FRANCE TELECOM-ORANGE : financial results 2012

Wed Feb 20, 2013 1:42am EST

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press release



Paris, 20 February 2013

France Telecom-Orange reached its operating cash flow target of 8 billion euros in 2012 while
increasing its investments 

Despite heightened competitive pressure, France Telecom-Orange maintains its operating cash flow
target of more than 7 billion euros for 2013

*France made a positive contribution to this target due to the quality of its network, commercial
offers and cost control:  

*Orange was ranked the best network by the French regulator ARCEP for the third consecutive year  
*after a difficult first half, the success of the new Sosh, Open and Origami segmented offers
helped to stabilise the mobile market share at 37.3% (31 December 2012) and to regain a total
mobile base of more than 27 million customers  
*the good performance on indirect expenses and commercial costs partially offset the increase in
interconnection costs linked to voice and SMS/MMS traffic  

*[1]France Telecom-Orange had 230.7 million customers at 31 December 2012, an increase of 3.0%
year on year (+6.8 million net additions), reflecting growth in mobile, with the customer base up
4.5%: 

*in France, the mobile customer base rose 0.4% in the year 
*1in Europe (excluding France), the mobile customer base grew 0.4% and 4G was launched in six
countries. In Spain, Orange was the market leader in mobile number portability in 2012 and mobile
contracts rose 6.4%, while the fixed broadband customer base increased 10.3% 
*Africa and the Middle East had 81.6 million mobile customers at 31 December 2012, up 9.4% year on
year (7.0 million net additions)      

*Consolidated revenues were 43.515 billion euros, a slight decrease of 0.6% on a comparable basis
and excluding the impact of regulatory measures: 

*In France, the decline in mobile services revenues was limited to 0.9%. The national roaming
contract signed with the new market entrant partially offset the impact of price decreases  
*in Europe (excluding France), revenues rose 0.9% with a 3.6% increase in Spain led by growth in
fixed broadband and the rapid development of mobile Internet browsing  
*in Africa and the Middle East, revenue growth continued to be strong at 5.3%, led by Côte
d'Ivoire and Guinea 

*forfait socialRestated EBITDA was 13.785 billion euros. The EBITDA margin (31.7%) fell slightly
by 1.6 percentage points due to direct cost savings (reduction of commercial expenses), the
control of labour expenses, and the stabilisation of other indirect costs with savings achieved as
part of the Chrysalid plan. Restated EBITDA for 2012 includes excess payroll costs in France of 40
million euros linked to the employer contribution based on profit sharing () and the 122 million
euro impact related to the European Commission's decision regarding the method of financing the
retirement of civil servants at France Telecom 

*The Group share of net income was 3.387 billion euros in 2012 on a comparable basis, a 30.7%
decrease in relation to the previous year (excluding the impact of the new Part-Time for Seniors
agreement of -726 million euros after tax in 2012 and excluding the impairment of goodwill and
assets of -1.841 billion euros in 2012 and -991 million euros in 2011). On a published basis, it
was 820 million euros in 2012 compared to 3.895 billion in 2011 
*Capital expenditure (5.818 billion euros) rose 1.7% compared to 2011 on a comparable basis, led
by investment in very high speed fixed (FTTH) and mobile (4G) broadband, which is accelerating,
notably in France. The ratio of CAPEX to revenues was 13.4% 

*Operating cash flow (restated EBITDA - CAPEX) was 7.967 billion euros, consistent with the
Group's operating cash flow target for 2012 of close to 8.0 billion euros  
*Net debt was 30.545 billion euros at 31 December 2012. The restated ratio of net debt to EBITDA
is 2.17, in line with the objective of returning to a net debt/EBITDA ratio of close to 2 by the
end of 2014 

Outlook for 2013: the Group confirms its operating cash flow target of more than 7 billion euros. 
Several operational goals support this target, including the following priorities:

*accelerating the transformation of the Group's cost structure in order to reduce the cost base in
2013, and generate revenue growth in mobile data services of at least 10% for the Group, 
*France: stabilising market share in the mobile segment at a level above 35% and reaching 4G
coverage of 30% of the population by the end of 2013. In the fixed segment, including the Livebox
Play with at least 50% of all broadband sales, and doubling the optical fibre customer base, 
*Europe: marketing convergent offers in seven countries; launching at least six mobile network
sharing programmes across the zone; increasing the Net Promoter Score in all countries, 
*Africa and the Middle East: reaching 8 million Orange Money customers and 12 million devices
compatible with data services (+70%) by the end of the year; reduce the churn rate for mobile
offers by 20%, 
*Enterprise: generating more than 30% growth in cloud computing over the course of the year;
double digit revenue growth in emerging countries; improving customer satisfaction across the
footprint. 

The Group's financial policy:

*objective of returning to a net debt / EBITDA ratio of close to 2 by the end of 2014 in order to
preserve the Group's financial strength and investment capability, 
*in this context, the Group will pursue a policy of selective acquisition, focusing on possible
consolidation operations in markets where the Group already operates,  

*payment of a minimum dividend of 0.80 euro per share for 2013. An interim dividend payment for
2013 of 0.30 euros per share will be paid in cash in December, 

*[2]the Group confirms the payment of the balance of the dividend for 2012 of 0.20 euro per share
to be paid in cash on 11 June 2013. 

Commenting on the publication of the Group's 2012 results, France Telecom-Orange Chairman and CEO
Stéphane Richard said: "During a particularly turbulent 2012, the Group showed its resilience by
achieving its financial targets, notably an operational cash flow of 8 billion euros. In addition,
the Group continued to capitalise on its networks, with almost 6 billion euros of investments, and
in particular it accelerated the rollout of optical fibre and 4G in France. The Group's customer
base surpassed 230 million globally, of which over 80 million are in Africa and the Middle East,
an increase of 10% on a year earlier. 

 

However, the economic situation and the continued price war in most European countries
necessitated an acceleration in the Group's transformation programme. The strengthening of our
mobile offers will be bolstered by a more marked distinction between low-cost and higher-value
models, providing customers with an unparalleled service, especially in the high-speed broadband
segment. This will be supported by the Orange network, its coverage, speed and extensive reach
throughout the country. 

 

In addition to the national roaming agreement in France, as well as MVNO and network-sharing
agreements, the Group will continue its policy of co-operating to improve returns on investment.
In tandem, we will simplify our operations to adapt to changes in our French workforce, an effect
that will be amplified by the new Part-Time for Seniors programme. All this enables me to confirm
our operational cash-flow target of over 7 billion euros for 2013."  

key figures

*full year data

                                                                                                                                                                                                                                                           
                                                                                  2012              2011              2011              change                         change              change                 impact of                      impact of 
 In millions of euros                                                                   comparable basis  historical basis    comparable basis  excluding regulatory measures    historical basis  change in exchange rates  change in consolidation scope 
                                                                                                                                                                                                                                                           
 Revenue                                                                        43 515            44 703            45 277              (2.7)%                         (0.6)%              (3.9)%                      0.5%                         (1.7)% 
 Of which:                                                                                                                                                                                                                                                 
                                  France                                        21 431            22 560            22 534              (5.0)%                         (2.3)%              (4.9)%                         -                           0,1% 
                                  Spain                                          4 027             3 989             3 993                0.9%                           3.6%                0.9%                         -                         (0,1)% 
                                  Poland                                         3 381             3 526             3 625              (4.1)%                         (2.5)%              (6.7)%                    (1.6)%                         (1,2)% 
                                  Rest of World                                  8 281             8 164             8 795                1.4%                           3.2%              (5.8)%                      1.8%                         (9,0)% 
                                  Enterprise                                     7 001             7 196             7 101              (2.7)%                         (2.7)%              (1.4)%                      1.5%                         (0,1)% 
                                  International Carriers and Shared Services     1 623             1 585             1 610                2.4%                           2.4%                0.8%                      0.3%                         (1,8)% 
                                  Eliminations                                 (2 229)           (2 317)           (2 381)                   -                              -                   -                         -                              - 
 Restated EBITDA*                                                               13 785            14 879            15 083              (7.4)%                         (5.3)%              (8.6)%                      0.2%                         (1.6)% 
                                  in % of revenues                               31.7%             33.3%             33.3%          (1.6) pts.                     (1.6) pts.          (1.6) pts.                         -                              - 
 Of which:                                                                                                                                                                                                                                                 
                                  France                                         7 834             8 699             8 654              (9.9)%                         (7.2)%              (9.5)%                         -                           0,5% 
                                  Spain                                            951               840               839               13.3%                          15.0%               13.3%                         -                           0,0% 
                                  Poland                                         1 156             1 238             1 274              (6.6)%                         (6.8)%              (9.3)%                    (1.0)%                         (1,8)% 
                                  Rest of World                                  2 800             2 818             2 994              (0.6)%                           1.0%              (6.5)%                      1.5%                         (7,4)% 
                                  Enterprise                                     1 177             1 291             1 283              (8.8)%                         (8.8)%              (8.3)%                      0.6%                           0,1% 
                                  International Carriers and Shared Services     (133)               (6)                39                   -                              -                   -                         -                              - 
                                  Eliminations                                       -                 -                 -                   -                              -                   -                         -                              - 
 Operating income                                                                4 063                               7 948                                                                                                                                 
 Net income before minority interests                                            1 104                               3 828                                                                                                                                 
 Net income attributable to equity owners of France Telecom SA                     820                               3 895                                                                                                                                 
 CAPEX (excluding GSM and UMTS licences)                                         5 818             5 720             5 770                1.7%                                               0.8%                                                          
                                  in % of revenues                               13.4%             12.8%             12.7%             0.6 pt.                                            0.6 pt.                                                          
 Operating cash flow (restated EBITDA*- CAPEX)                                   7 967             9 160             9 313             (13.0)%                                            (14.5)%                                                          
                                                                                                                                                                                                                                                           
                                                                                        31 December 2012  31 December 2011                                                                                                                                 
                                                                                                                                                                                                                                                           
 Net financial debt                                                                               30 545            30 890                                                                                                                                 
 Restated ratio of net financial debt / EBITDA**                                                    2,17              2,09                                                                                                                                 
                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                           


* EBITDA restatements are described in appendix 5.

** The method of calculating the restated ratio of net financial debt to EBITDA is described in
appendix 4.

*quarterly data

                                                                                                                                                                                                                                                                                              
                                                                    4th quarter 2012               4th               4th    change comparable basis  change excluding regulatory measures    change historical basis  of which change in foreign exchange  of which change in consolid. scope 
                                                                                          quarter 2011      quarter 2011                                                                                                                                                                      
 In millions of euros                                                                 comparable basis  historical basis                                                                                                                                                                      
                                                                                                                                                                                                                                                                                              
 Revenue                                                                      10 917            11 278            11 428                     (3.2)%                                (1.1)%                     (4.5)%                                 1.0%                              (2.3)% 
 Of which:                                                                                                                                                                                                                                                                                    
                       France                                                  5 325             5 645             5 661                     (5.7)%                                (3.0)%                     (5.9)%                                    -                              (0,3)% 
                       Spain                                                   1 011             1 010             1 010                       0.1%                                  2.5%                       0.1%                                    -                              (0,1)% 
                       Poland                                                    847               904               824                     (6.3)%                                (4.2)%                       2.9%                                 9.9%                              (0,1)% 
                       Rest of World                                           2 090             2 052             2 292                       1.9%                                  4.2%                     (8.8)%                                 0.5%                             (11,0)% 
                       Enterprise                                              1 786             1 836             1 818                     (2.7)%                                (2.7)%                     (1.8)%                                 1.2%                              (0,2)% 
                       International Carriers and Shared Services                415               414               423                       0.1%                                  0.1%                     (2.1)%                                 0.2%                              (2,4)% 
                       Eliminations                                            (558)             (583)             (600)                          -                                     -                          -                                    -                                   - 
 Restated EBITDA*                                                              3 135             3 438             3 472                     (8.8)%                                (6.5)%                     (9.7)%                                 0.8%                              (1.7)% 
                       in % of revenues                                        28.7%             30.5%             30.4%                 (1.8) pts.                            (1.7) pts.                 (1.7) pts.                                                                          
 CAPEX (excluding GSM and UMTS licences)                           2 118             2 021             2 039               4.8%                                                             3.9%                     0.9%                                 (1.7)%                              
                       in % of revenues                                        19.4%             17.9%             17.8%                   1.5 pts.                                                         1.6 pts.                                                                          
 Operating cash flow                                               1 018             1 417             1 433               (28.2)%                                                          (29.0)%                                                                                           
 (restated EBITDA* - CAPEX)                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                                              


* EBITDA restatements are described in appendix 5.

*

*        *

The Board of Directors of France Telecom SA met on 19 February 2013 and examined the Group's
financial statements.

The Group's statutory auditors audited these financial statements, and the audit reports
pertaining to their certification are in the process of being issued.

More detailed information is available on the France Telecom-Orange website:

www.orange.com http://www.orange.com/ 

comments on key Group figures

revenues

The France Telecom-Orange group revenues were 43.515 billion euros in 2012, a decrease of 2.7% on
a comparable basis.
Excluding the impact of regulatory measures (-916 million euros), the Group's revenues declined
slightly, by 0.6%, in comparison with the previous year. The impact of increased competitive
pressure in European countries, notably in France, was partially offset by the strong growth of
operations in Africa and the Middle East (+5.3%) and in Spain (+3.6%).   
In the fourth quarter of 2012, Group revenues were 10.917 billion euros, a decline of 3.2% on a
comparable basis. Excluding the impact of regulatory measures (-243 million euros), the decline
was 1.1%, the same as in the third quarter, after falling 0.1% in the first half.

Changes in revenues by location, excluding the impact of regulatory measures, were as follows:

*[3]in France, mobile services revenues fell slightly, by 0.9%, over the year: the growth of
Internet browsing and the development of national roaming largely offset the downturn of voice and
SMS revenues from Orange customers, marked by the redesign of the Sosh, Open and Origami segmented
offers. The mobile market share stabilised at 37.3% at 31 December 2012. At the same time, fixed
broadband revenues rose 5.2%, with a broadband market share estimated at 24% for the year (20.4%
in the fourth quarter); 
*in Spain, revenues grew 3.6%, led both by mobile (+2.4%), with the rapid growth of Internet
browsing and the growth in the number of contract customers, and by fixed services (+8.8%), with
the strong development of triple-play ADSL offers; 
*in Poland, mobile growth was limited to 0.3% for the year, marked by price cuts in the second
half (revenues were down 2.3% in the fourth quarter). Fixed services improved, with the decline
limited to 2.9% in 2012 compared to a decline of 6.4% in 2011, in particular due to the
development of business services;     
*Rest of World segment: solid growth of 5.3% in Africa and the Middle East in 2012 was led by the
recovery in Côte d'Ivoire, the improvement in Egypt and continued growth in Guinea, Cameroon,
Senegal and Niger. Europe increased 1.3% with growth in every country in the zone except for
Slovakia, impacted by the overhaul of its mobile offers;    
*Enterprise segment: a decline of 2.6% in 2012, excluding equipment sales, was at the same pace as
that of the previous year. The downward trend of traditional services was partially offset by the
growth of other operations, particularly internationally. 

On an historical basis, 2012 revenues fell 3.9% compared to 2011, including:

*the impact of changes in the consolidation perimeter (-1.7 percentage points), mainly with the
sale of Orange Switzerland (29 February 2012), the sale of TP Emitel in Poland (22 June 2011), and
the acquisition of the mobile operator CCT in the Democratic Republic of the Congo (20 October
2011); 
*the favourable impact of foreign exchange (+0.5 percentage points): the decrease of the Polish
zloty was more than offset by the increase of other currencies, in particular the US dollar, the
Egyptian pound, the Jordanian dinar, the Dominican peso and the Swiss franc. 

customer base growth

The Group had 230.7 million customers (excluding MVNOs) at 31 December 2012, a 2.3% increase in
relation to 31 December 2011, with 5.2 million net additions in one year. Excluding the impact of
the Swiss disposal, the number of the Group's customers grew 3.0%, with 6.8 million net additions
in one year, reflecting the development of mobile services in Africa and the Middle East.

In mobile services (excluding MVNOs), the Group had 172.4 million customers at 31 December 2012,
an increase of 4.5% year on year, excluding the impact of the Swiss disposal (7.4 million net
additions):

*Africa and the Middle East had 81.6 million customers at 31 December 2012, an increase of 9.4%
(7.0 million net additions). Orange Money, now marketed in thirteen African and Middle Eastern
countries, had 5.6 million customers at 31 December 2012; 
*in France, the mobile customer base improved significantly, with 552,000 additional customers in
the fourth quarter after an increase of 317,000 customers in the third quarter, offsetting the
downturn reported in the first half, thanks to the success of the new segmented Sosh, Open and
Origami offers. In all, France had a mobile customer base of 27.2 million customers at 31 December
2012, a year-on-year increase of 0.4% (+100,000 customers). The number of contract customers
increased 1.3% to 19.7 million, while the number of prepaid offer customers declined 2.0% to 7.5
million;    
*other regions (63.6 million customers at 31 December 2012) also contributed to the growth of the
Group's customer base with a 0.5% increase year on year (+325,000 customers) excluding the impact
of the Swiss disposal, notably Poland (+237,000), Spain (+176,000), Moldavia (+162,000) and the
Dominican Republic (+108,000), while the United Kingdom lost 343,000 customers. Contracts
represented 52% of the mobile customer base in the other regions at 31 December 2012, an increase
of 4.4% year on year. 

There were 14.9 million fixed broadband customers at 31 December 2012, an increase of 3.4% year on
year with 485,000 additional customers, including 295,000 in France and 131,000 in Spain. Added to
this was the growth reported in Slovakia, Egypt and Jordan. Fixed broadband subscribers included
234,000 optical fibre customers at 31 December 2012, of which 176,000 were in France and 56,000
were in Slovakia.   

In Europe, digital TV (IPTV and satellite) rose 15.0% with 5.9 million subscribers at 31 December
2012 (770,000 net additions in one year), mostly in France and Poland, but also in Slovakia and
Spain.

Restated EBITDA

Restated EBITDA was 13.785 billion euros in 2012 in contrast to 14.879 billion euros in 2011, a
decline of 7.4% on a comparable basis. Excluding regulatory measures (-316 million euros), the
downturn was 5.3%.
The ratio of restated EBITDA to revenues was 31.7%, a slight decline of 1.6 percentage points in
comparison with 2011, mainly due to:

*the reduction in commercial expenses and content purchases (-2.6%), reflecting in particular the
optimisation of mobile handset subsidies in France and Spain, and the development of SIM-only
offers;   
*[4]the controlling of labour expenses, with the increase limited to 1.7% for the year. The
average number of full time equivalent employees was 163,545 in 2012, as contrasted with 165,001
in 2011, on a comparable basis. The annual trend reflects the optimisation of the Group's cost
structure with a reduction of 1,456 full time equivalents year on year (-0.9%) despite the
internalisation of the Oviedo call centre in Spain (impact of +344 full time equivalents in 2012);
  
*the deployment of the Chrysalid plan aimed at improving operational efficiency, which achieved
total savings of 718 million euros in 2012, including 655 million euros on operating expenses and
63 million euros on capital expenditure. 

Changes in ratios of operating expenses to revenues, on a comparable basis, were as follows:

*the ratio of commercial expenses and content purchases was 15.5%, the same as in 2011; 
*the ratio of service fees and inter-operator costs was 12.6%, an improvement of 0.4 percentage
points. The decrease in call termination rates and roaming tariffs (favourable impact of 600
million euros) was partially offset by the growth in traffic exchanged with other operators,
particularly SMS traffic; 
*the ratio of (restated) labour expenses was 20.8%, an increase of 1.2 percentage points in
relation to the previous year, of which 0.4 percentage points corresponded to the 122 million-euro
expense linked to the European Commission decision made in December 2011 and to the impact of the
increase in the employer contribution based on profit sharing since 1 August 2012; 
*The ratio of other expenses to revenues was 19.4%, an increase of 0.8 percentage points in
relation to the previous year due to the reduction in revenues.  All other (restated) expenses
remained essentially stable: the increase in energy and lease expenses was offset by the reduction
in overheads and restructuring costs.  

operating income

Group operating income was 4.063 billion euros in 2012, a decrease of 3.885 billion euros (-48.9%)
on an historical basis, including -929 million euros from the effect of changes in the
consolidation perimeter and a foreign exchange impact of -20 million euros. Changes in other items
on a comparable basis were as follows:

*[5]the decline in EBITDA (-2.235 billion euros), chiefly corresponding to the decrease in
revenues (-1.188 billion euros) and the impact of the new agreement on the Part-Time for Seniors
plan signed in December 2012 (provision of 1.107 billion euros); 
*the increase in the impairment of goodwill and assets (-835 million euros on a comparable basis)
linked in particular to the impairments recognised in 2012 in Poland (-889 million euros), Egypt
(-400 million euros) and Romania (-359 million euros); 
*changes in the share of income from associates (-164 million euros). 



These unfavourable items were partially offset by the reduction in depreciation and amortisation
charges (+298 million euros on a comparable basis). 



net income

The France Telecom-Orange group consolidated net income was 1.104 billion euros in 2012, compared
to 3.828 billion euros in 2011, a decrease of 2.724 billion euros. The decline in operating income
(-3.885 billion euros) was partially offset by:

*the improvement in net financial income (+305 million euros), mostly tied to the revised
financial parameters for the acquisition price of ECMS shares from OTMT and for the free float,
which generated financial income of 272 million euros in 2012; and 
*the reduction in corporate income tax (+856 million euros) which in 2012 was due to the
recognition of a deferred tax rebate related to the new Part-Time for Seniors agreement in France
and to the revaluation of deferred tax assets in Spain. 

The Group's share of net income was 820 million euros in 2012, compared with 3.895 billion euros
in 2011. Excluding the impact of the new Part-Time for Seniors agreement (-726 million euros after
tax in 2012) and excluding the impairment of goodwill and assets (-1.841 billion euros in 2012 and
-991 million euros in 2011), the Group's share of net income was 3.387 billion euros in 2012, a
30.7% decrease on a comparable basis compared to 2011. 

CAPEX

CAPEX in 2012 was 5.818 billion euros, an increase of 1.7% on a comparable basis in relation to
the previous year, reflecting:

*the development and adaptation of the mobile network in Spain to support the growth in usages; 
*the reinforcement of Orange's leadership in networks with the acceleration of capital expenditure
programmes in very high speed networks in France (optical fibre and 4G mobile network).  

The ratio of CAPEX to revenues was 13.4% in 2012.
Investment in networks represented 55% of the Group's CAPEX in 2012, an increase of 1.4% with the
development of strategic projects, in particular:

*in France, the ramp-up of optical fibre deployment, the acceleration of CAPEX in very high-speed
mobile 4G and increased investment in other mobile network capacities;    
*in Spain, the continuation of mobile network transformation programmes, notably the renewal of
the access network and the increased investments in capacity;  

*in the Rest of World segment, the renewal of the mobile access networks in the principal European
subsidiaries to improve the quality of service and reduce energy costs, and the commercial launch
of 3G in the Congo and of 4G in Moldova, Romania, Luxembourg and the Dominican Republic; 



In 2012, two major high-speed submarine cables serving Africa were delivered: LION2 on the eastern
coast, which entered into service on 12 April, and ACE on the western coast, which entered into
service on 19 December. 
Investment in information technology (21% of total CAPEX in 2012) rose 4.6%, in particular with
the ongoing transformation programmes in France (redesign of the commercial system and convergence
of information systems for fixed, mobile and Internet services).  
CAPEX on service platforms also increased with the development of new growth engines such as
Orange Money in Africa and in the Middle East. 



operating cash flow

Operating cash flow, which corresponds to restated EBITDA minus CAPEX[6] #ftn6 , was 7.967 billion
euros in 2012. This is in line with the Group's target for 2012 of close to 8.0 billion euros in
operating cash flow.

net financial debt

France Telecom had net financial debt of 30.545 billion euros at 31 December 2012, a reduction of
345 million euros in relation to net financial debt at 31 December 2011. The main elements of the
change in net financial debt in 2012 are presented in appendix 4.

The restated ratio of net debt to EBITDA[7] #ftn7  was 2.17 at 31 December 2012, in line with the
objective of returning to a net debt to EBITDA ratio of close to 2 at the end of 2014.

changes to portfolio of operations

In 2012, France Telecom-Orange continued to pursue its international development strategy to
develop its growth potential with changes to the shareholders' agreement relating to ECMS in Egypt
and the increase in the Group's equity interest in that company.
In Spain, Orange reinforced its presence on the mobile market with the acquisition in December
2012 of 100% of Simyo, a mobile virtual network operator held until then by KPN.
The Group also finalised the disposal of its operations in Switzerland (early 2012) and in Austria
(early 2013). 
Finally, on 15 February 2013 Sonae and France Telecom-Orange signed a put and call-option
agreement regarding France Telecom's full participation of 20% in Sonaecom, a telecoms operator in
Portugal. Sonae is already the majority shareholder in Sonaecom with more than 53.17%.
These transactions gave shape to the Group's strategy of optimising its asset portfolio.

2012 dividend

Taking into account the interim dividend payment of 0.58 euros on 12 September 2012 (which is 0.60
euros minus the additional contribution of 3% on the dividends distributed), the Board of
Directors will recommend to the Annual General Meeting of Shareholders of 28 May 2013 the payment
of a dividend of 0.20 euros per share, to be paid in cash on 11 June 2013[8] #ftn8 . 

review by business segment

France

                                                                                                             
 In millions of euros                                   period ended 31 December                             
                              2012         2011              2011              12/11             12/11       
                                      comparable basis  historical basis  comparable basis  historical basis 
                                                                                                             
                                                                                                             
 Revenue                     21 431       22 560            22 534            (5.0)%            (4.9)%       
 Adjusted EBITDA              7 834        8 699             8 654            (9.9)%            (9.5)%       
 Restated EBITDA / Revenues    36.6%             38.6%             38.4%                                     
 CAPEX                        2 712        2 620             2 619             3.5%              3.6%        
 CAPEX / Revenues              12.7%             11.6%             11.6%                                     
 Restated EBITDA - CAPEX       5 122             6 080             6 035           (15.8)%           (15.1)% 


In France revenues were 21.431 billion euros in 2012, a 5.0% decrease on a comparable basis.
Excluding the impact of regulatory measures (-615 million euros), there was a 2.3% decline.

Revenues from Personal Communication Services decreased 2.2% on a comparable basis to 10.686
billion euros. Excluding the impact of regulatory measures (-566 million euros), revenues from
mobile services[9] #ftn9  fell 0.9%: the growth of Internet browsing and the development of
national roaming largely offset the downturn of voice and SMS usage by Orange customers, linked to
the overhaul of tariffs on the Sosh, Open and Origami segmented offers. As expected, ARPU[10]
#ftn10  declined 10% over the full year 2012.

The total mobile customer base (contracts and prepaid offers, excluding MVNOs) stood at 27.190
million customers at 31 December 2012, a 0.4% year-on-year increase linked to the recovery in
contract numbers that began in June, thanks to the successful new segmented offers. Over the year,
252,000 contract customers were added (net of terminations) to reach a total of 19.704 million
customers at 31 December 2012. Contracts represented 72.5% of the total customer base (+0.7
percentage point year on year). The Sosh online offers had 794,000 customers at 31 December 2012,
while the Open quadruple-play offers had 3.038 million customers on the same date. Prepaid offers
registered a decline of only 2.0% for the year: a fourth quarter recovery (320,000 net additions)
after the third quarter's stabilisation of the customer base (decrease limited to 3,000 customers)
partially offset the sharp drop in the first half (-468,000 customers) thanks to the new Mobicarte
offers marketed in August.   

Revenues from Home Communication Services decreased 4.0% on a comparable basis to 12.375 billion
euros. Excluding the impact of regulatory measures (-136 million euros), the decline was 2.9%,
reflecting the downward trend in traditional telephone services[11] #ftn11  (-15.0%).

Revenues from fixed broadband services rose 5.2%:

*fixed broadband had 295,000 net additions in 2012, including 81,000 for optical fibre, whose
development accelerated over the course of the year. The broadband market share was estimated at
20.4% in the fourth quarter and at 24% for the full year. The fixed broadband customer base rose
3.1% year on year to 9.893 million subscribers at 31 December 2012 (including 176,000 optical
fibre customers);    
*the digital TV customer base increased 15.8% year on year, with 5.067 million customers at 31
December 2012; 
*[12][13]fixed broadband ARPU increased 2.2%, with the impact of price cuts more than offset by
the growth of content sales, by the improved customer base mix with the spread of optical fibre,
and by the growing share of ADSL subscribers connected with naked ADSL (57.7% at 31 December 2012,
+7.6 percentage points year on year). 

   
Revenues from Carrier Services fell 0.3% on a comparable basis. Excluding the impact of regulatory
measures 
(-126 million euros), revenues rose 2.6% due to the increasing number of telephone lines sold to
other carriers (+10.1% year on year, 12.577 million lines at 31 December 2012).

fourth quarter 2012

France reported revenues of 5.325 billion euros, a 5.7% decrease on a comparable basis. Excluding
the impact of regulatory measures (-154 million euros), the decline was 3.0%, after falling 2.4%
in the third quarter and 2.0% in the first half.

Personal Communication Services declined 4.1% on a comparable basis to 2.667 billion euros, after
falling 2.3% in the third quarter and 1.1% in the first half. Revenues from mobile services[14]
#ftn14  fell 2.6% excluding the impact of regulatory measures (-147 million euros), after
declining 1.0% in the third quarter and rising 0.1% in the first half.

Revenues from Home Communication Services declined 2.0%, to 3.113 billion euros excluding the
impact of regulatory measures (-27 million euros), after falling 3.1% in the third quarter and
3.3% in the first half.

In France, restated EBITDA was 7.834 billion euros in 2012, a reduction of 865 million euros
(-9.9%) on a comparable basis, linked mostly to the impact of regulatory measures on EBITDA (-259
million euros) and to the decrease in revenues (-514 million euros, excluding the impact of
regulatory measures).
Excluding regulatory measures, the reduction of commercial expenses for mobiles services,
generated by the optimisation of handset subsidies and by the growth of SIM-only packages,
partially offset the increase in other direct costs (in particular the increase in volumes of
services fees and inter-operator costs). Indirect costs remained essentially stable compared with
the previous year.

CAPEX in France was 2.712 billion euros in 2012, an increase of 3.5% in relation to the previous
year on a comparable basis. CAPEX rose significantly in optical fibre and in very high-speed
mobile 4G. In addition to this there were:

*investments in the mobile network to support the growth in data volumes and to prepare for fourth
generation services (LTE); 
*investments in information systems to meet the challenges of improving service quality and
renovating the distribution information system. 

These changes were offset by the decrease in capital spending related to the Livebox and TV
decoders through process optimisation and recycling.  

Spain

                                                                                                            
 In millions of euros                                   period ended 31 December                            
                               2012              2011              2011             12/11             12/11 
                                     comparable basis  historical basis  comparable basis  historical basis 
                                                                                                            
                                                                                                            
 Revenue                      4 027             3 989             3 993              0.9%              0.9% 
 Adjusted EBITDA                951               840               839             13.3%             13.3% 
 Restated EBITDA / Revenues   23.6%             21.0%             21.0%                                     
 CAPEX                          473               405               405             16.9%             16.9% 
 CAPEX / Revenues             11.8%             10.2%             10.1%                                     
 Restated EBITDA - CAPEX        478               435               434             10.0%             10.0% 


Spain reported revenues of 4.027 billion euros in 2012, an increase of 0.9%. Excluding the impact
of regulatory measures (-100 million euros), revenues rose 3.6% in comparison with 2011.

Personal Communication Services reported growth of 2.4% to 3.262 billion euros, excluding the
impact of regulatory measures (-100 million euros), reflecting:

*[15]the steady increase in the number of contracts, +6.4% year on year (+484,000 customers) with
8.1 million contracts at 31 December 2012. At that date, contracts represented 68.4% of the total
customer base, in contrast to 65.3% one year earlier (+3.1 percentage points in one year). Orange
Spain was the market leader in mobile number portability in 2012; 
*the strong revenue growth in data services excluding SMS (+41%), with the rapid development of
Internet browsing. The number of subscriptions to offers including Internet browsing grew 69% year
on year to 5.0 million users at 31 December 2012; 
*the development of hosted MVNOs, whose customer base rose 20.9% year on year to reach 1.8 million
customers at 31 December 2012. 

These positive items were partially offset by the downturn in voice and SMS services, linked in
particular to the lower volumes exchanged in a particularly difficult economic environment.  

Revenues from Home Communication Services rose 8.8% on a comparable basis to 765 million euros,
led by strong growth in fixed broadband services (+14.1%). The number of ADSL subscribers rose
10.3% year on year to 1.396 million customers at 31 December 2012, while ARPU rose 2.0% over the
year with the growing share of totally unbundled ADSL subscribers (67.7% of the total customer
base at 31 December 2012, an increase of 6.3 percentage points in one year) and the growth of
Voice over IP.

fourth quarter 2012

Revenues in Spain were 1.011 billion euros, an increase of 0.1%. Excluding the impact of
regulatory measures 
(-23 million euros), revenues rose 2.5%, largely on strong fixed broadband revenue development
(+10.3%), while mobile revenues increased 1.2%.  

Restated EBITDA in Spain was 951 million euros in 2012, an increase of 13.3% (+112 million euros).
The restated EBITDA margin was 23.6%, an improvement of 2.6 percentage points in relation to 2011,
mainly due to revenue growth, the drop in commercial expenses, and the decrease in service fees
and inter-operator costs due to call termination price cuts decided by the regulator.  

CAPEX in Spain increased 16.9% to 473 million euros in 2012 in comparison with 2011 (+68 million
euros), reflecting the growth of investments in capacity and mobile network transformation, in
particular the replacement of the mobile access network designed to improve service quality and
reduce energy costs.

Poland

                                                                                                            
 In millions of euros                                   period ended 31 December                            
                               2012              2011              2011             12/11             12/11 
                                     comparable basis  historical basis  comparable basis  historical basis 
                                                                                                            
                                                                                                            
 Revenue                      3 381             3 526             3 625            (4.1)%            (6.7)% 
 Adjusted EBITDA              1 156             1 238             1 274            (6.6)%            (9.3)% 
 Restated EBITDA / Revenues   34.2%             35.1%             35.1%                                     
 CAPEX                          558               610               627            (8.5)%           (11.0)% 
 CAPEX / Revenues             16.5%             17.3%             17.3%                                     
 Restated EBITDA - CAPEX        598               628               647            (4.8)%            (7.6)% 


Revenues in Poland fell 4.1% on a comparable basis to 3.381 billion euros in 2012. Excluding the
impact of regulatory measures (-60 million euros), the annual change was -2.5%.

Revenues from Personal Communication Services decreased 3.0% on a comparable basis to 1.787
billion euros. Excluding the impact of regulatory measures (-59 million euros), the annual change
was +0.3%: the increase in incoming calls and the rapid development of Internet browsing were
offset by the decline in revenues from voice services related to price decreases. The total mobile
services customer base (14.895 million customers at 31 December 2012, excluding MVNOs) rose 1.6%,
led by a 3.9% increase in prepaid offers (7.984 million customers at 31 December 2012). 

Revenues from Home Communication Services declined 3.2% on a comparable basis (-2.9% excluding the
impact of regulatory measures) to 1.873 billion euros. The decrease in traditional telephone
services (-18% for the year) was partially offset by:

*[16]the growth of business services with the development of ICT; 
*[17]the growth of fixed broadband revenues (+2%), led by the increase in ARPU due to the
development of triple-play. The number of VoIP customers more than doubled in one year (394,000
customers at 31 December 2012) and the number of digital TV customers grew 11.0% (706,000
customers at 31 December 2012). The number of fixed broadband services customers remained stable
over the year, with 2.345 million customers at 31 December 2012.     

fourth quarter 2012

Revenues in Poland fell 6.3% on a comparable basis to 847 million euros. Excluding the impact of
regulatory measures (-20 million euros), revenues fell 4.2% in the fourth quarter, after falling
3.4% in the third quarter. Personal Communication Services declined 2.3% excluding the impact of
regulatory measures, after falling 0.7% in the third quarter under the impact of price cuts, while
the decline in Home Communication Services was limited to 2.4% after falling by 3.7% in the third
quarter, thanks to the improvement in fixed broadband, which rose 7.6% after rising 3.7% in the
third quarter. Orange Poland remains the leader in the value mobile market with an estimated
market share of 29.0% in the fourth quarter 2012.

Restated EBITDA in Poland (1.156 billion euros in 2012) decreased 6.6% on a comparable basis (-82
million euros) due to the decline in revenues, partially offset by:

*the reduction in service fees and inter-operator costs due to the call termination price cuts
decided by the regulator, 
*the decrease in overheads through cost optimisation programmes, and 
*the reduction of restructuring costs.  

CAPEX in Poland (558 million euros in 2012) fell 8.5% on a comparable basis following significant
spending in 2011 on the fixed broadband programme. At the end of 2012, 1.026 million ADSL lines
had been built or upgraded to higher speeds. The initial investments in the network-sharing
project improved the quality of the mobile network service, in particular outdoor 3G radio
coverage, which went from 62% of the population at 31 December 2011 to 69% at 31 December 2012.

Rest of World

                                                                                                            
 In millions of euros                                   period ended 31 December                            
                               2012              2011              2011             12/11             12/11 
                                     comparable basis  historical basis  comparable basis  historical basis 
                                                                                                            
                                                                                                            
 Revenue                      8 281             8 164             8 795              1.4%            (5.8)% 
 Adjusted EBITDA              2 800             2 818             2 994            (0.6)%            (6.5)% 
 Restated EBITDA / Revenues   33.8%             34.5%             34.0%                                     
 CAPEX                        1 308             1 365             1 409            (4.1)%            (7.2)% 
 CAPEX / Revenues             15.8%             16.7%             16.0%                                     
 Restated EBITDA - CAPEX      1 492             1 453             1 585              2.6%            (5.9)% 


Revenues in the Rest of World segment declined 5.8% to 8.281 billion euros in 2012 on an
historical basis due to changes in the consolidation perimeter[18] #ftn18  (-9.0 percentage
points), partially offset by the favourable impact of foreign exchange (+1.8 percentage points). 

On a comparable basis and excluding the impact of regulatory measures (-140 million euros),
revenues in the Rest of World segment grew 3.2% in 2012:

*in Africa and the Middle East, revenue growth (+5.3%) was led by Côte d'Ivoire (+24.3% after
significantly deteriorating in 2011), Egypt (+1.5%), Guinea (+47.3%), Cameroon (+7.4%), Senegal
(+2.5%) and Niger (+25.2%). The mobile services customer base in the Africa and Middle East zone
rose 9.4% year on year to 81.582 million customers at 31 December 2012, representing 7.0 million
net additions. The principal contributors were: Mali (+2.1 million), Cameroon (+1.1 million),
Senegal (+1.0 million), Egypt (+0.9 million) and Guinea (+0.5 million). In addition, Orange Money,
now marketed in thirteen countries in Africa and the Middle East, had 5.6 million customers at 31
December 2012, an increase of 2.4 million customers year on year (+74%); 
*in Europe, revenues rose 1.3% on the rapid growth of mobile Internet browsing and increased sales
of smartphones, partially offset by the decline in voice revenues due to the overhaul of mobile
services offers in most countries. Revenues in Belgium rose 3.2%, while Romania confirmed its
improvement at 0.8% for the year after falling 1.8% in the second half of 2011. Slovakia continued
to see the impact of price cuts, with revenues down 5.0%. 

Excluding the impact of the Orange Switzerland disposal, the mobile services customer base in the
Europe zone (20.583 million customers at 31 December 2012) rose 0.8% year on year, led by the 5.0%
growth in contracts (+505,000 additional customers);

*revenues in the Dominican Republic increased 3.1% on rapid growth of Internet browsing. Mobiles
accounted for 3.214 million customers at 31 December 2012, an increase of 3.5% year on year,
reflecting the strong growth in contracts (+13.8%).  

fourth quarter 2012

Revenues fell 1.9% on a comparable basis to 2.090 billion euros. Excluding the impact of
regulatory measures 
(-46 million euros), the increase was 4.2%, generated both by the Africa and Middle East zone
(+4.2%) and by Europe (+4.1%). In Africa and the Middle East, growth was mainly from Côte d'Ivoire
(+11.3%), Egypt (+2.6%), Guinea (+34.6%) and Senegal (+3.0%). The growth in Europe reflected the
turnaround in Belgium (+8.6%) due to the high level of mobile handset sales (particularly the
iPhone5).

Restated EBITDA for the Rest of World segment was 2.800 billion euros in 2012, a decrease limited
to -0.6% on a comparable basis. Excluding the impact of regulatory measures, it rose 1.0% on
growth in the Africa and Middle East zone, partially offset by the downturn in the Europe zone.
The EBITDA margin for the entire segment was 33.8% in 2012, with erosion limited to -0.7
percentage points through efforts to curtail the growth of commercial expenses and other external
purchases.

CAPEX in the Rest of World segment (1.308 billion euros in 2012) fell 4.1% on a comparable basis
following major investments made in 2011 for the LION2 (Indian Ocean) and ACE (Western Africa)
underwater cables delivered in 2012. Work to replace mobile networks was completed in Slovakia and
Romania and continues in Belgium, Egypt and Guinea. The initial investments in 4G mobile networks
led to the commercial launch of very high-speed mobile in Moldavia, Romania and the Dominican
Republic at the end of 2012.

Enterprise

                                                                                                            
 In millions of euros                                   period ended 31 December                            
                               2012              2011              2011             12/11             12/11 
                                     comparable basis  historical basis  comparable basis  historical basis 
                                                                                                            
                                                                                                            
 Revenue                      7 001             7 196             7 101            (2.7)%            (1.4)% 
 Adjusted EBITDA              1 177             1 291             1 283            (8.8)%            (8.3)% 
 Restated EBITDA / Revenues   16.8%             17.9%             18.1%                                     
 CAPEX                          352               362               343            (2.6)%              2.7% 
 CAPEX / Revenues              5.0%              5.0%              4.8%                                     
 Restated EBITDA - CAPEX        825               929               940           (11.2)%           (12.2)% 


Revenues in the Enterprise segment (7.001 billion euros in 2012) fell 2.7% on a comparable basis
due to the downturn in legacy network products and services, mainly in France. Internationally,
revenues rose 1.9% year on year (+3.1% excluding equipment sales).

Service operations (1.832 billion euros) rose 1.0% in relation to the previous year. Excluding
equipment sales[19] #ftn19 , the increase was 2.7% with the development of services integration,
the unified management of the customer relationship and communication services, and collaborative
work.

Growing networks (402 million euros) reported an increase of 6.9%, reflecting the strong growth of
Voice over IP (+11.8%) and satellite access (+7.8%). Image services fell 2.7%, due to the
repositioning of videoconferencing offers in France, though they were on a positive trend
internationally.

Mature networks (2.895 billion euros) rose 1.8%, led by the growth of IPVPN (+3.9%), both
internationally with the rise in connection speeds and in France with the growth in the number of
subscribers. Broadcasting reported a limited decline of 1.9%: the impact of the complete shutdown
of analogue television in France at the end of 2011 was partially offset by the favourable impact
of the London Olympics in the third quarter of 2012. Traditional nomad solutions (Business
Everywhere) continued their downward trend due to the migration of uses to other more recent
mobility offers.

Legacy networks (1.872 billion euros) reported a decline of 13.4%, versus -11.2% the previous
year, due to traditional telephony services and legacy data services, in particular the shutdown
of the X25 network in 2012.

fourth quarter 2012

Revenues (1.786 billion euros) declined 2.7% on a comparable basis in relation to the fourth
quarter of 2011. The downward trend in legacy networks (-13.2%) and the decline in nomad solutions
were partially offset by the growth of IPVPN (+5.4%), growing networks (+1.9%) and services
(+0.8%).

Restated EBITDA for the Enterprise segment (1.177 billion euros in 2012) decreased 8.8% on a
comparable basis. The EBITDA margin was 16.8%, a decrease of -1.1 percentage points compared with
2011. The downturn in revenues was partially offset by lower service fees and inter-operator
costs.

CAPEX was 352 million euros in 2012, a reduction of 2.6% on a comparable basis, reflecting the
adjustment of investments to changes in the business.

International Carriers and Shared Services

                                                                                                             
 In millions of euros                                   period ended 31 December                             
                                2012              2011              2011             12/11             12/11 
                                      comparable basis  historical basis  comparable basis  historical basis 
                                                                                                             
                                                                                                             
 Revenue                       1 623             1 585             1 610              2.4%              0.8% 
 Adjusted EBITDA               (133)               (6)                39                 -                 - 
 Restated EBITDA / Revenues   (8.2)%            (0.4)%              2.4%                                     
 CAPEX                           415               358               367             15.5%             13.1% 
 CAPEX / Revenues              25.6%             22.6%             22.8%                                     
 Restated EBITDA - CAPEX       (547)             (365)             (328)             49.8%             67.0% 


Revenues in the International Carriers and Shared Services segment were 1.623 billion euros in
2012, a 2.4% increase on a comparable basis linked to International Carrier services (1.382
billion euros), which rose 3.8% versus 2011.

Restated EBITDA was negative at -133 million euros in 2012, in contrast to -6 million euros in
2011 on a comparable basis, reflecting a deterioration of -126 million euros between the two
years, principally due to the recognition in 2012 of a 122 million-euro expense related to the
European Commission decision in December 2011 concerning the method of funding the retirement of
civil servants assigned to France Telecom S.A.

CAPEX was 415 million euros in 2012, a 15.5% increase on a comparable basis in relation to the
previous year, linked in particular to the development of innovative service platforms such as
Orange Money. Investments in underwater cables decreased following the delivery of the major LION2
(Indian Ocean) and ACE (Western Africa) cables.

schedule of upcoming events

*24 April 2013: first quarter 2013 results 

contacts

 press: +33 1 44 44 93 93        financial communications: +33 1 44 44 04 32  
 
 Béatrice Mandine              (analysts and investors)                     
 beatrice.mandine@orange.com     
 Patrice Lambert-de Diesbach                
 
 Jean-Bernard Orsoni           p.lambert@orange.com                         
 jeanbernard.orsoni@orange.com   
 Corentin Maigné                            
 
 Sébastien Audra               corentin.maigne@orange.com                   
 sebastien.audra@orange.com      
 Jérôme Blin                                
 
 Tom Wright                    jerome.blin@orange.com                       
 tom.wright@orange.com           
 Constance Gest                             
 
 Olivier Emberger              constance.gest@orange.com                    
 olivier.emberger@orange.com     
 Didier Kohn                                
 
 Mylène Blin                   didier.kohn@orange.com                       
 mylène.blin@orange.com          
 Florent Razafi                             
                                 florent.razafi@orange.com                    
                                                                              


All press releases are available on the Group's websites:

*www.orange.com  
*www.orange.es 
*www.everythingeverywhere.com 
*www.tp-ir.pl 
*www.orange-business.com 

disclaimer

This press release contains forward-looking statements about France Telecom-Orange. Although we
believe they are based on reasonable assumptions, these forward-looking statements are subject to
numerous risks and uncertainties, including matters not yet known to us or not currently
considered material by us. There can be no guarantee that anticipated events will occur or that
the objectives set out will actually be achieved. Important factors that could cause actual
results to differ materially from the results anticipated in the forward-looking statements
include, among others: fluctuations in general economic activity levels as well as the level of
activity in each of the markets in which we operate; the effectiveness of our strategy and the
level of Group investment necessary to pursue this strategy and to adapt out networks; our ability
to face intense competition within our sector and to adapt to the ongoing transformation of the
telecommunications industry, in particular in France with the arrival on the market of a fourth
mobile operator; fiscal and regulatory constraints, in particular in setting wholesale rates;
results of current litigation; risks and uncertainties specifically related to international
operations; risks related to the impairment of assets; exchange rate fluctuations; and conditions
for accessing the capital markets (in particular risks related to liquidity and credit ratings)
and counterparty risks. More detailed information on the potential risks that could affect our
financial results can be found in the Registration Document filed with the French Autorité des
marchés financiers (AMF) on March 29, 2012 and in the annual report on Form 20-F filed with the
U.S. Securities and Exchange Commission on April 13, 2012. Except to the extent required by law
(in particular pursuant to sections 223-1 et seq. of the General Regulations of the AMF) France
Telecom-Orange does not undertake any obligation to update forward-looking statements.

PR_Orange_FY2012_EN_200213 http://hugin.info/143465/R/1679534/548492.pdf 


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