RNS Number:8828A
Orange S.A.
22 March 2001
Annual Results for the year ended 31 December 2000
Record performance, rapidly growing profitability, strong financial position,
data projections looking conservative
o Controlled customer base 30.5m +68%
o Turnover* Euro12,059m +59%
o EBITDA* Euro1,765m +92%
o Operating profit* Euro383m (1999: loss of Euro111m)
o Loss before tax, goodwill
amortisation and minority
interests* Euro409m (1999 loss of Euro630m)
o Operating cashflow* Euro1,643m +91%
o Net debt Euro5,038m
o Balance sheet strength Net debt/ EBITDA* ratio: 2.85 Gearing to market
capitalisation
(as at 19 March 2001): 12 %
o 2001 synergies Euro390m of 2001 Euro400m target identified in Q1
o GPRS launches starting summer 2001
o On course to rebrand all controlled companies
o Continued strong momentum in customer connections
o Orange Wirefree(TM) home opened
o Summer presentation on OrangeWorld and Wirefree(TM) future
*All financials are pro forma as if the enlarged Orange group had been in
operation from 1 January 1998.
Paris and London 22 March 2001: Orange today announced its group financial
results for the year ended 31 December 2000, showing accelerated growth,
increasing margins and strongly growing earnings before interest, tax,
depreciation and amortisation (EBITDA), operating profit and operating cash
flow.
The Orange group was formed at the end of 2000 following the completion of
France Telecom's acquisition of Orange plc in August 2000, and the subsequent
merger of the majority of France Telecom's mobile interests into the new
enlarged Orange group. Unless otherwise stated, all financials are pro forma
as if the enlarged Orange group had been in operation since 1 January 1998.
Across the group, growth in controlled customers was 68% to 30.5 m
(proportional customers grew 74% to 31.2m). Turnover grew 59% to almost Euro
12.1bn. EBITDA almost doubled to Euro1.8bn with EBITDA margins as a percentage
of network revenue up 3 percentage points to 17%. The group moved from an
operating loss of Euro111m to an operating profit of Euro383m, and operating
cashflow increased by 91% to Euro1.6bn. Net debt at end of year 2000 was below
estimate at Euro5.0bn, giving a net debt to EBITDA ratio of 2.85, and
under-scoring Orange's strong financial position with a gearing to market
capitalisation at 19 March 2001 of 12%.
Non-voice, data services grew particularly rapidly, placing Orange on course
to reach its target of non-voice revenues being 25% of total turnover by 2005.
373m SMS messages were carried in January this year on our UK and French
networks, an 86% increase in the last six months.
In addition, Orange had almost 700,000 WAP users at the end of December 2000
in France and the UK, almost four times more than at end September 2000.
Commenting on the results, Jean-Francois Pontal, Chief Executive Officer said:
"Last year, we created the enlarged Orange, we increased the growth in our
businesses, accelerated the momentum in our EBITDA and EBITDA margins, moved
from operating loss to substantial operating profit, invested for the future
and laid the foundations for integrating Orange and securing the synergies.
"This year, we shall build upon our momentum, rolling out the Orange brand,
OrangeWorld services and GPRS and continue to drive quality customer growth,
usage, loyalty, margins and EBITDA."
Graham Howe, Deputy Chief Executive Officer and Chief Financial Officer, said:
"As well as our rapid growth and improved margins, these results make clear
the balance sheet strength of Orange. This is a further key resource as we
execute our strategy across the enlarged group.
"The underlying trends on take-up and usage of data services indicate to us
that our target of 25% of Orange's revenues from data by 2005 may be
conservative.
"In the summer, we shall be presenting Orange's next steps in product and
service development through the launch of OrangeWorld services, and the
introduction of GPRS.
"In the meantime, the Orange home, Europe's first totally-integrated
Wirefree(TM)
connected house, which is now open, demonstrates Orange's lead in delivering
the Wirefree(TM) future.
"The future's bright, the future's Orange."
Enquiries
Orange
Tel: 00 44 (0) 20 7984 2000
David Smyth, Group Director of Strategic and Investor Services
Denise Lewis, Group Director of Corporate Affairs
France Telecom
Bruno Janet, Vice President Corporate Information
Tel: 00 33 1 44 44 88 71
Nilou Ducastel, Head of the Press Office
Tel: 00 33 1 44 44 93 93
Citigate Dewe Rogerson
Tel: 00 44 (0) 20 7638 9571
Anthony Carlisle
Tel: 00 44 (0) 973 611 888
Sue Pemberton
Laure Lagrange
France and UK
France maintained its position as the largest and fastest growing French
operator in the year under review, holding market share at 48% and increasing
its customer base by 42% to 14.3m. Turnover grew 40% to Euro5.7bn and EBITDA
grew 62% to Euro1.5bn with EBITDA margins as a percentage of network revenue
increasing from 25% to 31%.
The UK maintained its position as the fastest growing UK operator in the year
under review, doubling its customer base to almost 10m and increasing its
market share from 20% to almost 25%. Turnover grew 76% to Euro4.2bn and EBITDA
grew nearly 100% to Euro759m (excluding group and integration costs).
Similarly EBITDA margins increased from 20% to 23% as a percentage of network
revenue, despite the dramatic growth.
Rest of World
Rest of World growth was even more rapid, reflecting the earlier stage of
development of these businesses. The customer base grew 99% to 6.4m and
turnover grew 86% to Euro2.2bn. There was strong growth in positive EBITDA in
Belgium, Romania and Slovakia with Mobilix in Denmark cutting its EBITDA
losses sharply as it moves towards becoming EBITDA positive. This was offset
by increasing start-up losses, particularly in Switzerland and the
Netherlands. Overall for the Rest of World, EBITDA losses increased from Euro
384m to Euro443m.
Data Services
Of particular note during the year was the explosive growth in SMS (short
message service or text messaging). The number of SMS messages sent on the
Orange France network in the fourth quarter increased more than five-fold to
236m messages (Q4 99: 44m). The UK also saw high growth in the use of SMS text
messages. SMS traffic accounted for 7.2% of UK network revenues in the second
half of 2000.
During the year, Orange moved towards making OrangeWorld, a new approach to
life services, a reality. We acquired interests in a number of innovative new
companies which combined, going forward, will contribute to Orange's aim of
humanising technology: Wildfire, a voice recognition and interaction service,
Ananova, the world's first digital newscaster and NewsTakes, a content
reformatting service are some of the foundation blocks for OrangeWorld. Our
objective is to use these technologies to create the consumers' remote control
for life - enabling communication wherever, whenever and however they want.
In addition, the Orange group offers a wide range of leading data products and
services. For example, Mobistar, in Belgium, has launched GPRS services aimed
at the corporate market; Mobilix, in Denmark, has developed a state of the art
mobile payment system and an SMS-based teletext chat TV service; and in France
we have already deployed MobiClick, the song-recognition service, and MIB or
Mobile Internet for Business which is aimed at serving our corporate customer
base.
In August 2000 Orange UK became the only UK operator to offer High Speed
Circuit Switched Data (HSCSD), a technology which can deliver data at speeds
more than three times faster than those currently achieved on GSM networks.
UMTS
During the year, Orange made strong progress towards achieving 3G coverage
across the group. A total of eight UMTS licences were awarded to members of
the group in the UK, the Netherlands, Germany, Italy, Austria, Sweden,
Switzerland and Portugal. Since the year end, Orange has won a further UMTS
licence in Belgium, expects to be granted a licence in France and intends to
apply for licences in Denmark and Romania.
Capital Expenditure
As planned, group capital expenditure grew approximately 50% to Euro3.3bn,
largely on network roll-out in newer operations and to support the strong
customer and usage growth in all the businesses. Capital expenditure was split
evenly between the UK, France and Rest of World.
Developments in 2001
Growth momentum across the group has continued into 2001. Progress on
integrating the group and securing group synergies is ahead of plan. Of the
target of Euro400m synergies for 2001, Euro390m has already been identified,
placing the group on track for securing total identified synergies of Euro800m
per year in 2003.
The launch of GPRS services is scheduled for summer 2001 in the UK and France,
with Motorola providing the launch handsets and plans for a range of between
10 and 15 GPRS handsets by year-end.
Year ended 31 December
2000 1999 1998
(millions of Euro)
Pro forma (unaudited)
Profit and loss account data(1)
Turnover
France 5,690 4,056 2,790
UK 4,211 2,392 1,446
Rest of World 2,193 1,182 701
Inter-segment eliminations (35) (45) (44)
--------- --------- ---------
Total 12,059 7,585 4,893
Cost of sales (5,358) (3,454) (2,212)
Selling, general and administrative costs (4,902) (3,184) (1,889)
Research and development costs (34) (28) (24)
EBITDA(2) 1,529 944 673
France
UK(11) 679 359 222
Rest of World (443) (384) (127)
--------- --------- ---------
Total 1,765 919 768
======= ======== =======
Depreciation and amortisation (excluding (1,382) (1,030) (735)
goodwill)
Operating income / (loss) 1,028 450 291
France
UK(11) 246 69 (8)
Rest of World (891) (630) (250)
--------- --------- ---------
Total 383 (111) 33
======= ======= =======
Interest expenses, net (392) (296) (224)
Other non operating expenses, net - (2) -
Equity in net loss of affiliates (400) (221) (30)
--------- --------- ---------
Loss before income taxes, goodwill amortisation (409) (630) (221)
and minority interests
Income taxes (459) (241) 266
Goodwill amortisation (612) (590) (588)
Minority interests 159 139 103
-------- ---------- ---------
Net loss (1,321) (1,322) (440)
======= ======== ========
Net loss per share (0.28) (0.28) (0.09)
Diluted net loss per share (0.28) (0.28) (0.09)
======= ======== ========
Selected cash flow data(1)
Net cash provided from operating activities 1,643 862 523
Purchase of property, plant, equipment and (3,330) (2,241) (1,729)
intangible assets
Purchase of UMTS licences (7,268) - -
Cash paid for investments and other (1,103) (326) (6,702)
----------- ------------ ------------
Net cash flow before financing activities (10,058) (1,705) (7,908)
======= ======= =======
Selected balance sheet data (at period end) (1)
(3)
Net debt 5,038 5,534 3,333
Shareholders' equity 22,499 13,245 14,136
Year ended 31 December
2000 1999 1998
Operating data
France 14,311 10,051 5,539
Customers (in thousands) (period end)
Contract 7,425 6,418 4,338
Prepaid 6,886 3,633 1,201
GSM network revenues (Euro in millions) (10) 5,017 3,741 2,562
Annual average revenue per user (Euro)(4) 426 522 640
Contract 596 623 713
Prepaid 183 246 275
Monthly average usage per user (minutes)(5) 147 160 145
Contract 209 193 162
Prepaid 58 67 59
Churn(6) 22.3% 22.7% 24.1%
Contract 26.0% 19.4% 22.9%
Prepaid 17.1% 31.6% 30.1%
Subscriber acquisition costs per connection (Euro)(7) 150 160 128
Contract 219 226 165
Prepaid 103 93 41
Equipment sales revenue (Euro in millions) 605 256 135
Other revenues (Euro in millions) 68 59 93
UK
Customers (in thousands) (period end) 9,834 4,894 2,163
Contract 3,077 2,443 1,676
Prepaid 6,757 2,451 487
GSM network revenues (Euro in millions) (10) 3,300 1,800 1,051
Annual average revenue per user (#)(4) 280 380 461
Contract 525 495 483
Prepaid 126 155 206
Monthly average usage per user (minutes)(5) 159 175 174
Contract 303 227 180
Prepaid 68 73 102
Churn (6) 9.2% 18.1% 20.2%
Contract 23.8% 21.1% 21.1%
(8)
Prepaid 5.3% 12.4% 9.2%
Subscriber acquisition costs per connection(#)(7) 83 102 153
Contract 196 200 220
Prepaid 49 43 36
Equipment sales revenues (Euro in millions) 839 510 306
Other network revenues (Euro in millions) 72 82 89
Rest of World 6,356 3,202 1,225
Customers (in thousands) (period end) (9)
Rest of World Data
The turnover, number of customers and EBITDA for our principal subsidiaries
included in the Rest of World for 1999 and 2000 are set out in the table
below:
Year ended 31 December
2000 1999
The Netherlands - Dutchtone
Customers (000's) 1,023 356
Turnover (Euro in millions) 215 50
EBITDA (Euro in millions) (277) (225)
Slovakia - Globtel
Customers (000's) 617 397
Turnover (Euro in millions) 176 134
EBITDA (Euro in millions) 64 45
Denmark - Mobilix
Customers (000's) 517 319
Turnover (Euro in millions) 159 75
EBITDA (Euro in millions) (69) (104)
Romania - MobilRom
Customers (000's) 1,222 622
Turnover (Euro in millions) 297 178
EBITDA (Euro in millions) 143 62
Belgium - Mobistar
Customers (000's) 1,800 1,040
Turnover (Euro in millions) 607 381
EBITDA (Euro in millions) 76 12
Switzerland - OCSA
Customers (000's) 786 313
Turnover (Euro in millions) 479 81
EBITDA (Euro in millions) (336) (161)
Other Rest of World
Customers (000's) 391 155
Turnover (Euro in millions) 260 283
EBITDA (Euro in millions) (44) (13)
Equity Accounted Affiliates
The turnover and number of customers for our principal equity accounted
affiliates for 1999 and 2000 are set out in the table below:
Year ended 31 December
2000 1999
MobilCom
Mobile customers (000's) 4,000 1,860
Turnover (Euro in millions) (12) 2,355 1,244
Wind
Mobile customers (000's) 4,923 1,330
Turnover (Euro in millions) (13) 1,317 412
Notes
1..Basis of preparation :
For the purposes of our initial public offering, we prepared pro forma
consolidated financial statements for the years ended 31 December 1997, 1998,
1999 and for the six months ended 30 June 2000. As we did not exist in our
current form during these periods, these pro forma consolidated financial
statements were prepared in order to reflect our financial position, results
of operations and cash flows as if we had existed in our current form over the
four periods presented. Entities were included in the pro forma consolidated
financial statements as if they had been part of our enlarged group on 1
January 1997, or from their formation date, if later, based on our ownership
interest at 31 December 2000.
We noted in the initial public offering prospectus ("the prospectus") that the
pro forma consolidated financial statements were prepared for illustrative
purposes only and had not been audited. They were prepared principally using
the financial statements of the various consolidated entities together with
accounting information taken from France Telecom's records.
The pro forma consolidated financial statements were not intended to reflect
what our financial condition, results of operations or cash flows would be in
future periods. We highlighted in the prospectus that we would prepare
financial statements for the 2000 financial year on a historical basis, and
that this is how we will prepare our financial statements in the future.
On this basis, our consolidated income statement for the 2000 financial year
included in our consolidated financial statements reflects only our historical
accounts and therefore shows no activity, as we had no operations prior to 29
December 2000. Hence, for illustrative purposes, we present a pro forma
consolidated income statement for the 2000 financial year, using, apart from
the recalculation of goodwill amortisation as described below, the same
assumptions used to prepare the pro forma consolidated financial statements in
the prospectus. Goodwill and goodwill amortisation reflected in the pro forma
consolidated financial statements included in the prospectus were based on the
30 June 2000 equity of entities to be transferred to our group in the second
six months of 2000. As we highlighted in the prospectus, our consolidated
financial statements for the 2000 financial year reflect the inception of our
group at the time the legal transfers of assets from France Telecom
effectively occurred, on 29 December 2000. We have therefore recalculated
goodwill based on the equity of each entity at the time of its transfer to our
group. Goodwill amortisation for the years ended 31 December 1998 and 1999 has
also been recalculated and is included in the pro forma consolidated income
statements presented above at the new amount. The recalculation of goodwill
resulted in a small increase in goodwill amortisation expense in our pro forma
consolidated income statements.
Borrowings contracted to finance (i) the acquisition of assets from France
Telecom at our inception and, (ii) the UK and Dutch UMTS licences, are deemed
to have been extinguished by share capital increases of Orange plc and Orange
SA. Consequently, interest expenses incurred on these borrowings are not
reflected in the pro forma consolidated income statements. In addition, the
remaining cash balance resulting from above-mentioned share capital increases
is deemed to have been placed on deposit with France Telecom during the second
half of 2000. The related interest revenues have been reflected in the pro
forma consolidated income statement for the year ended 31 December 2000.
Our consolidated balance sheet at 31 December 2000 included in our
consolidated financial statements reflects our historical accounts after we
were formed on 29 December 2000. The pro forma consolidated balance sheet at
30 June 2000 included in the prospectus was prepared using a number of
assumptions in respect of transactions occurring between 30 June and 31
December 2000. Such assumptions included an estimate of the capital structure
of our group at 31 December 2000. Our balance sheet at 31 December 2000
reflects the actual outcome of these assumptions and hence our capital
structure at 31 December 2000 differs in certain respects from the pro forma
consolidated balance sheet at 30 June 2000 included in the prospectus. These
differences are explained below :
A capital injection from France Telecom of Euro9,771 million, received on 29
December 2000, was reflected in the pro forma consolidated financial
statements included in the prospectus. It was assumed that this capital
injection would be used to extinguish borrowings of Euro5,975 million mainly
incurred in respect of the acquisition of 43.4% of Wind and 42.5% of Orange
Communications SA, borrowings of Euro542 million in respect of the acquisition
of 100% of Ananova and 34% of BITCO, as payment for the Dutch and Swiss UMTS
licences (Euro436 million and Euro35 million, respectively) and the transfer
of assets previously held by France Telecom (Euro1,452 million at 31 December
2000). A net cash balance after payment of these borrowings of Euro1,841
million was reflected in "Cash and cash equivalents" in the pro forma
consolidated balance sheet at 30 June 2000, included in the prospectus. These
borrowings were not extinguished at 31 December 2000 and are included in
"Accrued expenses and other current liabilities" and "Current portion of
long-term debt, bank overdrafts and other short-term borrowings", with the
related cash included in "Cash and cash equivalents" in our consolidated
balance sheet at 31 December 2000.
Certain current accounts with France Telecom in the pro forma consolidated
financial statements included in the prospectus were netted off to reflect the
cash pooling structure which we intend to establish in 2001. At 31 December
2000 these current accounts with France Telecom (Euro1,428 million) are
included in "Cash and cash equivalents" with a corresponding increase in
"Current portion of long-term debt, bank overdrafts and other short-term
borrowings" in our consolidated balance sheet.
In addition our consolidated balance sheets reflect goodwill recalculated as
described above. The recalculation of goodwill resulted in an increase of Euro
299 million in the gross book value of goodwill compared to the value in our
pro forma consolidated balance sheets included in the prospectus.
Our consolidated cash flow statement for the 2000 financial year included in
our consolidated financial statements also reflects only our historical
accounts. Our historical cash flow activity related primarily to the cash
injection of Euro9,771 million received from France Telecom on 29 December
2000 as described above. We present selected pro forma consolidated cash flows
above for comparative purposes.
Pro forma consolidated income statements and selected pro forma consolidated
cash flows, unaudited
The pro forma consolidated income statements and selected pro forma
consolidated cash flows for the years ended 31 December 1998, 1999 and 2000
presented above represent a pro forma consolidation of our activities which is
intended to reflect our results of operations and cash flows as if we had
existed in our current form over the periods presented. Entities are included
in the pro forma consolidated income statements and selected pro forma
consolidated cash flows as if they had been part of our enlarged group on 1
January 1998 or from their formation date, if later, based on our ownership
interest at 31 December 2000.
The pro forma consolidated income statements and selected pro forma
consolidated cash flows are presented for illustrative purposes only and have
not been audited. They were prepared principally using the financial
statements of the various consolidated entities together with accounting
information taken from France Telecom's records. This information has been
prepared on the basis summarised in Note 2 to our consolidated financial
statements.
(2) Earnings before interest, taxes, depreciation and amortisation ("EBITDA")
is operating income before depreciation and amortisation and is presented
because it is a measure commonly used in the telecommunications industry and
is presented solely to enhance the understanding of our operating results.
(3) Represents historic financial information at 31 December 2000, not pro
forma financial information as is presented for 1999 and 1998.
(4) Annual average revenue per user ("ARPU") is calculated by dividing GSM
network revenues (including outgoing traffic, incoming traffic, visitor
roaming and value added services) for the previous 12 months by the weighted
average number of our customers during the same period. The weighted average
number of our customers during a period is the average of the monthly average
customer bases for the period. The monthly average customer base is calculated
as the sum of the opening and closing customer bases for the month divided by
two. It is quoted on a revenue per customer per year basis. France Telecom
Mobiles does not currently receive revenues from other French mobile network
operators for calls from their networks that terminate on France Telecom
Mobiles' network as in some other markets, in particular, the United Kingdom.
As a consequence, French and UK ARPUs are not directly comparable.
(5) Monthly average usage per user ("AUPU") is defined as total usage
(including outgoing traffic, incoming traffic and roaming) for the previous 12
months divided by the weighted average number of our customers during the same
period. It is quoted in minutes on a usage per customer per month basis.
(6) Churn, the measure of customers leaving our networks, is calculated by
dividing the total number of customers who disconnect or are treated as having
disconnected from our network, voluntarily or involuntarily, for the previous
12 months by the weighted average number of our customers during the same
period. The way we compute churn differs between Orange UK and France Telecom
Mobiles in the following ways:
For Orange UK, customers migrating between contract and prepaid
product categories are included in individual product churn but do not
impact total churn as they remain Orange UK customers. Customer
disconnections which occur during the money-back guaranteed 14-day
trial period are not included in churn and we exclude from churn those
connections which, in our view, do not result in active customers,
including as a result of prepaid handset upgrades or the removal of
handsets from the UK market. Prepaid customers are treated as having
churned after six months if they have not made or received calls for
such six month period.
For France Telecom Mobiles, customer disconnections are counted when a
customer changes telephone number, which includes changes from prepaid
to contract or the reverse, even if the customer remains a customer of
France Telecom Mobiles. Prepaid customers are treated as having
churned after eight months if they do not "recharge" their account
during this eight month period.
Going forward, the Orange UK definition will be progressively applied
throughout our businesses, with the exception of the duration of the
period of "inactivity" after which a prepaid customer is disconnected,
which is a function of the conditions of each contract.
(7) Subscriber acquisition costs are included partly in "Cost of sales" and
the balance in "Selling, general and administrative expenses" and are expensed
as incurred. We analyse subscriber acquisition costs separately by subtracting
the revenue we receive from handset sales from our total cost of handsets
included in cost of sales. We then add that amount to the commissions that we
pay to distributors and that are included in selling, general and
administrative expenses. To calculate annual average subscriber acquisition
costs, we then divide this total for a 12 month period by the total number of
connections (including in the United Kingdom connections of prepaid upgraded
handsets and those removed from the United Kingdom) less disconnections under
a money back trial period and attempted fraudulent connections in the United
Kingdom for the 12 month period. Subscriber acquisition costs are quoted on a
per connection basis.
(8) From 1 January 2000, contract churn in the United Kingdom includes
migrations from contract to prepaid. If excluded, contract churn would have
been 15.5% at 31 December 2000.
(9) Includes all of the customers of our controlled wirefree operations. We do
not include the subscribers of companies in which we have a minority interest,
such as Wind or MobilCom, nor customers from our service provider subsidiaries
such as our UK service provider.
(10) Network revenues include access charges and usage fees.
(11) UK results include group and integration costs.
(12)Measured under International Accounting Standards.
(13)Measured under local GAAP.
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