Executives: Karine Gruson - Director, Investor Relations Philippe Marien - Senior Vice President Eric Haentjens - EVP Finance, HR &

Strategy
Analysts: Stéphane Beyazian - Raymond James Jakob Bluestone - Credit Suisse Jerry Dellis - Jefferies International Ltd. Frederic Boulan - Bank of America Merrill Lynch Nicolas Colisson - HSBC Bank Dimitri Kallianiotis - Redburn Giovanni Montalti - UBS Ltd. Stephen Bechade - Citigroup Josep Pujal - Kepler Cheuvreux Agathe Martin - Exane Ltd.

Operator: Ladies and gentlemen, welcome to Bouygues Q1 2016 Conference Call. I will now hand over to Karine Adam, Head of Bouygues Investor Relations.

Please go ahead.

Karine Gruson: Good morning, ladies and gentlemen. I would like to remind everyone that you can find on the company website at www.bouygues.com the earnings press release, the presentation we will be commenting on during this conference call, an Excel file with historical key figures for the group and its business, and the company's financial statements. Statements made on this call are forward-looking statements. Such statements reflect objectives that are not based on management's current expectations or estimate, and are subject to a number of factors or uncertainties that could cause actual figures to differ materially from those described in the forward-looking statements.

I would like to turn the call over to Mr. Philippe Marien, Senior VP of Bouygues.

Philippe Marien: Thank you, Karine. Good morning to all of you, and thank you for joining us. I would like to welcome everyone to our conference call to discuss Bouygues' first quarter results.

With me in the room is Eric Haentjens, Executive Vice President-Finance, HR and Strategy of Bouygues Telecom. Following my comments, we will be answering your questions. To begin with slide four, we can highlight two points for the quarter. First, Bouygues Telecom's commercial and financial results confirmed the turnaround of 2015. As a result, we are confident that Bouygues Telecom has the appropriate strategy and strength necessary to achieve its targets in a market with four operators.

Second, the construction businesses delivered solid commercial performance, continuing the positive momentum of 2015. In this context, we can confirm the full-year outlook shared with you in February. Turning to key figures on slide five, as a reminder, first quarter results are not indicative of full year performance, mainly due to the seasonality at Colas and the application of IFRIC 21. Regarding first quarter 2016, sales were down 3% and lower by 2% like-for-like, at constant exchange rates. The current operating loss for the quarter was €140 million, an improvement of €54 million over the first quarter of last year.

Let us now turn to slide six to see which business contributes to this improvement. You can see an increase of €29 million in Bouygues Telecom's profitability in the first quarter of 2016. In the construction businesses, the smaller operating loss was mostly owed to a reclassification of the Dunkirk refinery's operating losses. The losses of €15 million in the first quarter of 2016 are now being classified as a non-current charges, as the production and sale of refined products was halted. Negotiations with the unions on the redundancy plan are progressing well in line with our scheduled time table.

As a reminder, operating losses for the first quarter of 2015 were €29 million (sic) [€33 million] (04:02). On slide seven, you can see that the group maintains a strong financial position. The increase in net debt between end-December 2015 and end-March 2016 mainly reflects the usual seasonal impacts from Colas, the proceeds from Alstom's shareholder buyback of €996 million, the payment of the first installment of the 700 megahertz frequencies of €117 million and the acquisition of Newen Studios at TF1 for €291 million at 100%. Net debt was €3.5 million at end-March 2016, a decrease of €740 million compared to end-March 2015. By end 2016, we still expect net debt to be slightly above the end 2015 balance of €2.6 billion.

We will now turn to the review of operations starting with the construction businesses. Let's begin with commercial performance on slide 10. The order book remained at high level at €29.9 billion at end-March 2016, up 3% from year-end and almost flat with end-March 2015. In the first quarter, we maintained the good momentum of 2015 in the construction businesses notably abroad. 57% of the order book at Bouygues Construction and Colas is in international markets, unchanged compared to end-March 2015.

We can also notice the first signs of gradual stabilization in France as illustrated on the next slide. We told you in February that we were expecting a gradual stabilization in France for 2016 and the first quarter confirms the first signs of the stabilization. In building and civil works, we see some positive factors as evidenced by the following. First, order intake is increasing as we won significant projects in the first quarter, such as the Louvre Post Office, the extension of the Calais harbor, and the Alto tower in La Défense. Second, you can see on the chart that the order book in France for Bouygues Construction was flat compared to last year's first quarter, a positive trend over 2014 and 2015 which saw a decline of 4% and 9% respectively.

[Indiscernible] dynamic in the Greater Paris area is improving, thanks to Grand Paris tenders, as well as some private commercial projects. The market in the rest of France, however, remains challenging and very competitive. Growth continued in the residential market, thanks to the Pinel buy-to-let law and wider access in the zero-interest loan program. Residential property reservations at Bouygues Immobilier were up 12% in the first quarter of 2016 compared to last year, and we expect to maintain that trend during the full year. Furthermore, in the first quarter, private investors represent 55% of the reservations compared to 38% two years ago.

Concerning the road market, after two years of sharp decline, down 14% in 2014 and 11% in 2015, sales at Colas were down slightly in the first quarter of 2016 compared to last year and in line with full year expectations. Now, let me turn over to Eric Haentjens.

Eric Haentjens: Thank you, Philippe. Starting with slide 13, good commercial and financial performance confirms the turnaround started in 2015 and validates our strategic choices. It demonstrates that Bouygues Telecom has the strengths necessary to achieve its targets in 2017 and longer term in four operator markets.

As you can see on slide 14, we maintained good performance in mobile during the quarter, despite heavy promotional activity in the market, and while ongoing discussions with Orange created some confusion among clients and prospects. We won 240,000 new mobile customers in the first quarter of 2016, of which 151,000 were new plan customers excluding MtoM. Looking at the chart, we have now excluded MtoM subscribers from our target of 1 million additional mobile customers at end-2017 versus end-2014. Since January 2015, we are well on track to reach that target, as we have booked 664,000 new mobile customers, excluding MtoM. Moving to slide 15, you can see the continuous progress of our 4G offers among our customer base.

At end-March 2016, we benefit from 5.6 million active 4G subscribers, equaling 55% of our total customer base, excluding MtoM. Average data usage is holding up well, despite initial lower usage of new 4G customers compared to early adopters. As evidenced on the chart, 4G customers use an average 2.7 gigabytes per month. Altogether, with the continuing penetration of the data usage, mobile customers consume an average 1.6 gigabytes per month, which tripled in two years. I'll remind you that our definition of average data usage excludes Wi-Fi.

Looking at slide 16, the growth trend is continuing in fixed broadband. Bouygues Telecom won 71,000 new fixed customers in the first quarter of 2016 and now has a total customer base of 2.9 million broadband users. FTTH is growing quarter-after-quarter and contributes to almost 20% of first quarter 2016 net adds. The total FTTH customer base is more than 50,000, and the vast majority are new customers. With the steady commercial performance improvements, we are on track to reach our target of an additional 1 million fixed customers by 2017 versus end-2014.

Turning to slide 17, good commercial performance over the last several quarters is leading to strong sales improvement. Indeed, Bouygues Telecom's total sales were up 6% compared to last year. The chart on the right shows that sales from network were up 4% in the first quarter compared to last year, when the trend was a decline of 4%. For the first time, both fixed and mobile are contributing to growth. The solid sales growth validates our strategic choices.

On slide 18, EBITDA for the first quarter of 2016 is €146 million, an increase of 24% over the first quarter of 2015. Moreover, margin is up 2.3 points to 15%. As you recall, as always, in the first quarter, the application of IFRIC 21 impacts the timing of recognition of some taxes. Thus, the first quarter level of margin is not representative of the full year. We are confident that the continuous improvement in EBITDA margin will allow us to reach out 25% EBITDA margin targets in 2017.

Slide 19 highlights that our differentiated network and technical capabilities provide us with a competitive advantage over the long-term. It allows us to keep our position as the best-in-class mobile quality network in France. In very dense areas, Bouygues Telecom benefits from a deeper 4G network, thanks to the rollouts of new sites in major cities, and the investments in 25% of the French spectrum, providing the best ratio of spectrum per user. Therefore, in combining different bands of frequency, our clients gain the benefits of higher speeds. In less dense areas, we are currently building a wider network with improved 4G coverage, thanks to network sharing.

Network sharing allows us to differentiate through extended coverage, while optimizing both capital and operating expenditures. We target 4G coverage of 99% of the population in 2018. As a result of this strategy, you can see on slide 20 that Bouygues Telecom is recognized as the best-in-class mobile operator in any and all service measuring mobile network quality. On slide 21, you see that we have access to the full range of infrastructure in the fixed markets. First, we have rolled out our own DSL network in strategic areas to over 16 million households, thanks to more than 1,500 central offices at end-2015.

76% of our DSL customers are on our own network at end-March 2016 compared to 50% mid-2015. Second, we can deliver very high speed to almost 8 million households through the Numericable-SFR network. And third, we have access to FTTH infrastructure through rental or co-investments. In very dense areas, horizontal is shared via our co-investment with Numericable-SFR, while our vertical access is bought or rented. In less dense areas, we have a flexible model with rental or co-investments with Orange by steps of 5%.

Consequently, 1.6 million premises are already marketed at end-March 2016 with an objective of reaching 2 million by end-2016. A total of 6.5 million premises are already committed. Looking at slide 22, Bouygues Telecom offers competitive mobile and fixed plans with the best value for money. In mobile, we differentiate our higher-end Sensation plans with various bonuses including music with Spotify or TV programs with B.tv, relying upon the very good quality of our network. The subscription rates for bonuses has doubled since the first half of 2015, and we still have more opportunities to grow.

In fixed, our tariffs remain structurally the most competitive in the market. We recently raised prices for our new customers, while maintaining the price gap with our competitors. We now charge €3 for Bbox and Bbox Miami rental, and we increased the price of our Bbox Miami plan by €1. Our existing customers continue to benefit from free rental on the boxes, and from the same monthly plan.

Philippe Marien: Thank you, Eric.

I would like to briefly comment on the financial statements. We have already looked at sales and current operating profit shown on slide five. The €87 million of non-current charges in the first quarter of 2016 included mainly €34 million at TF1, as previously discussed in the results that published on April; €15 million at Colas, related to the Dunkirk refinery's losses following the decision to halt the production and sales of refined products; and €22 million at Bouygues Telecom essentially related to the rollout of network-sharing with Numericable-SFR. Cost of net debt decreased €10 million in the first quarter, thanks to lower financial expenses. As a reminder, we reimbursed two bonds in October 2014, and July 2015 for a total of €1.8 billion.

Turning to slide 25, as announced in our press release, the first quarter reflects Alstom's zero net contribution, which included the following. First, the net result of Alstom's second half 2015-2016. Second, the impact on Bouygues' accounts of the sales by Alstom of the Energy business to General Electric in November 2015. Third, the impact of Alstom's share buyback offer done in 2016. And finally, the reversal of the balance of the write-down recognized at Bouygues at end-2015.

The carrying amount of Bouygues' interest in Alstom at end-March 2016 was €1.9 billion or €30.83 per share. On slide 26, you can see the net debt evolution from end-December 2015 and end-March 2016. First, we received €835 million from disposals and acquisitions, of which €996 million coming from Alstom's public share buyback in January 2016, and an outflow of €171 million coming from the acquisition of 60% of Newen Studios. Second, we hold €120 million put option on the remaining 30% stake in Newen Studios, which is reported in the line others. And finally, we made the third installment payment of €117 million for the 700 megahertz frequencies.

The remaining variation is explained by operations. Turning to the detail of operations on slide 27, you can see that net cash flow improved year-on-year, owing to TF1 and Bouygues Telecom. CapEx were impacted by first the integration of Newen Studios at TF1. Please keep in mind that this increase in CapEx at TF1 will continue over the full year. However, this change in CapEx won't have any impact on free cash flow as net cash flow will increase accordingly.

Second, the pace of investments at Bouygues Telecom mainly due to the rollout of network sharing with Numericable-SFR. Working capital requirement increased by roughly €500 million year-on-year due to an unfavorable foreign exchange effect in the first quarter of 2016 on the net cash of foreign subsidiaries, mainly in dollars for about €200 million. And of the remaining €300 million, about half comes from litigation settlements at Bouygues Telecom that had a favorable impact in the first quarter of 2015. We remind you that, for the full year, we expect a deterioration in working capital requirement of between €350 million and €400 million at the group level, including €233 million for the payment of the first installments of 700 megahertz frequencies. Finally, we will turn our attention to the outlook for the full year.

As you can see on slide 29 and as stated at the beginning of this call, we confirmed the outlook shared with you in February. In the construction businesses, we will continue to target growth in international markets and maintain a broad portfolio of offers with innovative products and services. We expect profitability to improve starting in 2016. We confirm the target of a return to long-term growth in sales and profit at Bouygues Telecom. EBITDA margin is expected to be 25% for 2017.

We are confident with saving at least €400 million in 2016 versus end-2013. And we foresee capital expenditures of between €750 million and €800 million in 2016. We anticipate around €270 million of non-current charges for the group, as a whole, for the full year, an increase from the €200 million that was originally announced. This increase is primarily related to non-current charges at TF1, which are now expected to be €86 million instead of €50 million, and the addition of charges at Colas. Nevertheless, group profitability should continue to improve in 2016.

This concludes my presentation. Operator, please open the floor for questions.

Operator: Thank you very much, sir. [Operator Instructions] The first question is coming from Stéphane Beyazian, Raymond James. Please go ahead.

Stéphane Beyazian: Yes. Thank you. Three questions, if I may. The first one is regarding fiber. There was little progress, if I can say, in terms of the number of ultra-fast customers in the first quarter and actually overall over the past couple of quarters.

So, could you sort of elaborate a little bit on that and, let's say, how strong is the Orange brand in the market and, therefore, your ability to compete in this market? My second question is regarding some of the price changes you've done in broadband. I know it's probably early, but can you elaborate a little bit on the sort of impact on the demand that you have seen following the price changes? And my third question is regarding - also in Telecom, sorry, about the marketing cost. I think, if I'm not wrong, you're not reporting anymore the level of marketing cost at Bouygues Telecom. I know, in the last quarter, it was relatively stable. I just want to check whether there's any change in the sort of, let's say, environment in terms of customer acquisition costs? Thank you.

Eric Haentjens: Yes. Thank you, Stéphane. Well, regarding your first question, it is true that we are less strong than Orange in fiber, so it's not - it's easy to see that. It's a fact. We are - our development in the fixed broadband is mainly concentrated on DSL for the time being and we are happy with the figures we post quarter after quarter.

We have just started in 2015 to market FTTH offers and you see, on the first quarter of 2016, the first results of this marketing policy. So, of course, the proportion of FTTH customers in net adds - in fixed broadband net adds will continue to grow during 2016 with regard - at the very beginning of the commercialization of this product. And again, our focus is clearly more on DSL today. So, it doesn't prevent us from moving to FTTH later on, but for the time being, we are satisfied with the figures we post. Regarding price changes in the fixed broadband, so, no real impact.

We maintain a structural gap compared to peers. And it doesn't have any real impact on gross adds, since we have made these changes. I think, it's - some of these changes are totally market practice. So, for example, the box rental is something that is very common with our competitors. Regarding marketing cost, it's true that we don't report any longer our marketing cost, because we think that, well, the main purpose of this reporting was to show that we had strongly decreased marketing cost from the time where we had a lot of handset subsidy and distribution commissioning, so, we have now reached a level which is very low and quite flat.

And so, we have felt that it was no longer useful for analysts to report on this marketing cost, but I can ensure you that there is no change and so we have removed that to avoid talking about things that doesn't really move and doesn't bring any additional information.

Stéphane Beyazian: Thank you. Can I just ask a very final one and quick one? Is there any progress at the Wattway project at Colas, if I may?

Philippe Marien: Yes. And I think that the press, the report in the press are totally true. So, now we are in phases with a lot of samples under negotiation.

So now, it's the first phases, pre-commercialization phases. So, with discussions between some local authorities and Colas to start samples in some parts of France. So, the first step, samples. After that, we will see for more stronger development in the future. So, the first step will be samples in France and it's under negotiation in various areas.

Stéphane Beyazian: Thank you.

Philippe Marien: So it will not be material in the net sales and the profit of Colas in 2016 for sure.

Stéphane Beyazian: Very clear. Thank you.

Operator: The next question is coming from Jakob Bluestone, Credit Suisse.

Please go ahead.

Jakob Bluestone: Hi. Good morning. I've got three questions, please. Firstly, in Telecoms, could you share with us how much you booked for the tax on site, the IFER tax during Q1 that relates to IFRIC 21? Secondly, on the fixed price increases, I think as you said it was just for new customers.

Do you see scope for raising prices for existing customers as well? And then, finally, just on construction, you talked about how sort of an improving outlook, which I guess is more large contracts coming up for tender in France, and improvement in residential reservations in Immobilier. Could you talk a little bit about the competitive environment as well? What are you seeing in terms of, sort of, pricing and competitor aggression? That'll be useful. Thank you.

Philippe Marien: If I correctly understand your question, on your first question - your question was about the impact of IFRIC 21 in Q1?

Jakob Bluestone: Exactly. How big was the - how much tax did you book for the IFER?

Philippe Marien: Yes.

It's roughly - the impact is roughly €50 million. It's a negative impact of €50 million, I think it's €48 million to be precise.

Jakob Bluestone: Right.

Eric Haentjens: But, well, as you understand, there is no impact in the full year results, and there is no material variation compared to what we booked in 2015. So, the comparison between 2015 and 2016 is correct as there is no impact in the - between IFRIC 21 and the comparison.

Your second question was about price increase on fixed broadband. So, yes, it's only for new customers. It doesn't affect - it doesn't impact existing customers. So, they remain with their existing plan. So, no box rental and no - well, when you grow more on Miami plan.

Philippe Marien: So, regarding the French competitive environment in the construction businesses, up to now, we don't see any big move or big change. So, the market remains competitive and highly competitive. Probably - and it's our assumption, thanks to the increase of reservation in residential property development, we will see probably in the coming months some improvement in the residential construction because as the market will be better, the competition will be less intensive. But for the time being, it's not really the case. And regarding big projects, the competition remains the same between the biggest French competitors.

So, we don't anticipate really an improvement in term of competition. It is the reason why our strategy remain to be very well placed in terms of innovation, in terms of complexity for big projects. So, to sum up, no big changes in terms of competitive environment. The good news is the fact that we have in front of us, and especially in the Paris area, a better pipe in terms of future bids and tenders.

Jakob Bluestone: If I can just ask one follow-up, just on the price increases.

I guess the question was really, do you think there's room to raise prices on existing customers given you mentioned that there's no churn, no acceleration in churn, after raising - or, sorry, no impact on gross adds since raising prices for new customers? Could you raise prices on existing customers?

Eric Haentjens: Our intention is not to increase prices for existing customers because we think it's not fair. So we don't want to do that. It's part of our policy of client-first. So, they stay with their own existing plan, and we don't want to do that.

Jakob Bluestone: That's very clear.

Eric Haentjens: So, no additional churn, and we maintain the confidence we have with our customers. It's very important for us.

Jakob Bluestone: Great. Thank you.

Operator: The next question is coming from Jerry Dellis, Jefferies.

Please go ahead.

Jerry Dellis: Yes. Good morning. Thank you for taking my questions. There was a quite strong improvement in the mobile ARPU trend this quarter.

I just wondered whether you could clarify what was behind that, and whether perhaps there was a change in mix between the main brands in B&YOU within your connection volumes. And then, secondly, I think you added some promotional discounting to your B&YOU tariffs in the month of March in response to competitor initiatives, in particular, I think, Sosh, as I recall. I just wondered whether that March discounting, as it feeds through into the second quarter numbers, might dilute the strong mobile network revenue performance that we saw this last quarter. Any comments on that, please? Thank you.

Eric Haentjens: Yes.

Regarding your first question, so there is a strong improvement in sales, but not in ARPU, because ARPU is slightly - mobile ARPU for Q1 is slightly below the Q4 2015 ARPU. It was 22.8% for Q4, and it's 22.4% in Q1. So, there is a slight decrease in ARPU, which is mainly due to the promotions we have made during Q1. We don't capitalize any promotional effects. So, all the impacts of promotions are directly reflects on the turnover and sales.

So, regarding the promotions we made on B&YOU in March, yes, they will - they have an impact on ARPU, but not more than the promotions we made in January, December and February. So, it's now part of a four-player game on the French market. So, we have decided to be also part to this competition, and we try to do that, as best as we can, to be powerful in terms of volumes but also to maintain the good dynamic in terms of usage and ARPU. And as the B&YOU segment is really affected by promotions, it is less the case for Sensation plan, so [indiscernible] plans Bouygues Telecom, and we try to maintain good balance, good mix between both type of plans.

Jerry Dellis: Thank you.

If I could just come back on the mobile ARPU point, I mean, just as I see it from the numbers in your spreadsheet, mobile ARPU is down about 1% year-on-year in Q1; in the previous quarter, it was down 4%; prior to that, minus 5%; prior to that, minus sort of 6.5%. So, I suppose the question is whether that rate of improvement could be expected to continue and be built on into Q2 and Q3, please?

Philippe Marien: Well, I would we are very close to stabilization [indiscernible]. Our target is to stabilize the ARPU, so we are very close to this stabilization. You know that we are - there are also some seasonal effects especially in Q3. So, Q3 is already higher than Q2 and Q4.

But all in all, we are very close to a stabilization of mobile ARPU and it's really our target. So, it's a real difference compared to what we have experienced in 2013 and 2014.

Jerry Dellis: Thank you very much.

Operator: The next question is coming from Frederic Boulan, Bank of America Merrill Lynch. Please go ahead.

Frederic Boulan: Hi. Good morning. A couple of questions, please. Firstly, if I could come back on the attempt to sell the Telecom business in the beginning of the year, what do you need to see to feel comfortable with the disposal of the assets? And are the execution risks simply too high or are they could be manageable in your view? Secondly, on new wholesale strategies, cable wholesale is still part of your strategy. In America, you seems to indicate otherwise on the call two days ago.

And thirdly...

Operator: Excuse me, sir. The sound is not very good on your line. Can you please [indiscernible].

Philippe Marien: Yes, absolutely.

We don't catch your second question, Frederic.

Frederic Boulan: Yeah. Okay. So, is it better now?

Philippe Marien: Yes.

Eric Haentjens: Better, much better.

Frederic Boulan: The second question on your cable wholesale. Is this still part of your strategy? You indicated that was the case, but Numericable on their call on Wednesday seemed to indicate otherwise. So, just trying to understand if you're still pushing this product? And then maybe a follow-up on your comments on the construction outlook.

Philippe Marien: Frederic, it's again bad now.

Frederic Boulan: Okay.

Well, it's good to go then. Thank you.

Philippe Marien: You have a problem with your microphone.

Frederic Boulan: So, those are - that's it for my questions.

Eric Haentjens: Okay.

On your question about cable offers, yes, we continue to have an important customer base, several hundred thousand. But yes, it's true to say that we have put more efforts, more focus on DSL customers since the launch of our €20 price point during spring 2014. So, it is true to say that, given this focus on DSL, the cable installed base has not moved, has remained quite steady during the previous quarters. And so, we are more keen to sell either DSL out to market or FTTH [indiscernible]. But the wholesale agreement stay in-force, and we continue to serve our clients with the capabilities of Numericable-SFR.

Frederic Boulan: Okay. My first question?

Operator: Ladies and gentlemen, thank you for holding. Due to a technical issue, the speakers lost their connection. So please hold the line and the conference will resume shortly. Thank you.

[Music] (42:58-44:33)

Operator: Ladies and gentlemen, thank you for holding. The conference will resume shortly. [Music] (44:38-45:22)

Philippe Marien: Hello?

Operator: So, ladies and gentlemen, thank you for holding. The conference can resume now. Thank you.

Philippe Marien: Okay. So, Frederic, do you catch our answer to your two questions or not?

Frederic Boulan: I got the point on the cable, but there was no answer that we could hear on Bouygues Telecom disposal.

Philippe Marien: Okay. Yeah. So, I say that the question of the condition of a possible deal is no more relevant.

We have spent three months with extensive discussions between the - all the actors, and we were not able to reach an agreement. So now it's done. We have moved on and our only question for us is how to develop Bouygues Telecom and to continue to be successful in our stand-alone strategy. That's all.

Frederic Boulan: Okay.

Thank you.

Operator: The next question is coming from Nicolas Cote-Colisson, HSBC. Sir, please go ahead.

Nicolas Colisson: Thank you. Good morning.

You've confirmed your medium-term EBITDA target for Bouygues Telecom. But I was wondering if you had any other internal targets that look at return on investment, or more generally, what's your view on what should be the right level of return in your Telecom business? The second question on construction in France. I was wondering if you could share your expectation of the impact of the electoral cycle in France. Thank you.

Philippe Marien: Well, regarding the impact of the presidential election, we don't think that we will see a big impact, and it's a general comment.

In fact, local election have obviously a big impact in term of construction and mainly for road construction. Presidential election has usually no big impact. So, we don't anticipate any big changes because of the presidential election. But it was important. Well, the two new elements in terms of Pinel Law and the zero-interest loan program, that's done, and we anticipate no change up to the presidential election, which will be very important for us.

Except that, we don't see and we don't anticipate any positive or negative impact regarding presidential election. On your first question, for us, the target is very clear, it's to come back to positive and decent free cash flow generation coming from Bouygues Telecom. That's our first medium-term objective. So, we will be happy, if, in a couple of years, we will be able to come back to €300 million, €400 million free cash flow generation coming from Bouygues Telecom, and it will be good for Bouygues Telecom, and obviously for Bouygues in general. That's our only target today regarding Telecom.

Nicolas Colisson: Okay. That's very clear. If I may, just a quick follow-up, can you share with us the churn in fixed line? How is that evolved over the last quarters?

Eric Haentjens: The churn in the fixed broadband has improved as a result of our efforts to have more efficient processes. And so, that's a good point. But, well, churn remains at high level given the very high level of commercial activity from competitors.

So, the churn for commercial reasons remains at a high level. But I think it's consistent with the market which is very distracted with constant promotions. The 12-month rebate is becoming a standard on the market.

Nicolas Colisson: Okay. Great.

Thank you.

Operator: The next question is coming from Dimitri Kallianiotis, Redburn. Please go ahead.

Dimitri Kallianiotis: Good morning. My first question is regarding Colas.

I mean, we see some, as you mentioned, signs of stabilization in construction and property. I just wanted to get your view on Colas specifically in France, if you think we should expect also stabilization relatively soon and if you could make any comments in terms of the competitive environment and the impact on margins. My second question is regarding the Telecom business in particular the fiber network. I mean, you were talking about increasing the footprint of your network from 1.6 million homes covered to 2 million. It's obviously an improvement, but it's still a lot lower than some of your competitors.

So, I just wanted to know if you had any plans in terms of not only for this year but for the coming years to really accelerate a lot more significantly your footprint for fiber. Thank you.

Philippe Marien: So, regarding the road environment in France, we have anticipated a slight decrease in 2016, around minus 3%, and we have seen that in the first quarter. So, we remain with the same outlook and same environment. So, slight decrease, so not comparable to the big decrease of 2014-2015.

But we don't anticipate, on the contrary, a big rebound. The result of that is no real change in terms of competitive environment. It is the reason why we will continue to adapt Colas to this new situation since 2013, the merger of the three brands, and some reorganization and adaptation plan in Colas. So, we will continue that in 2016 to be able to meet with this situation. So, no more decrease.

Stabilization probably in 2017, and a very slight decrease in 2016.

Eric Haentjens: Yes, Dimitri, regarding fiber - FTTH, well, our number one priority is first to market the existing 1.6 million premises we have. So it's different processes from cable or DSL. So we have worked a lot on that in 2015. So now, we want to increase our FTTH gross adds.

So, it's what we have done during Q1, but it is clearly the priority, so start by selling the premises we have. The second priority is to roll out the horizontal fiber within the frame of the contract we have with Numericable-SFR. So, it has been difficult to follow the terms of the contract in 2015 because it was not the priority of Numericable-SFR. So, we know we are late on this contract. So, it's being watched by the ADFC.

So, our second priority is to get the full benefit of this agreement, which will give us the possibility to have roughly 3 million premises in the very dense area. And the third priority is to continue to work with Orange in the less dense area. So, we are following the pace at which Orange [indiscernible] various cities. But it is not something that will be available tomorrow morning. And we have time to consider that.

So, our first priority again is to market efficiently the 1.6 million premises we have. And for the rest, also bear in mind that we benefit today from a regulation framework which has been set by the regulation authority. We don't think that this regulation framework is definitive one. So, we think that this regulation framework will evolve during the next coming years, especially given the fact that in certain parts of the French territory, Orange is building a new sort of monopoly.

Dimitri Kallianiotis: Thank you.

Operator: The next question is coming from Giovanni Montalti, UBS. Please go ahead.

Giovanni Montalti: Hello. Good morning. Thank you for taking the question.

Sorry, just on this last point, this is the first time I hear such a comment from any of the French operators. Could you give us some more color on this because from, let's say, our contact with the French regulator, my understanding is that the framework for fiber is a final one in France. And also, if I can follow up on another previous point, you were - sorry, can you hear me?

Philippe Marien: Yes, yes, yes. Please go on.

Giovanni Montalti: You were saying that since you started selling fiber at - sorry, fixed broadband at €20, you kind of stopped pushing aggressively on cable connections.

I understand this is due to the fact that obviously you have a lower margin on the product because of the fee you need to pay Numericable-SFR. So, in this light, should we assume that you will plan to roll out your own FTTH infrastructure even in those areas where you already have an wholesale agreement with Numericable through their cable? Thank you.

Eric Haentjens: Yes, answering your second question, so it's not a question of margin, it's a question of - so, we prefer to have our customer on our own DSL infrastructure. That is the reason why we prefer to be very efficient with €20 reference price. And of course, it lets room to promote another cable offer.

So, clearly, we focus on DSL. It's time we can. Regarding the...

Giovanni Montalti: Sorry to interrupt. On this point then, since you are not pushing on this product, should we assume that going forward, you plan to, let's say, have an FTTH platform in the areas where there is the cable of Numericable? Or do you see the cable of Numericable as a solution for you in the long-term, because I mean, you are not using this wholesale agreement, it looks like you're not pushing on it? So, how should we see this for the long-term? Is this cable agreement something viable for you, or you aim to roll out FTTH even in those areas?

Eric Haentjens: Well, it's difficult to give you a general answer.

It depends on the - so, we have the make the analysis area by area. So, of course, in areas where we have the possibility to sell our own FTTH infrastructure, we will prefer to sell this infrastructure in comparison to cable. But in other areas where cable is the only infrastructure available for us, we could have a different reasoning. But yes, if we have - if and where we have our own FTTH infrastructure, of course, we will start to market this infrastructure. Your second question was about - or your first question was about the regulation framework.

My comment is just a general comment. So, first, regulation is not fixed for the eternity. So, regulation is adapted to the context. And I was just mentioning that the current regulation framework, in my opinion, is not a stabilized one, in the sense that it is visible, but especially in less dense areas or in certain part of the very dense area, Orange is building a form of monopoly. So, I think that, from a regulation standpoint, this situation can stay as it is.

It is just very general reflection.

Giovanni Montalti: Okay. So, if I may have a few follow-up. On the network sharing agreement you were mentioning before, can you tell us what is the, let's say, share of the agreement that is already being implemented? And the one-off cost will be booked all in 2016 or there will be something more left for 2017 as well? And the very final one, if I may, do you see any room for price increases on mobile or at least a lower rate of promotions going forward in the market, obviously, for new clients because I understand you're not particularly keen on price increases for existing ones? Thank you.

Eric Haentjens: Yes.

On the mobile network sharing, so we have started to implement the agreement with Numericable-SFR at an industrial base in 2016. So, we are now in a full production and this will continue mainly in 2016 and 2017, and the remaining rollout will be achieved and completed in 2018. So, the two biggest years of rollout will be the 2016 and 2017. And we can already see the results of this agreement in the figures of population coverage which has already increased since the end of 2015, so, 3 points more in terms of spot coverage between end of March and end of December. So, it will continue.

And we target more than 80%. So, I think it's 82% population coverage, mainly as a result of this network sharing agreement. So, it will be very positive for Bouygues Telecom and also for the Numericable-SFR. Your second question was about pricing in mobile. I'm not sure that I catched what you wanted to...

Giovanni Montalti: No. No. Just if you see any room in the market for some, let's say, reduction in the intensity of promotions and, eventually, also for some small price increases for new clients. Do you think there is any room for these in the coming quarters? Thank you.

Eric Haentjens: To be frank, no, because we think that it is a consequence of four market players.

So there are a lot of promotional activities. I think it is now part of the way the market works. So, we have elected our commercial processes to participate to this commercial challenge. And so, we now think that we are well prepared to answer or to take initiatives in order to get the maximum benefit of this commercial situation, which again concerns not exclusively, but mainly, the similarly Immobilier segments and less the high-end segments. The competition is very conservative in the B&YOU, Sosh, Free and RED, but less our transition plans.

So, it is a fact, it is a situation that we have to face. And we try to adapt ourselves to be the more efficient possible and to generate not only additional volumes, which is already a good result, but also to create value and to maintain a good trend in terms of sales. So, you've seen that we are more than 12% on the first quarter. And we were positive in terms of growth on the mobile segment. It's a very good result, which has been achieved in the current commercial context.

Giovanni Montalti: Thank you very much.

Operator: The next question is coming from Stephen Bechade, Citi. Please go ahead.

Stephen Bechade: Hi. Yes.

I've got two questions. The first is, I think, in the second quarter last year, you saw a big increase in the growth of your fixed revenues from changing the deposit on boxes. Now that you're charging €3 a month rental to boxes, I was wondering what happened to the deposits side, and therefore, fewer fixed revenues for the rest of this year. And then another question, just more on the size of your B&YOU customer base versus Sosh? I think when you first launched initially the two companies tracked each other quite well. Have you seen a material improvement versus Sosh in the recent years since you stopped disclosing the B&YOU subscriber base? Thank you.

Eric Haentjens: On your first question to the change we made in 2015 was related to the activation cost or subscription cost. So, it has nothing to do with the box rental. So, it's two different things. So, we continue to charge €50 as subscription cost or connection cost. And in addition, we charge €3 per month for the rental of the set-top box.

So nothing to do between both elements. On B&YOU and Sosh, B&YOU is in strong positioning, which is not exactly the same as Sosh, because B&YOU differentiates from transition offers mainly in the fact that there is no handset, but B&YOU, as you know, is also commercialized in our shops, for example, which is not the case at Sosh, if I understand well. So, B&YOU is competing with Sosh, Free and RED, but with its own positioning, which mainly no commitment and no handset.

Stephen Bechade: Okay. Thank you.

Operator: The next question is coming from Josep Pujal, Kepler Cheuvreux. Please go ahead.

Josep Pujal: Yes. Good morning, gentlemen. Two questions for me.

The first one is on contracting construction-related activities. The EBITDA, cumulatively, is down €30 million, whereas the EBIT is up €30 million. Could you explain the difference? And what explain that? Is it provisions release? And if yes, what do they relate to? And my second question is on the increase in exceptional charges that you guided from €200 million to €270 million. I guess that Colas is around €50 million. Could you give more details on that? Explain why there is these extra additional costs? Thank you.

Philippe Marien: Yes. So regarding your second question, yes. Clearly, the increase of €70 million is based on TF1 on one part and Colas on the other part. So, you are perfectly right. The reason of the increase is Colas is due to adaption and we anticipate more costs to be incurred in term of adaption plan, part in the Dunkirk refinery and part for the other activities to meet with the environment.

Regarding EBITDA, EBIT in construction, you know that it's always very difficult to have a detailed explanation between EBITDA and EBIT because, as you mentioned, the difference is provision and the valuation of provision. And the valuation of provision is made of thousands of various variation, project-by-project. And when I say thousands, it's probably tens of thousands. So, there is no material explanation or one or two or three big explanations. So, it's the result of variation between - in provision but for the series of projects, nothing material and specific this quarter or during the previous periods.

Josep Pujal: Okay. Because the €60 million swing compared to €140 million negative EBIT, let's say, it's a lot for this quarter. Yeah, I agree that the mechanics [indiscernible].

Philippe Marien: Yeah. As you know perfectly that, on a quarterly basis, there is absolutely no rational.

The rational is - at least on a yearly one. So, again, there is nothing very specific. We have some good news on projects, some bad news on other projects. And the balance is the result you see and you're perfectly right in your final comment. But it's the result of many, many different movement, nothing specific or material on one or two points.

Josep Pujal: Okay. Understood. Thank you very much.

Philippe Marien: No, thanks.

Operator: The next question is coming from Agathe Martin, Exane.

Please go ahead.

Agathe Martin: Yes. Good morning, everyone. Two questions on my side on Telecom. The first one is on content.

Some of your competitors are obviously investing more and more in content and I was wondering if that was something that you could consider as well as a customer retention or even acquisition too? And the second one is on investments in fiber. Tell me if I'm wrong, but the reason for not accelerating fiber investments, in particular in less dense areas, is a lack of financial capabilities. So, I was wondering if you could consider listing of the Telecom business to allow cash rising basically and further expand the business that way.

Philippe Marien: So, for the time being, the lifting of Bouygues Telecom is not at the agenda. Again, we have only one target, which is to be successful in the stand-alone plan and to reach the guidance I have given in terms of free cash flow generation.

So no plan in term of IPO for Bouygues Telecom. Regarding your first question, definitely, we consider that convergence between operator and content is important and it's a move. But we think that for 20 years now, because since before 20 years, we have involved either in TF1s or content, and operator Bouygues Telecom. So, it's nothing new for us. But with the big difference, we don't consider that we have to merge the two organization or the two companies to be successful.

We have exactly the same approach for construction. We are on one side on construction, and on the other side, on property development. So, it's very important for the group to have the two activities, but there is no reason to merge property development and construction. We have exactly the same analysis for media and telecom. So, we consider that it's important and very useful to be involved in the two activities.

It is the reason why, again, we have in the group TF1 on one side and Bouygues Telecom on the other hand. We consider that content is very important. It is the reason why TF1 has invested into Newen Studios, for instance. We consider that we have to organize synergies between the two organizations. But the idea to merge the two activity is not again our view.

And for an operator, we consider that the strength of an operator is to be able to offer all possible contents, all possible contents. The idea to have exclusivity, we don't think that it's a proper way. The proper way is to open as much as possible all the possibilities for the customer. But you are right, it's important to have the two activities.

Agathe Martin: Okay.

Thank you very much. So, that means that you could - apart from TF1, you could further invest in other content [indiscernible] in the market in order to aggregate as much possible content in your offers there?

Philippe Marien: Again, we have, on one hand, the content owned by TF1 able to offer content for Bouygues Telecom. Bouygues Telecom can use TF1, but can use Spotify, Netflix, all type of producers. And the idea is obviously to increase all the services offered by Bouygues Telecom, but the idea to be exclusive is not in our plan.

Agathe Martin: Okay.

That's very clear. Thank you very much.

Operator: There are no further questions, sir.

Philippe Marien: Okay. So, thank you very much for joining us today.

We will be announcing first half 2016 sales and earnings on end of August, on August 31. Should you have any question, please contact our Investor Relation team, and you have all their contact information. So, thank you very much. Have a good day. Bye.

Operator: Ladies and gentlemen, this concludes the conference call. Thank you, all, for your participation. You may now disconnect.