France Telecom Presents Five-Year Plan

an initial adaptation phase (2011-2013) during which the Group invests in its networks and markets, taking into account current and expected competitive, regulatory and economic conditions. This investment effort aims to anticipate new applications and customer needs in order to strengthen the Group’s market positions and its ability to monetize all identified growth opportunities;

and a conquest phase (2014-2015), during which the Group's goal is the return to sustained growth of both revenues and operating cash flow thanks to the investments made in the previous phase.

1. The adaptation phase (2011-2013) can be defined by the following ambitions:

a Group positioned for growth, with an aim to progressively accelerate revenue growth over the period (CAGR* of +0.6%);

EBITDA stabilized in 2013 above the 2011 level. This trend should be possible thanks in particular to the stabilization of EBITDA in France during this timeframe. The Group has been preparing since 2010 for an increased level of competition in its domestic market.

The Group’s goal is to achieve a cumulative EBITDA of around 45 billion euros in the 2011-2013 period.
This goal notably accounts for the implementation of a new performance plan and the benefits expected from the ramp-up of the procurement joint venture with Deutsche Telekom. Overall, the Group forecasts gross savings of at least 3 billion euros by 2015 (including over 2 billion euros by the end of 2013) versus the cost base in 2010. The performance plan, which is consistent with the implementation of the new social contract in France, focuses in particular on improving customer experience and IT systems, expanding network sharing, pooling service platforms, and optimizing synergies.

an aggressive investment plan aimed at ensuring that the Group is positioned as the best next generation network operator, consolidating its competitive advantage in terms of customer satisfaction, and enhancing the Group’s ability to monetize new growth opportunities.
From 2011-2013, the Group forecasts cumulative CAPEX of around 18.5 billion euros, including 1 billion euros for fiber deployment in France. This represents an average rate of CAPEX to revenues of 12.6% over the period (excluding FTTH in France). The rate of investment is expected to peak in 2012 (~14%) as the deployment of fiber accelerates and the Group fulfills its network coverage and capacity objectives.

Taking these items into consideration, the Group announces cumulative operating cash flow guidance (EBITDA – CAPEX) of around 27 billion euros over the 2011-2013 period, excluding exceptional items.

2. The trends expected in the 2014-2015 conquest phase should reflect the benefits of the preceding CAPEX phase, and translate into the following ambitions:

revenue: the expected revenue growth rate for the period is +2.7% (2013-2015 CAGR), with a return to growth in France and in the Enterprise segment, and a continued solid contribution from Europe and AMEA;

EBITDA, with 3.4% growth (2013-2015 CAGR);

CAPEX, with the return to a normalized investment level of 10% over the period, equal to approximately 9.8 billion euros (excluding FTTH in France, which represents an additional point, for a total CAPEX rate of 11% equal to 10.8 billion euros); and

operating cash flow, with a CAGR of +9% over the 2013-3015 period.

In addition, concerning the ongoing review of its portfolio of assets, one of the other drivers of value creation, the Group does not expect, over the long term, to remain a minority shareholder of assets in which it does not exercise an operational role. In the event of a significant divestiture, the Group will examine the possibility of an additional return to its shareholders.

The Group renews its commitment to paying a dividend of 1.40 euros per share for the 2011 and 2012 financial years. The announced financial goals enable the Group to envisage a stable dividend going forward.

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