.5 pounds sterling per month. ■ In June 2009, Orange launched a monthly mobile contract priced at just 5 pounds sterling per month in the United Kingdom (offers at 10 pounds sterling and 15 pounds sterling per month are also available), as well as a SIM Only offer aimed at customers wishing to have a more advantageous plan without giving up their mobile phone. The mobile contract priced at 5 pounds sterling per month is the cheapest on the market. ■ In June 2009, Orange launched the iPhone 3G S in France. The new version includes a video function, multimedia messaging (MMS) and voice control. To accompany the launch, Orange offered a new Origami for iPhone contract and special MMS and Modem price options. ■ In June 2009, Orange launched new offers for travelers as part of its Orange Travel range, which houses all the Group’s mobile roaming offers, and cut its roaming rates. New European tariff regulations on mobile communications made or received in Europe came into force on July 1, 2009. For Orange, calls made in European countries (excluding Switzerland and Andorra) are now billed at 51 eurocents per minute, second-by-second after the fi rst 30-second block, while calls received in these countries are billed at 23 eurocents per minute, second-by-second from the fi rst second. Sending an SMS now costs 13 eurocents, with the incoming messages still free of charge. Prices for communications outside Europe did not change. ■ In June 2009, Orange Business Services launched “Flexible Computing,” the new generation of virtual IT infrastructure. This new virtualization offer backs up Orange Business Services’ desire to offer private “cloud” computing services, guaranteeing security and quality of service. Flexible Computing allows businesses to outsource all or part of their IT infrastructure, using virtual technology: Intranet (key applications supported by an Orange Business Services VPN) or Internet (institutional websites, e-shopping, SaaS platforms, etc). ■ In July 2009, Orange and BIC launched the BIC phone in Spain, following its success in France. The BIC phone is a refi llable mobile telephone, 100% ready-to-use when purchased, with a fully charged battery and the SIM card already inserted. Launched in August 2008 in France, the BIC phone has been a great success, with more than 110,000 units sold. ■ In October 2009, Orange launched a new, more environmentally friendly, more ergonomic, more economical and more effi cient Livebox: recyclable components, a sleeker design, a simplifi ed WiFi modem, making it the real digital heart of all IT equipment in the home, better coverage and quicker speeds thanks to the WiFi-n standard. ■ In October 2009, Orange enhanced its Origami contracts in France. In response to the emergence of new uses and to satisfy individual users’ needs, Orange is now offering unlimited multimedia content or access to an exclusive service that can be integrated into Origami star, Origami fi rst and Origami jet contracts, including the following advantages: TV, Orange foot, Orange cinéma séries, music, 3G+ key, Orange maps and security. ■ In November 2009, Orange started marketing the iPhone 3G and 3G S in the United Kingdom. New and highly advantageous offers were proposed, including free handsets for 24-month contracts costing 30 pounds sterling or more per month. Monthly contracts and prepaid offers are available, as well as a Business offer for professionals. These offers will benefi t from the biggest 3G network in the United Kingdom in terms of population coverage, as well as extensive national WiFi coverage. Orange is now offering the iPhone in 28 countries and territories. Network rollout ■ In March 2009, Orange launched mobile telecommunication services in Uganda, thereby allowing Ugandan people to benefi t, thanks to its new GSM network, from a quality service and innovative offers across the entire country. Orange is now present in 15 African countries. 9 2009 REGISTRATION DOCUMENT / FRANCE TELECOM 201
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egistration document France Telecom
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table of contents 8 9 10 11 12 13 1
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nota This Registration Document ser
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3 CONSOLIDATED selected financial i
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4 risk factors In addition to the o
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4 OPERATIONAL risk factors RISKS In
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4 OPERATIONAL risk factors RISKS Fi
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4 LEGAL risk factors RISKS frequent
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4 FINANCIAL risk factors RISKS Cred
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4 FINANCIAL risk factors RISKS Equi
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5 INVESTMENTS information about the
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6 THE overview of the group’s bus
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6 THE overview of the group’s bus
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6 FRANCE overview of the group’s
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6 OVERVIEW overview of the group’
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11 innovation, research and develop
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14 ORGANIZATION administrative and
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14 STRUCTURE administrative and man
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14 INTERNAL administrative and mana
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14 REPORT administrative and manage
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15 RULES compensation and benefits
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15 TOTAL compensation and benefits
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15 COMPENSATION compensation and be
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17 WORKFORCE employees TRENDS The i
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17 WORKFORCE employees TRENDS Priva
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17 ORGANIZATION employees OF WORKIN
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17 employees COMPENSATION Z COMPENS
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17 employees COMPENSATION Option pl
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17 LABOUR employees RELATIONS Stock
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employees 17 TRAINING The preventio
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17 employees OUTSOURCING The amount
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18 DISTRIBUTION major shareholders
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20 NON financial information concer
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20 NOTES financial information conc
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20 DIVIDEND financial information c
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21 SHARE additional information CAP
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21 MEMORANDUM additional informatio
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26 DRAFT 2010 shareholders’ meeti
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26 REPORT 2010 shareholders’ meet
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26 STATUTORY 2010 shareholders’ m
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egistration document appendices TEC
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egistration document appendices FIN
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egistration document appendices ANN
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egistration document appendices COR
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580 2009 REGISTRATION DOCUMENT / FR
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France Telecom Group
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