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 ■ partially undermined by a 3.6% fall in Other Carrier services revenues, stemming from the reduction in revenues of services supplied to other France Telecom Group operating segments. Other home communication services On a comparable basis, other home communication services revenues in France fell by 12.2% to 895 million euros between 2007 and 2008. The fall resulted mainly from the decline in mature businesses (public phone traffi c, phone terminal leasing business excluding ADSL) and the implementation in France in July 2008 of a new law aimed at fostering competition to the benefi t of consumers (known as the “Chatel Law”). 9.1.3.1.2 EBITDA - France 2009 vs. 2008 On a historical basis, the EBITDA of the France operating segment fell by 6.1% between 2008 and 2009. On a comparable basis, the EBITDA of the France operating segment fell by 5.4% or 529 million euros between 2008 and 2009. In 2009, the EBITDA of the France operating segment included a 461 million euro provision covering the implementation of the “Part-Time Seniors” plan, following the signing in November 2009 of an agreement concerning the employment of older personnel (see Section 9.1.1.4 Key events in 2009). Excluding this provision, EBITDA would have totaled 9,713 million euros in 2009, down 0.7% (68 million euros) compared with 2008, with the ratio of EBITDA to revenues reaching 41.1%. This decline was attributable mainly to: ■ a 151 million euro increase in content purchases, particularly for Orange sport and Orange cinéma séries over the full year, as opposed to half a year in 2008; ■ a 86 million euro increase in taxes and other operating taxes, resulting mainly from the introduction of a new audiovisual tax; and ■ a fi ne imposed by the competition authority on Orange Caraïbe, with an impact of 35 million euros on the EBITDA of the France operating segment. These increased expenses were partially offset by: ■ a 75 million euro reduction in commercial expenses, largely attributable to lower advertising, promotional, sponsoring and rebranding costs due to the non-renewal in 2009 of one-time marketing operations organized in 2008; ■ a 63 million reduction in labour expenses, excluding the provision covering the “Part-Time Seniors” plan; and ■ a 49 million euro saving on service fees and inter-operator costs stemming from the positive impact of the cuts to fi xed and mobile call termination prices, covering the impact of increased traffi c, particularly text messaging (SMS). 2008 vs. 2007 On a historical basis, the EBITDA of the France operating segment increased by 2% or 195 million euros between 2007 and 2008. On a comparable basis, the EBITDA of the France operating segment increased by 2% or 191 million euros between 2007 and 2008. The increase was attributable mainly to i) a 431 million increase in revenues, ii) a 227 million reduction in labour expenses, partially offset by iii) an increase in commercial expenses and content purchases, for a total of 488 million euros. The increase in commercial expenses between 2007 and 2008 refl ected i) efforts made to promote and develop mobile broadband handsets in a fi ercely competitive environment, translating into an increase in the number of mobile broadband services customers to more than 11 million as of December 31, 2008 (an increase of 49% compared with December 31, 2007), and ii) the continued development of PCM (Programme Changer de Mobile) offers, which have helped cut the churn rate among customers on contract. 9.1.3.1.3 Operating income - France 2009 vs. 2008 On a historical basis, the operating income of the France operating segment fell by 5% to 7,060 million euros between 2008 and 2009. On a comparable basis, the operating income of the France operating segment fell by 4.1% year-on-year. The fall in EBITDA between 2008 and 2009 was not completely offset by the reduction in depreciation and amortization. 2008 vs. 2007 On a historical basis, the operating income of the France operating segment increased by 6.1% or 430 million euros between 2007 and 2008. On a comparable basis, the operating income of the France operating segment increased by 6.2% between 2007 and 2008. The improvement in operating income was attributable mainly to the increase in EBITDA and the 280 million euro reduction in depreciation and amortization, relating mainly to the mobile businesses. 9.1.3.1.4 Capital expenditures on tangible and intangible assets excluding licenses - France 2009 vs. 2008 On a historical basis, the capital expenditures on tangible and intangible assets excluding licenses of the France operating segment fell by 6.2% year-on-year to 2,160 million euros in 2009. On a comparable basis, the capital expenditures on tangible and intangible assets excluding licenses of the France operating segment fell by 6.3% or 146 million euros year-on-year. The decline was attributable mainly to i) a reduction in investments to extend fi ber optic networks, and ii) a reduction in ADSL capacity investments due to slower growth in the fi xed broadband user base (mature market). 230 2009 REGISTRATION DOCUMENT / FRANCE TELECOM
analysis of the financial position and earnings 9 ANALYSIS OF THE GROUP’S FINANCIAL POSITION AND EARNINGS In addition, growth in mobile 3G investments, which enabled the Group to achieve coverage of more than 87% of the population as of end-2009, offset the reduction in 2G mobile network investments between 2008 and 2009. 2008 vs. 2007 On a historical basis, the capital expenditures on tangible and intangible assets excluding licenses of the France operating segment increased by 1.1% or 26 million euros between 2007 and 2008. On a comparable basis, the capital expenditures on tangible and intangible assets excluding licenses of the France operating segment increased by 0.8% or 18 million euros between 2007 and 2008. The increase related mainly to fi xed access networks, owing to the pre-rollout of fi ber optics, partially offset by i) the fact that investments were brought forward to end-2007 as opposed to early 2008, and ii) the reduction in 2G capacity investments in areas covered by 3G and discounts obtained from equipment manufacturers on the purchase of 3G network equipment. 9.1.3.2 United Kingdom UNITED KINGDOM (in millions of euros) 2009 Financial years ended December 31 2008 2008 basis (1) basis comparable historical Chg. (%) Chg. (%) basis (1) basis comparable historical 2007 historical basis Revenues 5,108 5,289 5,926 (3.4)% (13.8)% 6,540 EBITDA (2) 939 1,080 1,204 (13.1)% (22.0)% 1,297 EBITDA/Revenues 18.4% 20.4% 20.3% 19.8% Operating income 251 261 286 (3.5)% (12.0)% 263 Operating income/Revenues 4.9% 4.9% 4.8% 4.0% CAPEX (2) 355 405 453 (12.3)% (21.7)% 520 CAPEX/Revenues 6.9% 7.6% 7.6% 8.0% Average number of employees 11,252 11,080 11,075 1.6% 1.6% 10,893 (1) Unaudited data. See Section 9.1.5.1 Transition from data on a historical basis to data on a comparable basis. (2) Operating income before depreciation and amortization, and impairment losses (EBITDA) and capital expenditures on tangible and intangible assets excluding licenses (CAPEX) are not defi ned under IFRS. For further information on the calculation of EBITDA and CAPEX, and the reasons why the France Telecom Group uses these aggregates, see Section 9.1.5.4 Financial aggregates not defi ned under IFRS and the Financial glossary appendix. The “United Kingdom” operating segment houses personal (mobile telephony) and home (fi xed-line telephony and Internet) communication services in the United Kingdom. 9.1.3.2.1 Revenues - United Kingdom On a historical basis, the revenues of the United Kingdom operating segment fell by 13.8% to 5,108 million euros between 2008 and 2009. This reduction was attributable mainly to the negative impact of foreign exchange fl uctuations, which represented 637 million euros year-on-year. On a comparable basis, the revenues of the United Kingdom operating segment fell by 3.4% between 2008 and 2009, as the British economy entered its deepest recession in 50 years. Personal Communication Services in the United Kingdom 2009 vs. 2008 On a historical basis, personal communication services revenues in the United Kingdom fell by 13.3% to 4,931 million euros between 2008 and 2009. The decline was attributable mainly to the negative impact of foreign exchange fl uctuations, which represented 611 million euros year-on-year. On a comparable basis, personal communication services revenues in the United Kingdom fell by 2.9% between 2008 and 2009, due to the impact of cuts to call termination prices and roaming rates. Excluding the impact of cuts to call termination prices and roaming rates, revenues would have increased by 0.9% between 2008 and 2009. This growth was attributable to: ■ a 3.2% increase in the total number of customers, with 16.5 million customers as of December 31, 2009, compared with 16.0 million customers as of December 31, 2008. This included an 11.8% increase in the number of customers on contracts, whose share in the total number of customers fi rmed to 41.8% as of December 31, 2009; ■ growth in “non-voice” services revenues, driven by the increase in the number of customers using broadband on their mobile telephone. Due to the reduction in regulated rates, the success of low-cost contracts (voice and SMS), and low-price mobile Internet offers, ARPU fell from 272 pounds sterling to 257 pounds sterling between 2008 and 2009. 9 2009 REGISTRATION DOCUMENT / FRANCE TELECOM 231
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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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6 ENVIRONMENTAL overview of the Gro
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6 REGULATIONS overview of the Group
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6 INSURANCE overview of the Group
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7 176 2009 REGISTRATION DOCUMENT /
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8 NETWORKS property, plant and equi
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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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18 340 2009 REGISTATION DOCUMENT /
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20 CONSOLIDATED financial informati
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20 NON financial information concer
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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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580 2009 REGISTRATION DOCUMENT / FR
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France Telecom Group
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