registration document France Telecom 2009 - Orange.com

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20 CONSOLIDATED financial information concerning the issuer’s assets and liabilities, financial position and profits and losses STATEMENTS Commercial Court seeking to enjoin France Telecom from conditioning the subscription to this service on the purchase of an Orange broadband access subscription, together with an order that France Telecom pay damages indemnifying a loss estimated at 54 million euros. Neuf Cegetel joined the proceedings, also claiming damages but calling for an expert report to value its loss. On May 14, 2009, the Paris Court of Appeals overturned the judgment of the Commercial Court dated February 23, 2009, which had ordered France Telecom, subject to a fi nancial penalty, to cease conditioning the linear TV broadcast of the Orange Sport service on the purchase of an Orange broadband access subscription and which had appointed a panel of experts to enable it to evaluate the amount of loss incurred by Free and Neuf Cegetel. This decision allowed France Telecom to resume marketing of the Orange Sport service to new subscribers. SFR and Free fi led an appeal before the French Supreme Court. At the same time, in February 2009, Canal + and SFR fi led a complaint with the French Competition Authority alleging tied sales between the Orange Sport service and the Orange broadband Internet access offers and predatory pricing on the tariffs of Orange Sport, and challenging the conditions under which, in February 2008, the French professional football league granted France Telecom the right to broadcast football games in France. The Competition Authority opened an investigation but, at this stage, France Telecom has no information on these proceedings. ■ In March 2009, Vivendi and Iliad brought a joint complaint before the European Commission for abuse of adominant position with respect to France Telecom’s practices on the local loop and broadband Internet access wholesale markets since 2006. Vivendi and Iliad allege that France Telecom is engaged in price squeezing on the downstream markets for telephone services access and broadband access to multiservice offers. The Commission has not yet decided what action it will take as a result of this complaint. ■ On December 9, 2009, SFR announced that it had fi led a complaint with the French Competition Authority that France Telecom had engaged in anticompetitive practices on the market of the reduction of zones in local communities not yet covered by a broadband network. The company Altitude Infrastructure fi led a similar complaint in July 2009. These complaints challenge the time allowed and the tariffs set by France Telecom to provide its wholesale offer to operators that wish to respond to local communities, or the conditions in which France Telecom itself bids in response to tender offers issued by the local communities. At this stage of the procedure, France Telecom has no access to the complaints of SFR and Altitude Infrastructure. ■ In April 2009, the European Commission informed TP S.A. that it was initiating proceedings against the company for breach of competition law in the broadband access market in Poland. This decision followed an inspection carried out by the Commission in September 2008 in the offi ces of TP S.A. and of its subsidiary PTK Centertel. TP S.A. has appealed to the General Court of the European Union from the Commission’s decision ordering this inspection. France Telecom cannot at this stage foresee the evolution of these proceedings. ■ In September 2006 and February 2007, the Polish Offi ce for Electronic Communications (UKE) imposed on TP S.A. two successive fi nes of 100 million zlotys and 339 million zlotys (107 million euros in total) for among other allegations having established the tariffs of its Internet access offers (“Neostrada”) without previously submitting them to its review and without observing the rule which requires prices to be based on the cost of provision. TP S.A. believes that the UKE erred in challenging its Internet access tariffs since they are not defi ned as regulated services. Appeals are pending before the Competition and Consumer Protection Court which suspended the proceedings pending decisions of the ECJ which is examining (i) a suit of the European Commission seeking to prevent Poland from regulating a market without having previously made an analysis of the relevant market and (ii) a reference for a preliminary ruling from the Polish Administrative Supreme Court on the consistency with European law of a provision of Polish law prohibiting any tied sales. Mobiles ■ On October 10, 2006, Bouygues Telecom fi led a claim with the Competition Council relating to practices engaged in by Orange France and SFR in the French mobile telephony market and based on a collective dominance of the two operators. This complaint gave rise to two different investigations from the Competition Council on the Residential and Enterprise markets of the mobile industry. The investigation on the Residential market resulted in 2008 in the notifi cation of complaints, followed by a fi nal report pointing to the existence in 2006 and 2007 of a price squeeze between the mobile call termination tariff and the retail price of certain offers for consumers which included unlimited on-net service on Orange and SFR networks. In May 2009, the French Competition Authority found that the complaint required further investigation as to whether a potential discrimination among operators had occurred. France Telecom lodged an appeal against this decision and the Paris Court of Appeals should render its decision during the fi rst half of 2010. The decision of the Competition Authority on the substance of the dispute is expected during the course of 2010. In April 2008, Bouygues Telecom fi led a new claim with the Competition Council, concerning the Enterprise mobile market. This claim is currently under investigation. ■ Bouygues Telecom Caraïbe and Outremer Telecom brought claims before the Competition Council respectively in July 2004 and July 2005, regarding practices of Orange Caraïbe and of France Telecom S.A. in the mobile and fi xed to mobile markets in the Caribbean and in French Guyana. The Competition Authority joined the two proceedings in 2007 and, on December 9, 2009 ordered Orange Caraïbe and France Telecom S.A. to pay a fi ne of 63 million euros in total. France Telecom paid the fi ne but lodged an appeal against this decision before the Paris Court of Appeals. 458 2009 REGISTRATION DOCUMENT / FRANCE TELECOM
financial information concerning the issuer’s assets and liabilities, financial position and profits and losses 20 CONSOLIDATED STATEMENTS At the same time as this procedure before the French Competition Authority, described in the preceding paragraph, in March 2009, the company Digicel (formerly Bouygues Telecom Caraïbe) initiated legal action for damages before the Paris Commercial Court amounting to an estimated 329 million euros, stemming from these practices. France Telecom believes that these demands are unfounded and that their amount would in any case appear to be totally unjustifi ed. ■ On December 1, 2005, the Competition Council ordered Orange France to pay a fi ne of 256 million euros for engaging in concerted practices with SFR and Bouygues Telecom which were said to restrict competition on the mobile telephony market. The criticized practices involved the exchange of strategic information and a market share stabilization agreement between 2000 and 2002. After dismissal of Orange France’s appeal by the Paris Court of Appeals in December 2006 and partial annulment by the French Supreme Court in June 2007, the Court of Appeals, hearing the case on remand on March 11, 2009, dismissed again Orange France, SFR and Bouygues Telecom’s action for annulment of the decision of the French Competition Council. As the fi ne had been paid in 2005, this decision had no impact on the Group’s fi nancial statements. France Telecom has fi led a new appeal with the French Supreme Court. ■ On September 18, 2008, the Competition Council notifi ed France Telecom of a substantive claim by Bouygues Telecom along with claims for pre-judgment measures, for anticompetitive agreements with Apple regarding conditions for distribution of the iPhone in the French market. On December 17, 2008, the Council upheld the request for prejudgment measures and in particular ordered the suspension of the exclusivity arrangements between Apple and Orange and its distributors. The Paris Court of Appeals confi rmed this decision on February 4, 2009, but on February 16, 2010, the French Supreme Court ruled that the legal grounds on which the suspension of exclusivity was based was erroneous and voided the decision of the Paris Court of Appeals. In addition, in order to close the substantive dispute, a Courtmandated settlement procedure was initiated, which resulted in November 2009 in the publication of commitments from Orange France and Apple. After an examination hearing held on December 9, 2009, the Competition Authority upheld these commitments on January 11, 2010. ■ In Switzerland, the Competition Council’s investigation into mobile call termination charges, which began at the end of 2002, is still pending. In February 2007, the Swiss Competition Council imposed a fi ne on Swisscom Mobile of 333 million Swiss francs for abuse of a dominant position in the call termination market during the period prior to June 1, 2005, at which date Swisscom Mobile signifi cantly reduced its call termination charges. The Council did not sanction Orange or TDC (Sunrise) for their call termination charge practices during that same period. However, the Council opened an investigation into the period after June 1, 2005. In May 2009, the Swiss telecom regulator issued a report concluding that the call termination charges of the Swiss mobile operators are higher than those of comparable operators in other countries. A decision could be handed down during the fi rst half of 2010. ■ In July 2009, following an investigation opened in October 2007, the national competition authority in Spain (CNC) ruled that there was no evidence of concerted practices among the country’s three main mobile telephone operators, Movistar, Vodafone and Orange, to increase their tariffs as of March 1, 2007. The CNC did not impose any fi nes on the operators. ■ In November 2009, the national competition authority in Romania carried out an inspection in the offi ces of Orange Romania. The Authority suspects infringement of competition law and notably concerted practices or abuse of a dominant position on the part of the main operators on the interconnection market (fi xed-mobile call terminations) and on the rates of mobile prepaid services. France Telecom cannot at this stage predict the evolution of these proceedings. 32.2 Other proceedings Civil and commercial proceedings, arbitration ■ On and after December 2003, the former MobilCom CEO Gerhardt Schmid (directly or through Mr. Wilhelm, the courtappointed liquidator in his personal bankruptcy) and his spouse Sybille Schmid-Sindram (in her name or through her company, Millenium, a shareholder of MobilCom), together with certain other minority shareholders of MobilCom, brought legal actions against France Telecom through three different procedures, either for hidden domination of MobilCom (minority shareholders’ action), or for breach of the partnership created by the Cooperation Framework Agreement (CFA) dated March 23, 2000 in respect of the roll out of UMTS in Germany (Gerhardt Schmid’s action). They claimed indemnifi cation from the prejudice allegedly suffered because of the withdrawal from the UMTS project, materialized by the drastic drop of the MobilCom share price, and valued at several billion euros. In addition Mr. Schmid claimed that the waivers of rights to legal recourse he had agreed to, as part of the negotiated settlement under the “MobilCom Settlement Agreement” (MCSA) dated November 20, 2002, were null and void. The fi rst action (Millenium), based on the losses suffered as a result of so-called de facto domination of MobilCom, was rejected on March 20, 2009 by the Court of Kiel. Millenium having limited its appeal to the claim brought on behalf of MobilCom, which was limited to 1 million euros, all other claims were therefore defi nitely rejected. The second action (Spruchverfahren), also based on the negative consequences of the alleged dominant relationship, was defi nitively dismissed by the Schleswig Court of Appeals on August 27, 2008. The third action (Wilhelm), based on contractual breach, brought by the liquidator in Mr. Schmid’s personal bankruptcy, was defi nitively dismissed on September 29, 2009 by the Frankfurt Court of Appeals, (absent a petition for review by the 20 2009 REGISTRATION DOCUMENT / FRANCE TELECOM 459
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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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8 NETWORKS property, plant and equi
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9 ANALYSIS analysis of the financia
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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 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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580 2009 REGISTRATION DOCUMENT / FR
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France Telecom Group
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registration document France Telecom 2009 - Orange.com

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