Executives: Ramon Fernandez - Deputy CEO and Chief Financial and Strategy Officer Fabienne Dulac - Senior Executive VP, Orange France
- : Thierry Bonhomme - Deputy CEO, Orange Business Services Laurent Paillassot - CEO Spain Pierre Louette - Interim CEO, Orange Wholesale France and

Purchases
Analysts: Jakob Bluestone - Credit Suisse Stephane Beyazian - Raymond James Eric Beaudet - Natixis Giovanni Montalti - UBS Dimitri Kallianiotis - Redburn Andrew Lee - Goldman Sachs Jerry Dellis - Jeffries Simon Weeden -

Citi
Operator: Good morning, ladies and gentlemen, and welcome to the Orange’s First Quarter 2017 Results Conference call. The call will be hosted by Mr. Ramon Fernandez, Deputy CEO and Chief Financial and Strategy, with members of Orange executive committee for the Q&A session that will start after the presentation. Thank you. And let me hand over to Mr.

Ramon Fernandez. Please go ahead, sir.

Ramon Fernandez: Good morning. Welcome to the presentation of our Q1 results. I would like first to highlight four quick points in order to better understand our performance.

First, starting from this quarter, we are adjusting the reporting for all fixed and mobile B2B customers in France. Revenues and OpEx for companies employing more than 50 employees are from now on reported in the Enterprise segment. Second, as indicated during our full year results conference call, 2016 comparable basis mostly impacted by the Egyptian devaluation which happened in Q4 2016. Third, with the integration of Orange Bank, all Group level mentions willing toward both telecom and banking activities unless otherwise specified. And fourth, as promised, we will from now on produce new figures and KPIs which will help you to better quantify why convergence is so important and we will also present all the ARPU on a quarterly basis to give you a more dynamic vision of our quarterly performance.

So let’s start our financial review with Slide 4, which presents the main results. You can see here that the first quarter confirmed the improving trends of 2016. Group revenues grew by EUR 85 million driven mainly by in Spain and thanks to a better performance in France and Poland with positive revenue trend contributed to an EBITDA growth of EUR 50 million, up 2% year-on-year. Excluding Orange Bank, the EBITDA of our telecom activities grew by 2.2%. CapEx was up 2.1%, sustaining our ongoing investments in very high broadband networks.

And concerning our commercial performance, we now serve a total of 265 million customers with a positive upturn of mobile net adds in the African and Middle East region. So the next Slide is devoted convergence. As I just said, we will from now on communicate a number of indicators on convergence because in the European markets which is fast transitioning to convergence with demanding high quality networks both in mobile and fixed together with the convenience of a single bill and a single point of service, our long standing strategy based on household centric convergence, network superiority and customer experience, this is proving increasingly relevant. And I think we are starting to see this. It’s going to set us apart from competitors.

It’s going to become more and more important, more and more visible in the future and it will also probably contribute to structure all markets. You can see here that convergence is a strong acquisition tool for both initial and follow-on services. We see a growing number of mobile lines per convergent contract standing above 1.4 - 1.5 line in all our major countries today. We also convenience that there is an upsetting opportunity in line of business other than connectivity such as content, IoT, financial services and other future adjacent services. So convergence is good for the top line.

Convergence is also above for retention tool resulting in a much lower churn for both fixed and mobile components. We have an economic benefit to Orange much worth the discount we have to provide compared to separate fixed and mobile contracts. For incidence, when we compare convergent fixed broadband contracts to all fixed broadband contracts, we see a churn improvement of more than two points in France, seven points in Spain and almost 4 points in Poland. Also combining the growth in B2C convergent offers a subscribed with the corresponding average revenue per convergent offer ARPCO. So we will be giving figures about ARPCO from now on.

While we get a much better trend in total build convergent revenues than the B2C business as a whole. For example in Q1, convergent build revenues grew 10% in France, 12% in Spain, 23% in Poland. And finally, we rolled out our new convergent family of offers called LOVE in Spain, Belgium and Poland and we now provide convergent services across our full European footprint. We have a total base of 9.5 million B2C convergent contracts growing at 10.5% year-on-year. Let’s now turn to the financial results in Slide 6.

In Q1, Group revenue grew for the seventh quarter in the row with plus 0.8%, plus EUR 85 million improving on Q1 2016, where growth stood at plus 0.6. This performance was mostly driven by Spain with growth accelerating to 8.5% year-on-year, this is plus EUR 101 million and African, Middle East area reported a moderate growth of 0.7%. This would have been 1.5% when corrected for the February 2016 year impact. This is a prepaid market so when you have one day less, it counts. And this would have been on par with the Q4 2016 performance that’s 1.6%.

Also growth has been accelerating at the end of the quarter in Africa Middle East. In France, despite intense promotional activities by competitors, we almost reached revenue stabilization while still impacted by the decrease in national and European rooming. And the underlying trend in mobile services broadly remains unchanged. I will come back to this later. Poland posted a second consecutive quarter of growth supported by the growing total of mobile and equipments revenue.

Turning to EBITDA for telecom activities, Q1 was up by 2.2% confirming the positive trend of the previous quarters, also helped by a favorable comparable base effect in Q1 2016. Excluding all one-offs, EBITDA would have been flat year-on-year, which is fully in line with our 2017 guidance of an EBITDA higher than in 2016 on a comparable basis. Once again, this quarter we limited the impact of top line up turn on the content and commercial costs, thanks to our efficiency program expo 2020 and to labor cost reduction with full time equivalent employees decreasing by 2.7%. We therefore maintained what we believe is right balance between growth and profitability. Let's now have a look at our investments.

We continued our investment efforts to keep our competitive advantage in connectivity amounting to EUR 1.5 billion this quarter with a ratio to sales of 14.7% keeping our focus on networks especially 4G and a very high fixed broadband. As a result of this sustained effort, we reached 10 million fiber connectable homes in Spain, up 35% with a target of a further 4 million homes by 2018. We reached 4.7 million connectable homes in France, up 35% year-on-year and we accelerated our fiber deployments in Poland, we have 1.7 million connectable homes representing a doubling over one year. In Romania, the agreement with Deutsche Telekom Georgia to access their fiber footprint allowed us to multiply by seven in one year our homes connectable in Central Europe. The Group also strengthened its leadership position in mobile particularly in the 4G coverage.

In Poland, we now cover 99% of population up by 10 points year-on-year, while in France we cover 89% of the population this is plus eight points year-on-year. Let's now turn to our business review starting with France, Slide 10. Despite a tough market and some expected adverse effects, Q1 2017 showed good financial figures with total revenues close to stabilization at minus EUR 4 million or minus 0.1%, thanks to a strong performance of broadband and wholesale activities. Mobile service revenues continued to be under pressure due to the national roaming agreement revenue decrease, but to a lesser extent than in 2016 hence still the increase of European roaming. However the underlying mobile service revenue was in line with 2016 at minus 1%.

We were able to preserve value consistent with our strategy focusing on maintaining a price premium against our competitors and limiting promotions to a soft brand. In the meantime, we are continuing to focus on convergence and fiber, which are our key assets, in Q1 convergent revenues, which account for 23% of total revenues grew by 10% year-on-year and broadband revenues continued to grow at 5.5%, thanks to both good commercial performance and the continuous after increase. The broadband quarterly ARPU increased by 1.6% supported by the May 2016 price increases and also a good customer mix. Going forward we expect broadband revenues to continue to grow adverse space. Fixed wholesale revenues have also been exceptionally high at more than 5% - 5.1% as we benefited from a favorable momentum and almost all lines of business and especially on the FTTH go financing revenues, bitstream access and the ULL with an increase by 35 cents of the ULL tariff in 2017.

In terms of commercial performance, Slide 11, and keeping in mind that we have transferred the business customers for companies of more than 50 employees to the Enterprise segment. In Q1, we have strong net adds continued to be driven by a very high broadband and convergence at the end of the quarter we had 5.6 million B2C convergent customers representing 57% of the broadband customer base. Convergence once again is a strong retention and acquisition tool supporting our performance both in fixed and mobile 76% of new convergent customers when new fixed and or mobile customers and I'm not going to repeat what I think saying on churn, but you have seen the figures. In mobile we recorded another strong commercial performance this quarter. We have 73,000 net adds and a decrease of a quarterly churn rate despite a competitive environment, especially on the low end of the market.

On fixed broadband we had 73,000 net adds we once again a record first quarter with 127,000 FTTH net adds of which 51% are new Orange customers. The FTTH adoption rate was at 21.5% up two points year-on-year with fiber representing now 14.4% of our broadband customer base. So all in performance in France was good in Q1, this is clearly the result of our strategy which is focused on the quality of our network, and convergence. In mobile we continue to lead the market with 89% of 4G population coverage. And in fiber, we now have 7.4 collectible homes in line with our targets to be at 12 million by 2018.

Let's now turn to Spain, where a group was once again very strong this quarter. In Spain, Slide 12, despite heavy discounting from competitors since last December, overall revenue grew by 8.5% suppressing the 7.9% group achieved in Q4 2016 and more broadly over the full year 2016 where Orange widely over performed its two closest competitors. This comes as a result of our values strategy with less recourse to promotions and competitors. And our Orange brand strategy with Jazztel brand achieving leadership in mobile portability before Masmovil in Q1. Mobile revenue accelerated to more than 8% driven by a 5.4% growth in the contract base, and 4.6% growth in mobile quarterly ARPU supported by recent service upgrades, the latest on the Jazztel brand last October and February on the Orange brand, but we also revised our mobile only tariffs beginning of April and announced a new service upgrade for the Jazztel brand starting in May 1st.

Fixed broadband revenue increased by 8.5% despite aggressive complaints by competitors partially managed by Orange, is group performance was driven by plus 5.4% year-on-year on growth in subscribers and also a 3% growth in the broadband quarterly ARPU fueled by fiber and TV penetration. Convergent revenues, our new metric grew by 12.1% to 503 million driven by a 6.5% growth in the member of convergent offers subscribed, and 5.2% growth in convergent ARPCO 250 per month. Commercial performance in Spain, Slide 13, in mobile was great. Our 4G user base increased by 42% reaching 8.2 million customers and we clearly led via 4G Spanish market in the 2016. Fixed broadband commercial performance was also very good as we leveraged our extensive 10 million fiber connectable homes footprint and grew our fiber base to a total of 1.8 million.

This is close to 8% increase over 12 months, now representing 43% of our fixed broadband base. And here also Orange led the market in fiber net adds over the course of 2016. TV subscribers multiplied by 1.5 over 12 months to 537,000 supported by our strong FTTH performance. With regards to convergence, Orange continued to be the most dynamic operator in Spain, having the highest penetration of B2C convergence in its fixed broadband base, this figure is now 82%. In Poland, Q1 revenue growth was positively impacted by equipment sales and higher revenues in ICT.

We successfully launched the Orange LOVE convergent offer. Our B2C convergent base reached 748,000 and we are pursuing our investments in order to maintain our leadership in mobile, but also and this is our key to improve our quality in the fixed network. Our strategy to invest in fiber and in wireless for fixed is bearing fruits. As over the past 12 months, we managed to transform our fixed base towards a better quality with the increase of the share of a very high broadband and wireless for fixed from 30% to 35%. In Q1, in Portland, we had 117,000 fiber customers out of a total footprint of 1.7 million homes test and we also had 260,000 fixed LTE customers.

As said in the previous quarter, Orange Poland turnaround strategy is not only based on investments, but also on efficiency and the company Orange Polska will disclose an update of its strategic plan along with Q2 results this year. In Belgium and Luxembourg, we launched successfully our convergent offer with, in Belgium 50,000 customers. Total service fixed and mobile revenue grew by 0.6% in Q1 with mobile service revenues going down by 0.4% and fixed service revenues progressing well with the performance of over 14% year-on-year. Orange Belgium remains focused on venue of its strategy to monetize mobile data and as a result, postpaid ARPU has increased to 28.9 from 28.6 a year ago despite the year adverse EU roaming impact. Turning to be Central European country sub segments, well this is still growing with a good commercial momentum with postpaid customer base growing in Romania by 2.2%, also in Moldova plus 13% and.

Thanks to 4G with 3.5 million customers in Vieira. This is an increase of 350,000, 11% over Q1 2016. And we are also following our convergent strategy in all three countries. In Romania, we launched a national convergent offer, while in Moldova, the acquisition of Sun Communications boosted all very high broadband base. This is now 231,000 customers in all Central European region including fixed LTE.

Also as part of our essential 2020 strategy to grow new revenues streams, we successfully launched Orange Money in Romania in November reaching now 41,000 customers. Let's now turn to Slide 17 to Africa & Middle East. Revenue grew by 0.7% in Q1. This is still impacted by the deteriorated environment in Egypt and DLC, also the impact of customer identification in 2016. And if we neutralized the impact of via basic style or calendar effect we’ve one day less in Q1 2017 when in the previous year.

Revenue would have grown by 1.5% in line with the previous quarter and improving in the last month of the quarter. Data based services and new business lines such as Orange Money and B2B are consistently contributing to a group of our revenues in west regions, compensating for the decline of voice. Mobile data revenue grew by 31% in Q1, thanks to the fast growth of smartphone penetration and supported by our strategy to build mobile very high broadband networks in the region. We've now 4G available in 11 countries. The reliability and strength of our 3G and 4G networks is also a strong competitive tool to capture new revenues in the B2B segments, in Q1 B2B revenues grew by 11 percent confirming the 8% growth achieved in 2016.

And finally Orange Money that is today our main diversification tool showed revenue growth acceleration at 64% on euro compared to 53% for the year 2016. Turning to enterprise, Side 18, so once again this new parameter now includes all mobile customers and revenues of complete employing more than 50 employees. Why are we doing this, well in order to have a better alignment between management focus and reporting with consolidated P&L view per segment and this will also help to fully mobilize on the development on mobile, which is a key driver of the year digital transformation of our B2B customers generating a productivity gains for improved sales force and the field operations performance. Despite a good commercial momentum in Q1, voice and data revenues were impacted by some base effect and VM Bank already explained in Q4 2016 of the loss of a couple of international contracts. In the past mobile remained on the side pressure due to the decrease of European roaming, but mobile customer base grew by 14,000 in Q1.

Group continued to be fueled by IT an integration services wave security and cloud growing by 15% and 19%. All in all Q1 was a bit below our trend and we expect H2 2017 to be better than H1. This concludes our operational review, just a few words on our 2017 guidance, which is fully confirmed. Starting with our full year guidance of a group adjusted EBTIDA above 2016 on a comparable basis. We will also maintain our net debt to adjusted telecom EBTIDA ratio around two in the medium term.

Regarding the dividend for fiscal year 2017 as you know we will propose in 2018 as some regional dividend payment of EUR 0.65 and we planned to pay a EUR 0.25 interim dividend in December this year. We will pay the 2016 dividend balance of EUR 0.40 on June 14. Regarding our portfolio management policy, we’ll maintain our selective approach focused on our existing footprint and on value creation for Orange and its shareholders. And finally, as announced last week during the Hello Show, we are about to launch our Orange Bank offer in France on the 6th of July. Thank you for your attention.

And I am now available with all my colleagues to answer your questions.

Operator: [Operator Instructions] Our first question comes from the line of Credit Suisse, Jakob Bluestone. Your line is open, please go ahead.

Jakob Bluestone: Hi. Good morning.

Two questions, please. Firstly, could you maybe just give us a little bit of an update on how you see the French mobile competitive environment involving? And them secondly, could you maybe also give us an update on the content side, it’s obviously been some press coverage about the distribution agreement with Canal+, I don’t know to what extent you can comment, what you think that might bring to you. Thank you.

Fabienne Dulac: Hello. Good morning.

It’s Fabienne Dulac speaking. So the French mobile and market is very competitive as you can see it’s a very turbulent market. Maybe one figure to share with you in this first quarter, we have had to face 76 days of promotion on 90. So you can see the turbulent market. We expect a competitive markets always especially on the low end part with more and more discount price as we can see at the beginning of the year.

You see another point very important it’s the recent competitors move with a limited data. So the competition is increasing them especially under low end market. But we are confident that the mobile market in this - that we are confident that around in this movement can be sustainable with such as we proved with the net adds we recorded this first quarter and with Orange, because the quantity stay a very important choice, decision in the tradeoff made by the customers.

Ramon Fernandez: Thank you, Fabienne. So I would to support what Fabienne says which is, when you look at the performance on Q1 in terms of net adds and the quality of our performance.

In a market, where convergence once again is going to be more and more key, this is quite outstanding. And I think the best demonstration events of a quality of a network, the quality of a service is absolutely key, we can be a successful in this environment. In terms of content policy, I think we are sticking to our general strategy which is to offer to all clients, the content we want to have in terms of distribution, in terms of aggregation, we have a number of offers in France, we are distributing widely throughout 6.6 million TV clients. We have agreements with Canal+, with VN, with Netflix, we have a OCS as you well know with 2.5 million clients and some very attractive deals within OCS especially HBO, you have seen a few weeks ago that we have a new agreement with HBO which is very exciting for our customers, we are leaders in VoD et cetera. So in different countries situations are different.

In Spain for instance, we are neutralizing our investments in content on sports rights with Telefonica. In Belgium, we are launching TV offer through a regulation and cable access in Africa, we have another set of initiatives. And in terms of the relation with Canal+, Canal is clearly one of the very key partners we have when we develop these policies. Canal is a shareholder with us in OCS. We are partnering in a number of countries of course in France with the offer a family by Canal that was launched also in last autumn.

But not only in France, in Poland, we are also distributing Canal, we are partnering in Africa for instance. And in the content of this relationship, we are regularly discussing with Canal to see what else can be done in order to reinforce the impact of our policies. And this is going to be continued in order to secure for our customers as a capacity to access to what they want to have. I think at this stage, this is what we can say, but obviously we are very much focused on all these issues and you also know that we spend significant resources on content. It’s over EUR 600 million a year and this is the policy we will continue to roll out without being convinced when vertical integration is of a solution.

There is a much more efficient way we believe in order to a secure access to content for our customers.

Jakob Bluestone: Great, thank you very much.

Operator: We’ll take our next question from the line of Raymond James from Stephane Beyazian. Your line is open, please go ahead.

Stephane Beyazian: Yes.

Thank you. Two questions, if I may. The first one is on the Orange Bank, I think the selling point of the product where quite clear in the presentation. There wasn’t too sure on this sort of monetization and possible net banking compared per user. Are you able to give us some indications on the sort of fees that you are planning or any sort of indication on ARPU, also just consider for now that this would be a subsidized product I think in the range of 100 million EBITDA impact in 2017 and potentially some on same levels are beyond 2017? My second question I know it’s not such an important as of margin business, but there was some deterioration in international carrier services which is something we also absorbed at KPN yesterday.

I was wondering whether you can make, it’s a very volatile business but is there any something more structural happening in the market and whether you can comment on that? And my third question sorry, it’s just a follow-up on the content discussion. So am I right to understand that making OCS for which you just renewed to HBO deal so clarity, you’re strengthening the OCS proposition. So making OCS an exclusive product to Orange and Canal+ customers is still not an option today even if SFI is launching its bundles? Thank you.

Ramon Fernandez: Okay. So maybe just starting with the last question on the OCS, OCS is not exclusive to Orange I mean we’re not going to change this.

But obviously OCS is very much close to Orange and old customers of OCS I think have a clear understanding. So we will continue to use OCS as a very powerful tool for Orange but it’s not exclusive to Orange. And I think more generally, this idea of exclusivity is not really driving, we believe the content business, I don't think it either for competition rules or economic reasons for best way to follow. On the EC maybe, Marie-Noelle Jego-Laveissiere will answer to your question is it a structural or more conjectural and maybe Marc Rennard will say a few words on that, maybe I can and start with Orange Money just to say that now it's as you say the picture is getting clearer and clearer, we have this figure of EUR 100 million of net negative contribution in terms of EBITDA in 2017, this also obviously depends on the acquisition vision costs would be growing with the launch of the operations in July. And for some time this would be you know the kind of - its some unique CapEx process, then following a number of years, five, six years we are reaching the equilibrium and we start to be on the positive trend.

So in terms of KPIs more specific, we will be I think when we have launched the operation it would be time to go into more details, but it's not meant to be subsidized telecom operation for your it's initially kind of startup model, you invest in building the base and then it would be contributing, so it would have both benefit in terms of the standalone basis, as a bank. And second of course, in terms of the benefits to telecom operations in terms of acquisition and retention, so we will play on both sides with this bank projects. Marie-Noelle?
Marie-Noelle Jego-Laveissiere: As far as international carriers concern, I guess we have two different trends; the first one is on voice. And the revenue of internal external voice is decreasing. However, the impact is completely different in the need EBITDA we have a strong impact on the revenue, but nearly no impact in the EBITD.

And on the other side the data business is growing those in volume in the volume of data which is turning around is growing. And also with services, we are pushing services for security, for food, for interconnection and so on, which are high value services, so we are trying to manage the decrease of the voice maintaining the EBITDA while decreasing the revenue and pushing strongly the data pack that we growing the way in the future, so this is two different trends.

Stephane Beyazian: Thank you. Just a follow-up if I can, are you able to disclose the number of ACS, OCS sorry customers and recent trends? Thank you. Marie-Noelle Jego-Laveissiere: EUR 2.5 million essentially through the operators and also to the OTT standalone distribution.

Stephane Beyazian: Thank you.

Ramon Fernandez: Thank you.

Operator: We’ll take our next question comes from the line of Natixis, Eric Beaudet. Your line is open. Please go ahead.

Eric Beaudet: Yes, hello. Two quick question if I may, it’s Eric Beaudet from Natixis. The first one concerns the Enterprise division you mentioned you expect an improvement in the second half of the year. I was wondering where that would come from as the European roaming impact will should actually impact your revenues in the second half, so I was expecting a worse second half than a first half, so where do you see that improvement coming from? And my second question is on Africa Middle East, you've had now for a couple of quarters top line, organic top line growth of daily 1% or 2% below your long term 4%, 5% growth targeted. What would be the trigger for that African growth to pick up? Thank you.

Thierry Bonhomme: Okay so that’s Thierry Bonhomme speaking from our Orange Business Services, I will answer the first question on the where do we stand when it comes to our B2B revenues. The first point is that our Q1 results are not a surprise. We anticipated those results according to what happened to our some and that would all idea launched in few months ago. Two big contracts at international level, we were not renewed one year ago. Why we are committee for the future, because we have a very strong, very strong commercial pipe, both in France and at international level.

And the second point its own ID working very well, we were eroded I will not mention the big contacts both in France to big contacts for next five years, when hearing the other news the T-series are total value of those contacts, it’s very close to one billion, so it's a huge number and as well at international level. So the business is there, our go to market teams are successful and we are second point still very confident when it comes to the growth that's the key for our IT and integration services that's very well embedded by security services and cloud services as well.

Ramon Fernandez: On Africa and Middle East, you're right to say that the group has been lower than initially expected, in 2016 we had a 2.6% growth this quarter it's a 0.7%, but once again it's a prepaid market, so when you have one day left on a comparable basis, because of the bissextile here in 2016 that it has an impact, so if you take comparable figure would be roughly in Q1 at the same level of Q4 which was 1.5%. Within the quarter the process has been improving, you have to be aware the identification process or prepared customers, which has been hitting the markets in 2016 was in the second half of the year, so when we are in the early quarters of 2017. We are comparing ourselves with a base, which was much higher in 2016.

We are now back on the net adds positive dynamic, which is online with the usual acquisition, we used to see in this region. And we will have behind us the hit we took with the devaluation of the Egyptian pound in late 2016, so there are number of elements which of course would be behind us in the future, I think the key in this region is to manage this shift from you know essentially a market where we were monetizing voice to markets where data is going to be more and more important, and we’re also seeing this in line with higher penetration of smart phones. If you took - if you take the GSME, the GSME figures you can see that the penetration of smart phones in Africa is growing from 25% in 2014 to 40% in 2016 so this is a shift which is happening now at quite a rapid space. And we are going to build on this to grow our revenues in the future prove once again mobile data revenue we are growing by more than 30%. We are growing the B2B business which was not a traditional business for us in Africa, but we are now putting a focus on this, there is a lot of demand, and we’re able to provide new services in line with our 3G and 4G network that we are building and operating now.

And finally, Orange Money which is a fast growing activity we have now EUR 150 million revenues. This is growing by more than 50% year-on-year. So all these engines will grow for full speed working, of course we are starting from a base which is smaller than we traditional voice business. But this is going to be the key to go back to a higher growth figures and clearly the 2017 performance is going to be much higher than what you are seeing in the first quarter.

Eric Beaudet: Thank you.

Operator: Our next question comes from the line of UBS, Giovanni Montalti. Your line is open. Please go ahead.

Giovanni Montalti: Hello. Good morning.

Thank you for taking the question. One on Spain, Vodafone has recently reaches an agreement with Telefonica. And therefore sale access to do Telefonica fiber network and seems to have given up on the further extension of the all proprietary network. So I wanted to understand if it is any ground for you to consider the option to join agreement with that? And if this means that for sure you will not do any more joint with Vodafone? And also if you can add any color on the dynamics of the roaming revenues from ELET [ph]? Thank you. Marie-Noelle Jego-Laveissiere: So, Laveissiere, just on Spain.

So the agreement between Telefonica and Vodafone, by the way is open to other parties as us being an agreement signed by the incumbent. But on our side, we have already built what we wanted to build in terms of fiber on the areas which are concern in the test for the phone agreement today. And on the other hand, I just mentioned that you have also co-investment agreement with Masmovil which help us also to cover. So second point is that when we look at the economics of the fiber in Spain, we are using some let’s say wholesale agreement of that type, but for small part because it’s much more attractive in terms of return on investment to build its own fiber of to share it on the real co-investment plan then to rent it from sub parties. This is why we might use of this but just to keep customers in higher which are not today priority for us in terms of investment.

Second point, I think it shows also in our views the difficulties of Vodafone to invest into his network for two reasons. One, relatively high cost of modernizing the cable infrastructure and the fact that it cannot dedicate that much resource to new investment in new areas, that’s also for us a signal that easy for that. So this is why we look at the agreement. I would say, positively to a certain extent because it shows different strength of the different players on the market.

Giovanni Montalti: That your let’s say total target of coverage at the additional 4 million outsource premises if I remember correctly is I mean we should assume that these are going to be maintained regardless of the fact you will not be sharing these with Vodafone anymore? Is that correct way of looking at it?

Ramon Fernandez: I will hand over to Laurent Paillassot, CEO of Spain who is with us to give you the details but you maintain our objective.

Hello?

Laurent Paillassot: Yes. Hi to all of you. Yes, obviously as the Ramon said initially more than that we are accelerating our deployment of fiber. So the initial objectives that we have for the EUR 14 million was 220. 220 we will be reaching it by end of 2018.

So basically yes, we do think that accelerating the deployment of fiber is going to be key, are the economics are very strong on fiber and the big swing agreements that Telefonica and Vodafone have that we already have access to that and we don’t use it because it doesn’t fly. So yes we are committed to growing EBITDA, FTTH is actually the strong element of that.

Giovanni Montalti: Thank you so much.

Ramon Fernandez: Okay. So on your question on the Elliot [ph] roaming revenue, you know that in 2016, we had a significant impact of around EUR 170 million for the year.

We expect this in fact to be significantly less important in 2017 due to the accounting modalities of contracts we signed in December 2016. And the impact on the quarterly basis would be less and less important over the quarters of 2017.

Giovanni Montalti: Sorry. Does this mean that the lowering part in terms of revenue decline is to be let’s say explained mainly by the dynamics implied by the renewal of the contract and the accounting implications of these rather than the evaluation of the volume of traffic that you’re actually managing on your network.

Ramon Fernandez: It’s a mix of all these elements.

Giovanni Montalti: Thank you.

Operator: Our next question comes from line of Redburn, Dimitri Kallianiotis. Your line is open, please go ahead.

Dimitri Kallianiotis: Good morning. It’s Dimitri from Redburn.

Thank you taking the questions. I have two questions. The first one is regarding France and I just want to ask you what in terms of your strategy at the moment most of your net adds come on the SOSH brand and I wanted to ask you if you thought that you needed to sort of reprice or change a bit your first on your main Orange brand to make it more attractive or if you are just happy to basically acquire most of your customers on the SOSH brand even if they come with a lower ARPU? And my second question is on Spain, I just wanted to come back on the point mentioned by Ramon during the presentation on the service upgrade on the Jazztel brand. I wanted to understand to me and I’ve been looking details but it looks like a price cut. So I just wondering why are you cutting prices bear in mind your performance is very strong in Spain, so is it because you see more competition coming? Thank you.

Fabienne Dulac: For the first question on France, so we recall, I would like to remind first that we recall the strong commission performance in the tough market I’ve described just before. So Thanks to the attractiveness of our office and I will come on this point after. And the capability we have to address all part of market, the low end market and the high end market. The mix we have today is still well oriented between high end offers, thanks to open as Ramon said this before and thanks to the convergence. And in the same times, we succeeded in the low end resource.

This first quarter as I said was a very competitive, so SOSH has been the good tool for acquisition we need. I would like just to say in the same time the very good resistance of Orange office because that we maintain the dynamic on the high end market and it was not so heavy in this first quarter. We are able to maintain and to have a good balance between high end and low end markets. In front of the move of this first quarter we just talk about it just before, the move who offered unlimited data for convergent customer. I would like to specify two points.

The reality of the data consumption is not clear today because if you know the consumption is around 2.4 gigabyte and the offer is really restricted today offered by competitors. So it’s why we decided to have - and to launch a good response, in the same time to maintain the attractively - attractiveness of our offers and to maintain the price premium. And we are really confident in this way because there is one point I think it’s in this market where you can see the value is - there is transferred of value between mobile to facts activity drive and by convergence, that convergent will be the winner at the end and if the strategy we have with Orange and it’s why we pursue to work low end and high end market because it was the key at the end of the story.

Ramon Fernandez: Laurent, on the Spanish question.

Laurent Paillassot: Yeah, I think I understand the question correctly was about Jazztel doing promotions, just little information when you see Jazztel communicating on 50% it excluding commission connection fees, which basically mean it’s only 28% when you include the connection fee.

So when is this temporary what we're doing right now, as Ramon mentioned we are doing a service upgrade, so everyone is a little bit attacking customer base, so it's really temporary that we expect to keep you the size very, very soon. And if you look really what happened in Q1 everyone Mobistar and Vodafone was in the range of 50% six months promotions where you know Jazztel we were in the 20% three months. So basically not only we've been growing Q1 with less promotions and competition, and not only that we have been accelerating our growth, so maybe it looks the same trend. So no I mean we are doing service upgrades and we are remaining focus on value and creating growth.

Dimitri Kallianiotis: Thank you.

Operator: Our next question comes from the line of Goldman Sachs, Andrew Lee. Your line is open. Please go ahead.

Andrew Lee: Good morning everyone, I’m Andrew Lee from Goldman Sachs. I'm going to go for the three questions, if that's okay.

Firstly just on the French growth outlook this year, so wholesale fixed rate is unlikely to be sustainable at least around 12 months, can improvements in consumer fixed and mobile offset headwinds from those wholesale fixed growth revenues abating, how realistic is it France growth this year? Secondly Enterprise down 2% and you're saying it’s going to improve into the second half of the year, but across Europe structural challenges to B2B is being highlighted from your incumbent peers, what do you see as the structural growth outlook for Enterprise going forward? And thirdly investments clearly paying off, but it's also raising, could you talk us through your CapEx outlook for the group the next three years, what that increment and increment investments being spent on and should we still see material drop-off in group CapEx in full year 2019? Thank you. Marie-Noelle Jego-Laveissiere: For the first question, I think your question is about the sustainability of the revenue trend in France and maybe supported by broadband. The revenue trend is driving today in France by two kind of revenue - broadband service revenue and by fixed wholesale revenue. On the broadband service it's constant to growth at 5.5% and I think it's really sustainable. Thanks to the good commercial betterments and thanks to continues ARPU increase.

This broadband revenue is driving by the growth of customer base you can see 3.6% year-on-year growth by - growth of payment price and the recent price increase we made with the launch with the new box and on the fiber, so it's really sustainable, because as I said fiber convergence is the key success for Orange and for the market, so there's no reason to have a return. I hope it's clearly maybe if you want to precise your question.

Andrew Lee: I think it's more a broader, is it realistic that French overall revenues will grow this year, so does that broadband growth offset the other headwind as you see i.e. wholesale fixed growth declining in potential ongoing competition in Mobile?

Ramon Fernandez: This is Ramon, I think we have nothing to change to what we've said when we had the same question in February commenting the full year 2016. What we said at the time that we were - is that we were expecting as we had said in 2015 by the way, going towards stabilization over the year in 2017.

So you have a trend and you can see the elements as Fabienne said, you know we're broadband is really growing very nicely. Wholesale I think Pierre will come back to wholesale part. And on Mobile there is this kind of structural minus 1% on mobile service revenues, which should be quarter-over-quarter in 2017 still the same impact as we had seen in 2016. So we are going in the right direction in this environment which is one we have and with the assets we have I think it's clear that we have a key to sustain this improving performance and the trend is what we just said. Pierre on wholesale?

Pierre Louette: Yes, on the wholesale side and actually we have a very solid and satisfying even surprising performance on the wholesale side, which is great news for all of us.

We are able to compensate the roaming agreement program decrease of revenues by two main factors. The first one is actually the dynamism co-funding that we received from our competitors, we have rolled out most of the existing FFTH plugs and they do know co-finance heavily which was not the case two years ago started being the case last year and is increasing this year. So this is very impressive, it's more than 90% growth with regard to first semester of 2016. Actually our competitors have also benefited from fiscal incentivization which has helped us in this regard. And the second thing is that we benefit from the development of what we have called wholesale new territories, which is a program we launched two years ago, and we have signed major contracts in that scope with the French rail company SNCF, euro star we have opened also some of our optical and not to our competitors in the very dense areas, so we guess on this.

One of those revenues put together with the sound performance of the - actually the legacy cupboard because of the price affect all of those effects put together give us a good increase, and we're pretty confident that we can project our sales with the same trend till the end of this year. Probably with the help of our activities in the very less dense areas what we call the hip areas and the contracts we do with the territorial connectivity this is also growing, so we have put some new engines that work in order to compensate what was programmed which is the decrease of the roaming agreement revenues.

Ramon Fernandez: May be we are going to turn to Thierry on base question, but and once again look at the convergent figures, once again look back to via Slide 5 and to the slide devoted to two fronts. Where you can see this is 25%, close to 25% of total revenues now in France a convergent revenues this is a customer base which is growing by 10%, this is revenues growing by 10%, with churn difference which is key. When we see there is a difference of two points in churn this is the comparison with the total broadband base, if you compare broadband convergent customer to broadband only customer the difference is six points, right.

So all this is going to contribute to re-progressive improvement of revenues in France and I think we are very well on track to go in this stability and when growth in revenues in France, which will be a following this process, so very encouraging sign. Thierry, on OBS and after we will go back to CapEx question.

Thierry Bonhomme: So I will try to answer your question about the structure of our markets, and why we are more confident that other incumbents within yard. First point it's about technology probably more and before than other competitors, we invested within the IP transformation to Orange group level both for our voice services and for our data connectivity of those investing more than others within the high gradation of networks combining in PLAs and internet technology. And that's something we have still being walking on when it comes to the future SGN is one of the key technologies, we have been walking on for more than four years, and I think again the head of competition here.

Seven point customer base, it's true it's for regulation, the regulatory buddies when it comes to the roaming prices evolution in Europe or on the fiber unit prices in Europe, it's true that there is a pressure and competition is still there, but it's too as well that our customer base when it comes to the Enterprise market within our Orange Business Services is no more - it's not only a local or European customer base. We have been working on the MNC market for years, and as I said answer the answering the first question few minutes ago, we have been facing solid strong growth within the MNC market worldwide, outside of Europe, this is a good news, and a difference when comparing to the other European incumbent. And last but not least, it’s our growth strategy. We took the risk few years ago to invest within IT integration services and it's well embedded by Orange cyber defense offers, our Orange Cloud offers, our Orange Application offers where we have solid strong growth and pipeline. So competition is there, pressure is there, that's true, but we have differences.

Ramon Fernandez: In terms of CapEx, as we said in February, we expect this year to be investing around EUR 7.2 billion, which is going to be slightly higher than the 2016 figures both an absolute and in a relative terms to sales. I think it's good to have in mind events these investments are rebuilding you know the networks which are going to be key in the future to grow revenues and to win the competition and we have a very focused process in terms of selecting the best investments, which we provide the highest returns. And I have also to see events, when you look at the increase in these investments it's not only very high broadband networks, first fibers, second 4GE, it's also when we accelerate a little especially in Spain where we see a very direct impact on the revenues and margins and if you look at the Spanish figures, once again I think you don't need much more explanation. In terms of a perspective for the next years, our expectation is that we would reach a peak in 2018 around the same figures as 2017, and then starting in 2019 we should start to go towards and downward trend both in absolute and relative terms. We will come back to you with more details in the second half of this year to give you a more precise update on what are our expectations, but this is what we have in mind now.

Andrew Lee: Thank you very much.

Operator: Our next question comes from the line of Jeffries, Jerry Dellis. Your line is open. Please go ahead.

Jerry Dellis: Yes, good morning, it’s Jerry Dellis from Jeffries.

I’ve got two questions please related to EBTIDA. Firstly, focusing on the Q1 2017 performance you reported organic EBITDA growth for the telecom activity of 2.0% that you’ve highlighted the favorable comp. And I just like to explore that in a bit more detail please. I think looking back to last year you’ve reported employee share plan costs of EUR 50 million there was also the euro 2016 cost of EUR 16 million. I think Orange Belgium reported a pile on tax provision of EUR 16 million as well.

So if I take the EUR 50 million and the two lots of EUR 16 million, and I add them back to the Q1 2016 carry back EBITDA and I get a clean number for Q1 2016 of about to 630 and again that backdrop your Q1 2017 number of 2598 looks like about a 1% year-on-year decline, is it fair to sort of say that the underlying performance on group EBITDAR in the first quarter is about minus 1% year-on-year or the other factors that we should take into account. And then the second question is, if the underlying run rate is minus 1% of the key one stage, your guidance is obviously for full year EBITDA growth and that was the outlook on which you predicated the proposed return to dividend growth, but as we look forward you probably have incremental drag from roaming you’re also be lapping the benefit from Q4 2016 of the reversal in Belgium the pile on tax provision, and I think you also have a much harder compound EBTIDA in France in the second half of 2016 probably related to slightly easier promotional environment in H2 last year relative to H1. So as far the question is what therefore gives you the confidence that we really can see an improved underlying EBITDA performance in the balance of the year given the starting point on what do you look to be some more difficult comps? Thank you.

Ramon Fernandez: Okay, so first regarding Q1, I mean you know when you look at EUR 10 billion revenue figure and to a 2.6 billion EBITDA figure you have quarter-after-quarter, a number of one-offs some one-offs are positive, some one-offs are negatives. What I was telling you introducing this discussion was that if you eliminate all the positive and all the negatives one-offs in Q1 2016 and Q1 2017 the Q1 EBITDA 2017 is absolutely flat, okay, so you have indentified the number of one-offs that we had been discussing last year especially on the employee share plan and the few others, but if you take all these one-offs we are flat.

This is crystal clear. So looking ahead, I have you know I'm perfectly confident about what we have been seeing in the beginning of this year with an expectation of higher EBITDA in 2017 on a comparable basis there is strictly nothing to change to this guidance total confidence on my side. And you very well know event there is kind of simplicity of quarter-after-quarter the first quarter is never the best one clearly, and we are very much confident on for instance the consensus in terms of evolution for the year. So events what I can see you know going to all the details of every year single one-off I don't think it's going to be extremely interesting, but you can have - you can have my word that if you take everything into account you are flat.

Jerry Dellis: Thank you.

Could I just briefly follow-up, I mean just in terms of the outlook for the balance of the year then you're confident on the ability to grow EBITDA on the organic basis through the year, does that require more than just Spain to be growing, so would you say that you're confident of France too will demonstrate positive EBITDA growth for the year?

Ramon Fernandez: We said for instance event for the Enterprise business we expect the second half to be better than the first half, I also said on Africa Middle East that the second half would be better than first quarter. So all in all I mean there is a profile for operations in our different regions of course we expect Spain to remain very strong this year. So there are number of elements which are contributing to this performance and there is nothing that I can see which would deviate us from this perspective.

Jerry Dellis: Thank you very much.

Operator: Our next question comes from the line of [indiscernible].

Your line is open. Please go ahead.

Unidentified Analyst: Hi. Thanks for taking my questions. I had two.

The first one is on France and fixed narrowband and normally every two year you have a price increase that’s also rise by the regulator. I was wondering if this was something we should expect this year? And the second question was on the content side, there is a review ongoing by the competition authority which results are to be known I think end of Q2 or beginning of Q3. And on the Pay TV market in France, I was wondering if Orange had any hope or things that like to get out of this review whether it’s on exclusives, content purchasing, what’s your philosophy regarding this ongoing review? Thank you very much. Marie-Noelle Jego-Laveissiere: So the first question regarding the price increase, there is, you’re right there is no a two year period which is going to end and we’re in the midst of a review of all the fixed markets in this country. The fixed market reviews is try annual and increases is now every second year.

We’re not expecting in the major raise in the prices of the copper loop now for the coming years, because of the balance actually that the authority makes between the incentivization to roll out fiber and also the price which is supported by historical costs that we have in our accounts, so this is a first element. On the content review actually what you’re describing is the end of the period in which the competition authority has described measures that Canal+ have to take injunctions that were made to Canal+ . So the review is focused actually in the end of this injunction period. We have contributed to the authorities reflections on that and then of course, we will defend positions that we have defended in the past which are that no one should be private that’s really as the high quality content and no major extensibility should be granted to them. We are consistent with the positions we have developed actually already two years ago.

Unidentified Analyst: Okay. Thank you very much.

Operator: Our next question comes from the line of Citi, Simon Weeden. Your line is open, please go ahead.

Simon Weeden: Yes.

Thank you very much. Simon Weeden from Citigroup. I am just want to if you could elaborate a bit on what you see is the impact from the next stage of the international roaming regulations, in particular there was a news item today saying that Telenor [ph] seen a 900% increase in data volumes on roaming over the last 12 months or so, I imagine there is quite a few moving parts or Orange at EBITDA level with Spain and France in the group and large in the groups. So I just wanted if you could put in some caps for some that? Thank you. Marie-Noelle Jego-Laveissiere: Okay.

Just in if you want one comment on that. The situation of the group is except Poland and Belgium most of the countries are net receiver and France being neutral which we said the big difference, just remind that only 12% of the French are traveling abroad. So - and this is because you really give more data package in roaming that they will pay the travel ticket to travel, whereas not the countries are sending many travelers which I think everybody understand especially in summer. So this is a first actual affect. And if you take Telefonica for incidence Telefonica is net receiver in Europe and not the net center.

So how will we see that’s a wholesale price, that’s very difficult to predict. Today in terms of roaming in, we have difficulties to really evaluate that will be the roaming in and we see relatively lower coming out.

Stephane Richard: At group level the expectation is that the impact in terms of revenue will be around EUR 130 million for the full year 2017. This is a negative of course. He is asking me to say negative.

Yes, it is negative. But this is the figure we have taken on board looking ahead for 2017. With this revenue it’s not very far away from - not very far away but this is the revenue figure. Maybe we have time now for one last question.

Operator:
.

:

Unidentified Analyst: Yes. Good morning. Thanks for taking the question. I have got two questions, please. The first question…

Operator: Sorry.

His line idles for accident. Shall we take next question?

Stephane Richard: Okay. I’m afraid we lost you, we don’t heat the question, maybe you can write it down in SMS or connect, take an Orange plan maybe, yes.

Operator: Our next question comes from the line of New Street Research, Bernardus Willer [ph]. Your line is open, please go ahead.

Unidentified Analyst: Yes. Thank you. I’m on an Orange plan. I just have a quick question on the fiber ARPU growth because if I look on your website, I mean looks as though there’s happy promotion around fiber, so I just want to confirm that the increase in the fiber ARPU is coming from value added services and if that’s the case, presumably there is quite high costs associated with that, so is it quite low margin revenue? And then obviously you say you’re taking 51% - sorry 51% to fiber customers are new to Orange. Could you just explain who or sort of how that work, is that - who you are winning those customers from and in which regions, is that in the dense areas or the less dense areas? Thank you.

Fabienne Dulac: So, on the fiber ARPU, as you say that we raise the price of the fiber last year, so we have a fiber ARPU better oriented that ADSL with fixed row of a gap between ADSL and fiber. And the mix is in the same time well oriented, 57% of fiber customers made the choice to take premium offer. So this point the growth of the customer base, the mix offer and the price has a very good improve - good result in the fiber revenue. As I said it’s time the impact of the promotion is very light, very light, it’s not so important. I want just to remind you we only have two promotion and very short time promotion in this quarter at 99, 98 around EUR 20.

And the sales realized on promotion offers are on less than 20% of the gross sales. So the majority of the growth sales are realized on premium offers. That proved by the figures I stated before. We expect the broadband ARPU to raise on year-on-year with the 3 point exchanges before. Yes, sorry, the second part of the question.

The new customers on fiber from very high end CSO - yes, I didn’t see the question, sorry. They come - it’s a win back in the majority of the case, so they come from the competitors. It is a good thing.

Unidentified Analyst: Thank you.

Ramon Fernandez: Okay.

So I think except our friend of Morgan Stanley, I think we will put an end to with the discussion and we will catch up with to try and find out what the question we were not in a position to answer. Thank you very much for attending this call and have a good day. Bye-bye.