3 Q11 France Mobile Operator Forecast Executive Summary

3Q.2011 France Mobile Operator
Forecast
France to have 83 million mobile subscriber connections in 2015 with Orange taking
44% market share

October 2011

Stable subscriber growth continues in France
5.6% industry average subscriber growth in 2Q.2011

INDUSTRY AVERAGE Chart 1: Subscriber Growth (4Q08 – 2Q11), %
SUBSCRIBER GROWTH IN
FRANCE’S WIRELESS MARKET 15%
REMAINS STABLE
The operator-wide average
subscriber growth (YoY) was at 5.6%
in 2Q.2011, the same as in 2Q.2010. 10%

The largest operator, Orange, saw
its subscriber growth (YoY) decline
from 5.5% in 2Q.2010 to 4.2% in
2Q.2011. 5%

Subscriber growth (YoY) at
Bouygues Telecom declined from
6.6% in 2Q.2010 to 56.1% in
2Q.2011.
0%
On the other hand, SFR’s 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11
subscriber growth (YoY) increased
from 2.0% in 2Q.2010 to 5.8% in
Orange SFR Bouygues Telecom Industry Total
2Q.2011.

Source: IEMR

© 2011 IE Market Research Corp.
All rights reserved.

2

ARPU level is stabilizing in the French wireless market
+4.7% industry average ARPU growth in 2Q.2011

THE AVERAGE ARPU IN FRANCE Chart 2: ARPU Growth (4Q08 – 2Q11), %
CONTINUES TO DECLINE
6%
The industry average monthly ARPU
was US$ 42.92 in 2Q.2011, up +4.7%
4%
YoY.
At the operator level, Orange’s 2%
monthly ARPU declined by -2.0%
(YoY) to reach US$ 43.72 in 2Q.2011. 0%

SFR continues to have negative -2%
ARPU growth at -4.6% in 2Q.2011
(down from -3.4% in 2Q.2010). -4%

ARPU growth at Bouygues Telecom
-6%
continues to increase, but it still
remains negative at -6.3% in 2Q.2011 -8%
(down from -3.6% in 2Q.2010). 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11


Source: IEMR


3

Minutes of Use per Subscriber is increasing
Industry average MOU/Sub is 252 minutes per month

The operator-wide average Minute of Chart 3: MOU/Sub Growth (4Q08 – 2Q11), %
Use (MOU) per subscriber was 252
10%
minutes per month in 2Q.2011, up
+7.3% YoY. 8%

MOU/Sub growth at Orange 6%
increased from -3.0% in 2Q.2010 to -
4%
0.5% in 2Q.2011.
2%
MOU/Sub at SFR continues to be
higher than MOU/Sub at Orange and 0%
Bouygues Telecom. -2%
MOU per subscriber at SFR, Orange -4%
and Bouygues Telecom was 319
minutes, 190 minutes and 282 minutes -6%

respectively in 2Q.2011. -8%
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11


Source: IEMR


4

Negative EBITDA growth at all of Orange, SFR and Bouygues Telecom
in 2Q.2011

-5.9% INDUSTRY-AVERAGE EBITDA Chart 4: EBITDA Growth (4Q08 – 2Q11), %
GROWTH IN 2Q.2011
• The industry average EBITDA growth
rate (YoY) in 2Q.2011 was -5.9%, 20%
down from -3.0% in 2Q.2010.
• All of the major wireless carriers 10%
suffered from negative EBITDA growth
in the latest quarter. SFR’s EBITDA
growth (YoY) was -5.1% in 2Q.2011 0%

(down from -1.5% in 2Q.2010).
• EBITDA growth rate (YoY) at Orange -10%
was -7.3% in 2Q.2011 (down from -
5.3% in 2Q.2010). Also, Bouygues
Telecom’s EBITDA growth was -3.4% -20%
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11
in 2Q.2011 (down from 0.6% in
2Q.2010).

Source: IEMR


5

So what is IEMR’s Forecast?
Total mobile subscriber connections in France to reach 83.3 million in 2015

We forecast that the number of total Chart 5: Subscribers by operator (CY09 – CY15F)
wireless subscriber connections in
France will increase from 65.8 million 40,000
in the end of 2010 to 83.3 million in
35,000
the end of 2015.
Given the latest quarter numbers, 30,000
our model predicts that Orange will

subscribers (000s)
have approximately 36.6 million 25,000
mobile subscriber connections in
2015. 20,000

In our view, Orange will continue to 15,000
hold a dominant position as the
largest mobile operator in France with 10,000
a 44.0% market share in 2015.
5,000
On the other hand, we forecast that
SFR will have 27.5 million wireless 0
subscribers in 2015 (33.1% market CY09 CY10 CY11F CY12F CY13F CY14F CY15F
share).
Orange SFR Bouygues Telecom

Source: IEMR


6

ARPU levels in France to decline

WE EXPECT THE OPERATOR-WIDE Chart 6: Average Revenue per User (ARPU)
AVERAGE ARPU LEVEL TO per month (CY09 – CY13F), EUR
DECLINE TO ABOUT EUR 32.60 IN
2013 45

We expect that ARPUs in France will 40
be declining over the next two years.
35
Our forecasting model predicts that
30
the industry average ARPU will be
about EUR 32.60 per month in 2013. 25

We expect that Bouygues Telecom’s 20
ARPU level will continue to be higher
than those of Orange and SFR over 15
the next two years.
10

5

0
CY09 CY10 CY11F CY12F CY13F

Orange SFR Bouygues Telecom Average

Source: IEMR


7

Stable profitability at Orange, SFR, and Bouygues Telecom

We forecast that EBITDA margins at Chart 7: EBITDA margins (CY09 – CY13F), %
the largest three operators will
continue to decline over the next two 45%
years.
40%
We expect that SFR’s EBITDA
35%
margin will be highest among France’s
mobile operators in 2013 30%

Bouygues Telecom’s EBITDA 25%
margin will remain lower than those of
its competitors at about 23% from 20%
2012 to 2013, according to our model.
15%

10%

5%

0%
CY09 CY10 CY11F CY12F CY13F

Orange SFR Bouygues Telecom Average

Source: IEMR


8

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3 Q11 France Mobile Operator Forecast Executive Summary

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