registration document France Telecom 2009 - Orange.com

6 OVERVIEW
overview of the group’s business
OF BUSINESS
France
3G coverage commitments
The commitments made when the UMTS licenses were
awarded in 2001 were not achieved by the initially anticipated
deadline as a result of the initial 28 month postponement due to
the delay in developing UMTS equipment. This roll-out delay led
to the Arcep revising Orange’s coverage commitments during
the review of interim commitments. The Arcep thus announced
on March 9, 2004 that the commercial launch of the Orange
France 3G network was being pushed back from June 2002
to December 2004, with an obligation to cover 58% of the
population by end 2005. On June 29, 2006 Orange France
subsequently undertook to cover 70% of the population by end
2006.
The commitments made in 2001 provide for coverage of 98%
of the population by August 2009. Following the review of these
commitments by the Arcep at the end of August 2009, the
Authority served formal notice on Orange in December 2009
to comply with its obligation to cover 98% of the population by
end 2011 with an interim milestone of 91% by end 2010. Failure
to comply with these new obligations could result in fi nancial
penalties.
Z 3G COVERAGE OBLIGATIONS AND ACTUAL COVERAGE OF THE THREE OPERATORS
France Orange SFR Bouygues Telecom
3G coverage obligations associated with the awarding of 3G licenses
(8 years after award)
98%
as of 08/2009
99.3%
as of 08/2009
75%
as of 12/2010
3G population coverage at December 1, 2009
(according to the Report published by the Arcep) 87% 81% 80%
Mobile call termination rates (MTRs ) in metropolitan France
On December 2, 2008, the Arcep capped mobile call termination rates in metropolitan France for the July 2009 to December 2010
period, bringing about a rapid and sudden fall in call termination rates over this period (close to 60% in 18 months), and maintaining
substantial asymmetry between the MTR of Bouygues Telecom and that of Orange and SFR.
Z REGULATION OF MOBILE CALL TERMINATION RATES BY ARCEP SINCE 2005
1 st market review cycle 2 nd market review cycle
MTR euro cents per min 2005 2006 2007 Jan 08 - Jun 09 Jul 09 - Jun 10 Jul 10 - Dec 10
Orange France 12.5 9.5 7.5 6.5 4.5 3.0
SFR 12.5 9.5 7.5 6.5 4.5 3.0
Bouygues Telecom 14.79 11.24 9.24 8.5 6.0 3.4
Asymmetry 18% 18% 23% 31% 33% 13 %
Note: Bouygues’s call termination in the second half of 2010 was due to ARCEP’s decision of 18 February, 2010.
In January 2009, France Telecom lodged an appeal with the
French Administrative Supreme Court seeking the overturning
of this decision, notably disputing the fact that the Arcep has
maintained call termination asymmetry in favor of Bouygues
Telecom thirteen years after its market entrance.
On July 24, 2009, the French Administrative Supreme Court
decided that the level of rate asymmetry set by the Arcep for
the second half of 2010 was too high, and Court accordingly
overturned the Arcep’s decision on the call termination rate of
Bouygues Telecom over this period.
In February 2010, the Arcep took a decision cutting the level
of asymmetry in favor of Bouygues to 13% for the second half
of 2010 (compared to 33% in the initial decision), proposing a
MTR of 3.4 euro cents per minute for Bouygues.
Arcep announced that it would launch the third market review
cycle on mobile voice call termination in spring 2010. Over the
2011-2013 period, the average MTRs rates should continue to fall
and asymmetry with Bouygues should continue to reduce. Arcep
is also expected to set the MTR rates for Free Mobile.
Even if the impact on wholesale revenues is negative, a uniform
drop in MTRs is largely neutral on the wholesale business in
France profi tability for an operator such as the France Telecom
Group with both fi xed-line and mobile operations. In the retail
market, the low levels of MTRs generally lead to the development
of abundance offers.
Mobile call termination rates (MTRs) in the French overseas
departments
The Arcep decision to cap MTRs in the French overseas
departments in 2010 will bring about a sharp reduction (from
8.5 euro cents per minute in 2009 to 5.5 euro cents per minute
in 2010 for Orange Caraïbe) with a reduction in asymmetry. As
asymmetry generally benefi ts Orange’s competitor operators in
the French overseas departments, a reduction in asymmetry is
rather positive for Orange.
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2009 REGISTRATION DOCUMENT / FRANCE TELECOM