3 q11 france mobile operator forecast executive summary

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

October 2011

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© 2011 IE Market Research Corp.All rights reserved.

Source: IEMR

INDUSTRY AVERAGE SUBSCRIBER GROWTH IN FRANCE’S WIRELESS MARKET REMAINS STABLE

The operator-wide average subscriber growth (YoY) was at 5.6% in 2Q.2011, the same as in 2Q.2010.

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

Subscriber growth (YoY) at Bouygues Telecom declined from 6.6% in 2Q.2010 to 56.1% in 2Q.2011.

On the other hand, SFR’ssubscriber growth (YoY) increased from 2.0% in 2Q.2010 to 5.8% in 2Q.2011.

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4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Orange SFR Bouygues Telecom Industry Total

Chart 1: Subscriber Growth (4Q08 – 2Q11), %

Stable subscriber growth continues in France5.6% industry average subscriber growth in 2Q.2011

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Source: IEMR

THE AVERAGE ARPU IN FRANCE CONTINUES TO DECLINE

The industry average monthly ARPU was US$ 42.92 in 2Q.2011, up +4.7% YoY.

At the operator level, Orange’s monthly ARPU declined by -2.0% (YoY) to reach US$ 43.72 in 2Q.2011.

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

ARPU growth at Bouygues Telecom continues to increase, but it still remains negative at -6.3% in 2Q.2011 (down from -3.6% in 2Q.2010).

Chart 2: ARPU Growth (4Q08 – 2Q11), %

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

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4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11


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Source: IEMR

The operator-wide average Minute of Use (MOU) per subscriber was 252 minutes per month in 2Q.2011, up +7.3% YoY.

MOU/Sub growth at Orange increased from -3.0% in 2Q.2010 to -0.5% in 2Q.2011.

MOU/Sub at SFR continues to be higher than MOU/Sub at Orange and Bouygues Telecom.

MOU per subscriber at SFR, Orange and Bouygues Telecom was 319 minutes, 190 minutes and 282 minutes respectively in 2Q.2011.

Chart 3: MOU/Sub Growth (4Q08 – 2Q11), %

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

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Source: IEMR

-5.9% INDUSTRY-AVERAGE EBITDA GROWTH IN 2Q.2011

• The industry average EBITDA growth rate (YoY) in 2Q.2011 was -5.9%, down from -3.0% in 2Q.2010.

• All of the major wireless carriers suffered from negative EBITDA growth in the latest quarter. SFR’s EBITDA growth (YoY) was -5.1% in 2Q.2011 (down from -1.5% in 2Q.2010).

• EBITDA growth rate (YoY) at Orange was -7.3% in 2Q.2011 (down from -5.3% in 2Q.2010). Also, BouyguesTelecom’s EBITDA growth was -3.4% in 2Q.2011 (down from 0.6% in 2Q.2010).

Chart 4: EBITDA Growth (4Q08 – 2Q11), %

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

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4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11


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Source: IEMR

We forecast that the number of total wireless subscriber connections in France will increase from 65.8 million in the end of 2010 to 83.3 million in the end of 2015.

Given the latest quarter numbers, our model predicts that Orange will have approximately 36.6 million mobile subscriber connections in 2015.

In our view, Orange will continue to hold a dominant position as the largest mobile operator in France with a 44.0% market share in 2015.

On the other hand, we forecast that SFR will have 27.5 million wireless subscribers in 2015 (33.1% market share).

Chart 5: Subscribers by operator (CY09 – CY15F)

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

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Orange SFR Bouygues Telecom

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Source: IEMR

WE EXPECT THE OPERATOR-WIDE AVERAGE ARPU LEVEL TO DECLINE TO ABOUT EUR 32.60 IN 2013

We expect that ARPUs in France will be declining over the next two years.

Our forecasting model predicts that the industry average ARPU will be about EUR 32.60 per month in 2013.

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

Chart 6: Average Revenue per User (ARPU) per month (CY09 – CY13F), EUR

So what is IEMR’s Forecast?ARPU levels in France to decline

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Orange SFR Bouygues Telecom Average

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Source: IEMR

We forecast that EBITDA margins at the largest three operators will continue to decline over the next two years.

We expect that SFR’s EBITDA margin will be highest among France’s mobile operators in 2013

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

Chart 7: EBITDA margins (CY09 – CY13F), %

So what is IEMR’s Forecast? Stable profitability at Orange, SFR, and Bouygues Telecom

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Orange SFR Bouygues Telecom Average

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3 q11 france mobile operator forecast executive summary

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