RN Number:8811A
Orange S.A.
22 March 2001
PART 1
Consolidated financial statements
ORANGE
As at and for the years ended 31 December 2000, 1999 and 1998
ORANGE - CONSOLIDATED INCOME STATEMENTS
In millions of euro (except data per Year
share) ended 31
Year ended 31 December
December
2000 2000 1999 1998
--------- ---------- ------ ------
Pro forma (unaudited)
------------------------
Turnover 5 - 12059 7585 4893
Cost of sales - (5358) (3454) (2212)
Selling, general and administrative - (4902) (3184) (1889)
expenses
Research and development expenses - (34) (28) (24)
--------- --------- ------- ------
EBITDA (1) - 1765 919 768
========= ========= ======= ======
Depreciation and amortisation 10,11 (1382) (1030) (735)
(excluding goodwill)
--------- --------- ------- ------
Operating income/(loss) - 383 (111) 33
========= ========= ======= ======
Interest income (expenses), net 4 (392) (296) (224)
Other non-operating expenses, net - - (2) -
Income taxes 9 - (459) (241) 266
Equity in net loss of affiliates 12 - (400) (221) (30)
(excluding goodwill amortisation)
--------- --------- ------- ------
Income/(loss) before goodwill 4 (868) (871) 45
amortisation and minority interests
Goodwill amortisation 10,12 - (612) (590) (588)
Minority interests 17 - 159 139 103
--------- --------- ------- ------
Net income/(loss) 4 (1321) (1322) (440)
========= ========= ======= ======
Net income/(loss) per share 0,00 (0,28) (0,28) (0,09)
Diluted net income/(loss) per share 0,00 (0,28) (0,28) (0,09)
========= ========= ======= ======
(1) EBITDA: operating income before depreciation and amortisation
As the group was formed on 29 December 2000, the consolidated income statement
for 2000 does not reflect any activity.
Consequently, comparative pro forma consolidated income statements are
presented for 2000, 1999 and 1998. Refer note 2
ORANGE - CONSOLIDATED BALANCE SHEET
In millions of euro Note As at 31
December
2000
---------------
ASSETS
Intangible assets, net (excluding goodwill) 10 7651
Goodwill, net 10 3962
Property, plant and equipment, net 11 8216
Investments accounted for under the equity method 12 8591
Non consolidated investments 13 428
Other long-term assets 131
Deferred income taxes 9 528
--------------
Total long-term assets 29507
--------------
Inventories 20 435
Trade accounts receivable, less allowances 8,20 2602
Deferred income taxes 9 68
Prepaid expenses and other current assets 8 1128
Cash and cash equivalents 7 11612
--------------
Total current assets 15845
--------------
TOTAL ASSETS 45352
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity 18 22499
---------------
Minority interests 17 (58)
---------------
Long-term debt, less current portion 14 4363
Other long-term liabilities 16 200
---------------
Total long-term liabilities 4563
---------------
Current portion of long term debt, bank overdrafts and 14 6312
other short-term borrowings
Trade accounts payable 3867
Accrued expenses and other current liabilities 14 7697
Deferred income taxes 9 75
Deferred income 397
---------------
Total current liabilities 18348
---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 45352
=========
As the Group was formed on 29 December 2000, no comparative balance sheets are
presented. Refer Note 2.
ORANGE - CONSOLIDATED CASH FLOW STATEMENT
In millions of euro Note Year ended 31
December
2000
------------------
OPERATING ACTIVITIES
Net income 4
Change in other operating assets and liabilities 15
------------------
Net cash provided from operating activities 19
------------------
INVESTING ACTIVITIES
Increase in other long term assets (14)
Cash and cash equivalents of entities transferred on 29 1836
December 2000
------------------
Net cash provided by investing activities 1822
===========
FINANCING ACTIVITIES
Increase in shareholder's contributions 18 9771
------------------
Net cash generated from financing activities 9771
===========
Increase in cash and cash equivalents 8 11612
Impact of changes in exchange rates on cash and cash -
equivalents
-----------------
Cash and cash equivalents at beginning of year -
-----------------
Cash and cash equivalents at end of year 11612
=========
As the Group was formed on 29 December 2000, no comparative cash flow
statements are presented. Refer Note 2.
1. PRESENTATION OF ORANGE
Orange S.A. ("the Company") is listed on Premier Marche of Euronext Paris and
the London Stock Exchange.
The Company, its subsidiaries, jointly controlled entities, associates and
investments (together "the Group") offer a broad range of voice and data
communications services in France, United Kingdom and in selected markets in
continental Europe and in the rest of the world.
Created on 29 December 2000, the Group consists of (i) FTM, the mobile
division of France Telecom until 31 December 1999 and FTM S.A., formed as a
result of the transfer of FTM to FTM S.A. on 22 August 2000, with a
retroactive legal effect as from 1 January 2000, (ii) the operations of Orange
plc, which are mainly located in the United Kingdom and which were acquired by
France Telecom from Vodafone group in August 2000 and (iii) France Telecom
operations and investments in a number of European and international
subsidiaries, jointly controlled entities, associates and investments.
The Company, a shell entity incorporated in 1992 under the name of France
Telecom Electronic Directories and a wholly-owned subsidiary of France Telecom
received, on 29 December 2000, substantially all the share capital of (i) FTM
S.A., (ii) Orange plc and (iii) France Telecom Participations Belgium ("FTPB")
and France Telecom Participations Denmark ("FTPD"), a Belgian and Danish
incorporated parent company respectively, which hold European and
international mobile operations, associates and investments.
2. BASIS FOR PREPARATION
As a result of the inception of the Group on 29 December 2000, the following
financial information is presented :
- the consolidated financial statements as at 31 December 2000, reflecting the
effect of the legal transfers which occurred on 29 December 2000;
- the pro forma consolidated income statements for the years ended 31 December
2000, 1999 and 1998, as no operations are reflected in the consolidated income
statements prior to 29 December 2000.
The Group's consolidated financial statements and pro forma consolidated
income statements have been prepared in accordance with French generally
accepted accounting principles as they are applied by the Group (refer Note 3
below) and approved by the Board of Directors of the Company on 21 March 2001.
Consolidated financial statements
The consolidated financial statements reflect the inception of the Group at
the time the legal transfers of assets from France Telecom effectively
occurred on 29 December 2000.
The consolidated balance sheet as at 31 December 2000 reflects the effect of
the following legal transactions:
1. transfers of substantially all the shares of FTM S.A., France Caraibe
Mobiles S.A. ("FCM"), France Telecom Mobile Service S.A. ("FTMS"), Orange plc,
FTPB and FTPD from France Telecom to the Company in exchange for newly issued
shares of the Company. These transfers have been accounted for under the
purchase method of accounting under paragraph 215 of "Comite de la
Reglementation Comptable" Rule 99-02. Accordingly, such transfers have been
reflected at the consolidated historical carrying value of their respective
net assets.
Prior to the transfer of FTPB to the Company by France Telecom, FTPB acquired
certain assets previously owned by France Telecom, such as Wind
Telecomunicazioni S.p.A. ("Wind") and Dutchtone N.V. ("Dutchtone"), for cash
consideration. Goodwill arising from these acquisitions was determined based
on the equity of each entity at the time of its transfer to FTPB.
2. share capital increase of the Company amounting to euro 9,771 million on 29
December 2000. This capital increase is intended to finance the 43.4%
investment in Wind for euro 4,775 million and the 42.5% investment in Orange
Communications S.A. ("OCSA") held by FTPB for euro 1,349 million.
The consolidated income statement for the year ended 31 December 2000 mainly
reflects the activity of the Company, which had no operations prior to 29
December 2000.
The consolidated cash flow statement primarily reflects the cash injection of
euro 9,771 million resulting from the 29 December 2000 share capital increase
and the net cash position of the businesses transferred to the Company, mainly
FTM S.A.
Pro forma financial information
To enable comparison with the unaudited pro forma consolidated income
statements that were presented in the prospectus prepared for the purpose of
the initial public offering of the Company, an unaudited pro forma
consolidated income statement is presented for the year ended 31 December
2000.
The pro forma consolidated income statements for 1999 and 1998 presented in
this document are directly comparable with those included in the prospectus
except for the amortisation of goodwill, which has been restated to reflect
the value of goodwill which was recalculated based on the equity value of each
entity transferred to the Group at the time the transfer actually occurred.
Preparation of the pro forma income statements
The Group's pro forma consolidated income statements for the twelve months
ended 31 December 2000, 1999 and 1998 are intended to reflect the Group's
results of operations as if the Group, which was created on 29 December 2000,
had existed over the three years presented. The Group's pro forma consolidated
income statements are presented for illustrative purposes only and are not
necessarily indicative of what the Group's results of operations would have
been had the Group's inception occurred at an earlier date.
Operations legally transferred to the Group before 31 December 2000 have been
consolidated or accounted for under the equity method over the periods
presented, based on the Group's ownership interest at 31 December 2000,
effective from the date such operations were launched or from 1 January 1998
if launched earlier than 1 January 1998. The Group's investments in KPN Orange
N.V. ("KPNO") and Hutchison Telecommunications GmbH ("HTG"), which are to be
disposed of, are accounted for as non consolidated investments (refer Note
13).
Borrowings contracted to finance (i) the acquisition of assets from France
Telecom at the Group's inception and, (ii) the UK and Dutch UMTS licences, are
deemed to have been extinguished by the share capital increases of Orange plc
and the Company. 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 the above-mentioned share
capital increases is deemed to have been placed 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.
Financial statements used for the preparation of the pro forma income
statements
The Group's pro forma consolidated income statements have been prepared on the
basis of:
1. FTM S.A.'s audited financial statements as at and for the year ended 31
December 2000 and FTM's 1999 and 1998 year-end pro forma financial statements
derived from the FTM divisional accounts which were included in the audited
financial statements of France Telecom, restated under the Group's accounting
policies as necessary. FTM's revenue and expenses were thus identifiable in
France Telecom's audited statutory financial statements. FTM's income tax has
been measured as if FTM had existed as a separate taxable entity so that tax
losses at 1 January 2000 carried forward upon incorporation of FTM into FTM
S.A. were nil according to FTM S.A.'s tax position upon incorporation on 22
August 2000 (nil tax loss carry forward as at 1 January 2000).
2. Orange plc's audited 2000, 1999 and 1998 year-end financial statements as
restated under the Group's accounting policies as necessary and adjusted to
exclude the euro 53 million and euro 58 million extraordinary items net of
tax, incurred during the years ended 31 December 2000 and 1999 respectively,
as such extraordinary items comprise non-recurring costs associated with the
successive changes of control of Orange plc in 1999 and 2000.
3. Audited financial statements for the same periods of France Telecom's and
Orange plc's European and international mobile subsidiaries, jointly
controlled entities, associates and investees.
No synergies have been reflected in the pro forma income statements, including
the potential tax savings that could result from the inception of a tax
consolidation starting from 2001 in France.
3. ACCOUNTING POLICIES
The Group's consolidated financial statements are prepared in accordance with
French generally accepted accounting principles under Rule 99-02 of the
"Comite de la Reglementation Comptable" of 29 April 1999.
Presentation of the financial statements
The consolidated financial statements are presented in euro on the basis of
the parity in use since 1 January 1999 of 6.55957 French francs for one euro.
* In the consolidated income statement, operating charges are presented on
a functional basis, except for net depreciation and amortisation which are
shown under two separate headings being "Depreciation and amortisation
excluding goodwill" and "Goodwill amortisation".
* Gains or losses on disposal of investment securities are recorded under
the heading "Other non-operating income (expenses), net".
* The heading "Goodwill amortisation" includes goodwill of all
consolidated companies as well as those accounted for using the equity
method.
* Unusual and infrequent events and transactions are shown net of taxation
under the heading "Extraordinary items, net of tax".
* The balance sheet classifies assets and liabilities based on liquidity
or maturity dates, and presents short-term balances (due within one year)
separately from long-term balances.
* The cash flow statement excludes from changes in cash changes in bank
overdrafts and marketable securities having maturity in excess of three
months at the time of purchase, which are presented respectively as
financing and investing activities.
CONSOLIDATION PRINCIPLES
Under the conventions set out in Note 2, the consolidation principles are as
follows:
* Subsidiaries which the Company controls either directly or indirectly
are fully consolidated.
* Companies in which the Group and a limited number of other shareholders
have agreed to exercise joint control are accounted for using the
proportionate consolidation method.
* Companies over which the Group exercises significant influence but does
not control (generally a 20% to 50% controlling interest) are accounted
for under the equity method.
* All material inter-company balances and transactions have been
eliminated.
FOREIGN CURRENCY TRANSLATION OF THE FINANCIAL STATEMENTS OF FOREIGN
SUBSIDIARIES
The financial statements of foreign subsidiaries presented in local currency
are translated as follows :
* assets and liabilities are translated at the closing rate,
* items in the consolidated income statement are translated at the average
rate for the period,
* the resulting translation adjustment is included as a separate component
of shareholders' equity. Translation adjustments relating to subsidiaries
within the euro zone have been fixed based on the parities fixed on 31
December 1998.
The financial statements of entities which operate in a hyper inflationary
environment have been remeasured into their functional currency, prior to
converting to euro, using the following method:
* monetary elements of the balance sheet are translated at the closing
rate,
* non monetary elements are converted at the historic rate,
* items in the consolidated income statement are translated at the average
rate for the period except for depreciation and provision charges and
reversals which are translated at the historic rate.
* the resulting translation adjustment is recorded in the consolidated
income statement as an exchange gain or loss.
TRANSACTIONS IN FOREIGN CURRENCIES
At year-end, monetary balances denominated in foreign currencies are
translated using closing exchange rates. Unrealised gains and losses on
balances denominated in foreign currencies which are not hedged are recognised
in the consolidated income statement of the corresponding period.
REVENUE RECOGNITION
Turnover includes airtime revenue (including fixed monthly access charges),
roaming revenue, revenue from sales of telecommunication equipment and value
added services.
Revenues from airtime, roaming and value added services are recognised when
the service is rendered.
Revenues from fixed monthly access charges are recognised on a straight-line
basis over the contract period.
Revenues from sales of telecommunication equipment and connection charges are
recognised upon delivery to the customer or activation by the customer, as
appropriate.
SUBSCRIBER ACQUISITION AND LOYALTY COSTS
Subscriber acquisition and loyalty costs are expensed as incurred. These costs
primarily include commissions and rebates paid to distributors.
ADVERTISING COSTS
Advertising costs are expensed as incurred.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid investments, with
no capital risk, with maturities generally of three months or less at the time
of purchase, and are stated at cost which approximates realisable value.
CREDIT RISK ON TRADE ACCOUNTS RECEIVABLE
Allowances are set up against the estimated cost of non-recovery of
receivables. Allowances are based on an individual or statistical evaluation
of the risk of non-recovery.
In view of the different types of customer (residential and professional
markets), the Group does not consider that it is exposed to a concentration of
customer risk.
INVENTORIES
Inventories principally comprise handsets. Inventories are stated at the lower
of cost or probable net realisable value, taking into account future revenues
expected from subscriptions. Cost is determined on a first in first out basis.
PURCHASE ACCOUNTING
Upon acquisition of a business, its cost of acquisition is allocated on a fair
value basis to the identifiable assets and liabilities of the business
acquired.
The excess of the purchase price over the fair value of the share of
identifiable assets and liabilities of the business acquired is recorded as
goodwill under the heading "Intangible assets" for the consolidated entities
and included in the heading "Investments accounted for under the equity
method" for entities over which the Group has significant influence.
The amortisation period for goodwill is determined taking into account the
specific nature of each acquisition, particularly with regard to its business
segment.
Goodwill is subject to impairment review when events or circumstances occur
indicating that an impairment might exist. Such events or circumstances
include significant adverse changes, other than temporary, in the assumptions
or expectations considered at the time of the acquisition. The need to
recognise impairment is assessed with reference to non discounted cash flows
within the economic and operating assumptions used by the management of the
Group. Impairment, where necessary, is recorded as the difference between book
value and fair value. Fair value is determined based on future cash flows
discounted at appropriate rates, taking into account benefits expected at
acquisition, such as synergies expected to result from the integration of the
business with the Group's operations and the strategic position of the
business for the Group.
In accordance with the purchase method of accounting under paragraph 215 of
"Comite de la Reglementation Comptable" Rule 99-02, the historical carrying
value of the business acquired is reflected in the acquirers' financial
statements when the acquisition meets the criteria set out in paragraph 215
(amongst other criteria the acquisition must cover at least 90% of the shares
of the company in a single transaction and must be settled through a share
issue by the acquirer).
PLANT, PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS
Licences to operate mobile networks are recorded within intangible assets.
They are recorded at cost of acquisition and are amortised on a straight-line
basis over the period over which the Group expects to benefit from use of the
licence, taking into account the likelihood of licence renewal as appropriate.
They are amortised from the date of commercialisation of services.
Plant, property and equipment are recorded at cost of acquisition or at
construction cost, including, for the cost of networks, planning and
construction costs, site installation and equipment upgrade costs.
Interest arising from debt incurred to finance construction and development of
tangible assets is capitalised as part of the cost of the assets during the
construction period.
Repairs and maintenance and removal costs are expensed when incurred.
Depreciation of property, plant and equipment is calculated on a straight-line
basis over their estimated useful lives. Main estimated useful lives are as
follows :
Analogue and GSM network 5 to 8 years
Buildings and fittings 10 to 30 years
Computer equipment and software excluding
Network equipment 3 to 5 years
Other 3 to 10 years
Leased assets are recorded as a fixed asset and a related liability when the
terms of the lease effectively transfer the risks and rewards of ownership of
the asset to the group.
Impairment of long-lived assets
Plant, property and equipment and intangible assets (excluding goodwill) are
written down when, as a result of events or changes in circumstances, their
recoverable value appears to be permanently less than their carrying value.
For assets to be held and used, impairment is principally determined for each
group of assets by comparing their carrying value with the undiscounted cash
flows they are expected to generate based upon management's expectations of
future economic and operating conditions. Due to uncertainties specific to the
telecommunications industry, it is possible that these conditions will change
in future periods and consequently affect the estimations of future cash
flows.
Should the above comparison indicate that an asset is permanently impaired,
the write-down recognised is equivalent to the difference between carrying
value and fair value. Fair value is determined on the basis of discounted cash
flows or by reference to replacement cost for used equipment, cost of
alternative technologies or recent transactions for similar businesses, or
market prices.
Assets to be disposed of are written down to their fair value, less costs of
disposal, when such value is lower than their carrying value.
NON CONSOLIDATED INVESTMENTS
Non consolidated investments are stated at cost. An allowance is recorded when
the fair value, based upon management's analysis of the specific nature of
each investment, is permanently less than carrying value.
DEFERRED INCOME TAXES
Deferred income taxes are accounted for on temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and for tax purposes, as well as those arising from tax loss carry forwards.
Deferred tax assets are provided for to the extent that the recovery of these
taxes is not considered probable.
Deferred taxes are calculated using the liability method, applying the enacted
tax rates applicable at the time the temporary difference is expected to
reverse.
DEBT ISSUE COSTS
Debt issue costs are deferred and expensed through income over the term of the
facility.
RETIREMENT INDEMNITIES
In France, legislation requires that lump sum retirement indemnities be paid
to employees based upon their service life and level of compensation upon
retirement. The actuarial cost of this unfunded obligation is charged to the
consolidated income statement over the employees' service lives. The effect of
changes in assumptions is accounted for in the consolidated income statement
over the average remaining service life of employees.
Civil servant employees of the Group benefit from the French State civil and
military pension scheme. The corresponding defined contributions to the civil
servant pension scheme are included within personnel costs.
In England, Orange plc operates a defined contribution pension scheme and
funded unapproved retirement benefit schemes for eligible employees.
Contributions to these two plans are expensed as incurred.
FINANCIAL INSTRUMENTS
Interest rate and foreign currency risks are managed using derivative
financial instruments, primarily interest rate swaps, forward exchange
contracts, currency swaps and exchange rate options. All such instruments are
entered into for hedging purposes.
Income and costs resulting from the use of these instruments are recorded in
the consolidated income statement in the same manner as compared with the
underlying transaction being hedged:
* differences between interest receivable and interest payable on swaps,
caps and floors, as well as premiums paid for these operations are
recorded in the consolidated income statement over the life of the
contract as an adjustment to the interest expense;
* initial differences between the negotiated term rate and the fixing rate
for the day on forward exchange contracts and currency swaps designated as
hedging operations are recorded in the consolidated income statement over
the life of the contract as an adjustment to the interest expense. The
gains and losses subsequently generated by these contracts, due to
fluctuations in the exchange rate, are recorded as exchange rate
corrections resulting from the item hedged;
* the gains and losses resulting from contracts allocated to the hedging
of firm commitments or identifiable future transactions are deferred and
taken into account in the valuation of the transaction at maturity.
EARNINGS PER SHARE
Earnings per share are calculated based on the weighted average number of
shares outstanding during the year.
Diluted earnings per share take account of conversion into ordinary shares of
existing potentially dilutive instruments. Diluted earnings are calculated as
net income adjusted for the financial charges of dilutive instruments, net of
their effect on taxation and employee profit sharing.
SHARE BASED COMPENSATION
Shares issued upon exercise of subscription options granted to employees are
reflected as a share capital increase at the exercise price of the option.
With regards to purchase options, a provision is recorded to the extent that
the acquisition cost of the shares purchased to serve the exercised options is
higher than the exercise price of the options.
Social charges assumed in connection with share option plans are provided for
when it is probable that the options will be exercised.
4. CONSOLIDATION SCOPE
The list of consolidated entities and equity investments is detailed in Note
26.
As the Group was formed on 29 December 2000, there was no acquisition or
divestment during the year ended 31 December 2000.
5. TURNOVER
Year ended 31 Year ended 31 December
December
(in millions of euro) 2000 2000 1999 1998
---------- -------- ------- ----------
Pro forma (unaudited)
France - 5,690 4,056 2,790
United Kingdom - 4,211 2,392 1,446
Rest of world - 2,193 1,182 701
Inter segment - (35) (45) (44)
elimination
---------- -------- ------- -----------
Total - 12,059 7,585 4,893
======= ======= ======= =======
The main operating indicators by segment are presented in Note 23.
6. PERSONNEL COSTS
Year ended Year ended 31 December
31 December
(in millions of euro, except 2000 2000 1999 1998
employee numbers)
---------- ---------- ---------- ---------
Pro forma (unaudited)
-------------------------------
Average number of employees (1) -
24,282 17,239 12,301
Personnel costs
Wages and salaries - 824 541 341
Social charges and other pension - 175 125 91
related charges
--------- ---------- --------- ---------
Total - 999 666 432
===== ====== ====== ======
(1) Average full time equivalents
In addition, personnel costs in the pro forma consolidated income statements
include employee profit-sharing expenses of the French operating entities
totalling euro 19 million in 2000, euro 4 million in 1999 and euro 5 million
in 1998.
Own shares acquired under the Orange plc long-term incentive plans that
terminated in November 1999 were included in marketable securities and a full
allowance recorded as the shares were distributed at no cost to participants
of the scheme.
As part of the formation of the Group, various incentive plans, such as
warrants and stock option schemes, have been put in place for the employees
and management of the Group. These plans are described in Note 19.
7. CASH AND CASH EQUIVALENTS
As explained in Note 2, cash and cash equivalents at 31 December 2000 mainly
comprise:
* the euro 9,771 million cash contribution from France Telecom resulting
from the share capital increase of the Company on 29 December 2000;
* the euro 620 million cash transfer from France Telecom to FTM at the
time of its incorporation into FTM S.A.
8. TRADE AND OTHER RECEIVABLES
The Group does not consider itself exposed to a concentration of credit risk
with respect to trade accounts receivable due to its diverse customer base
(residential, professional and large business customers) operating in numerous
industries and located in many regions and countries.
Other debtors mainly comprise VAT receivables and prepayments.
Trade accounts receivable and other debtors are mostly due within one year.
9. INCOME TAXES
Income tax (charge) / credit is analysed as follows:
Year ended 31 December Year ended 31 December
(in millions of euro) 2000 2000 1999 1998
--------- -------- -------- --------
Pro forma (unaudited)
-----------------------------
Current income taxes - (418) (23) (19)
Deferred income taxes - (41) (218) 285
---------- --------- --------- --------
Total - (459) (241) 266
====== ===== ===== =====
Movements in income tax charges and credits are mainly attributable to Orange
Personnal Communications Services Ltd ("OPCS") and FTM.
At 31 December 1998, given the forseeable taxable results of OPCS for the
following years, deferred tax assets of euro 391 million were recognised in
respect of tax losses carried forward and temporary differences.
Deferred tax assets relating to tax losses carried forward of FTM, totalling
euro 280 million at 1 January 1998, were utilised in 1998 and 1999, generating
a pro forma tax charge of euro 103 million and 177 million, respectively. In
2000 FTM, as a stand alone taxable entity, incurred a current income tax
charge of euro 391 million.
The reconciliation between the income tax expense computed at the French
statutory tax rate and the effective income tax expense is as follows:
Year ended Year ended 31
31 December December
(in millions of euro) 2000 2000 1999 1998
------- ----- ------ ------
Pro forma
(unaudited)
---------------------
Income tax calculated at the enacted tax rate
(1)
- 154 252 92
Impact of equity in income from affiliates
accounted for under the equity method
- (151) (88) (13)
Impact of unused tax losses carried forward
and other temporary differences (2)
- (340) (299) 235
Impact of non French tax rates, permanent
differences and changes in income tax rate
- (122) (106) (48)
------- ----- ------ -------
Effective income tax - (459) (241) 266
======= ===== ====== =======
(1) Enacted income tax rate was 37.76% at 31 December 2000 (40%, and 41.67% at
31 December 1999 and 1998, respectively) applied to the loss before tax,
goodwill amortisation and minority interests.
(2) Relates to start up operations in respect of which deferred tax assets are
not recognised according to the Group's accounting policies.
At 31 December 2000, the analysis of deferred tax assets and liabilities by
nature of temporary difference is as follows:
(in millions of euro) At 31 December 2000
----------------------------
Deferred tax assets
Losses carried forward 1,081
Other deferred tax assets 330
---------------
Total deferred tax assets 1,411
Valuation allowance (815)
---------------
Deferred tax assets after valuation allowance 596
---------------
Including current deferred tax assets 68
Including long-term deferred tax assets 528
---------------
Deferred tax liabilities
Tax accelerated depreciation 23
Other deferred tax liabilities 58
---------------
Deferred tax liabilities 81
----------------
Including current deferred tax liabilities 75
Including long-term deferred tax liabilities 6
===========
10. INTANGIBLE ASSETS
Cost Accumul. Net book
(in millions of euro) Amortisation Value
-------- ---------------- ---------
UMTS licences 7,035 - 7,035
Goodwill 4,106 (144) 3,962
Licences, patents and access rights 706 (159) 547
Other intangibles 89 (20) 69
--------- ----------- ----------
Total 11,936 (323) 11,613
====== ======== =======
UMTS licences
UMTS licences can be detailed as follows:
Date of Local Value in local Euro equivalent at 31
award currency currency December 2000
Orange 3G Ltd September GBP 4,095 6,564
2000
Dutchtone August 2000 NLG 960 436
Multimedia
OCSA December CHF 55 35
2000
-------- ----- ------ -------
Total 7,035
======== ===== ====== =======
As described in Note 3, UMTS licences will be amortised as from the date of
commercialisation of services.
Goodwill
The table below presents the net book value of goodwill of fully consolidated
companies at 31 December 2000 determined as described in Note 2.
(in millions of euro) Net book value at 31 December 2000
--------------------
OCSA 1,453
Dutchtone 1,147
MobilRom S.A. 635
Globtel A.S. 318
Wildfire Communications, Inc 127
Ananova Ltd 137
Other 145
------------
Total (net) 3,962
========
Pro forma information
On a pro forma basis, amortisation of intangible assets, excluding goodwill,
amounted to euro 77 million in 2000, euro 35 million in 1999 and euro 23
million in 1998.
Goodwill is amortised over a period ranging from 5 to 20 years depending on
the specific nature of the business acquired and on the strategic value of
each acquisition. In the pro forma consolidated income statements,
amortisation of goodwill includes euro 245 million in 2000, euro 226 million
in 1999 and euro 224 million in 1998 relating to the companies mentioned
above.
11. PROPERTY, PLANT AND EQUIPMENT
Cost Accumul Net book
(in millions of euro) Depreciat. Value
-------- ------------ ---------
Land and buildings 2,911 (830) 2,081
Network equipment 7,471 (2,579) 4,892
Computer and terminal equipment (excluding 1,510 (641) 869
network)
Other 603 (229) 374
---------- ------------ --------
Total 12,495 (4,279) 8,216
======= ======= ======
Land and buildings include euro 1,670 million of network infrastructure as at
31 December 2000.
Interest charges capitalised under the value of property, plant and equipment
amount to euro 58 million at 31 December 2000.
The net book value of assets under capital leases amounts to euro 886 million
at 31 December 2000.
Pro forma information
On a pro forma basis, depreciation of property, plant and equipment amounted
to euro 1,305 million in 2000, euro 995 million in 1999 and euro 712 million
in 1998.
12. INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD
Investments accounted for under the equity method are as follows at 31
December 2000:
Interest at 31/12/2000 Net book value at 31 December
(%) 2000
------------------ --------------------
(in millions of
euro)
Wind 43.4 4,537
MobilCom 28.5 3,687
BITCO 34.0 359
NewsTakes Inc. 25.0 6
Book2eat Ltd 32.3 2
------------ -------------
Total 8,591
======== =========
At 31 December 2000, the net value of goodwill relating to investments
accounted for using the equity method amounted to euro 4,479 million for Wind,
euro 2,680 million for MobilCom and euro 233 million for BITCO.
In accordance with the agreement signed on 23 March 2000 with MobilCom AG
("MobilCom"), the German telephony operator, FTPB acquired an interest in
MobilCom during the second half of 2000 by transferring its interest in
MobilCom Multimedia, a 50% owned entity that obtained a third generation UMTS
mobile telephony licence in Germany in August 2000. The consideration for this
transfer was effected through a capital increase by MobilCom issued to FTPB
for euro 3,739 million as a result of which the Group holds 28.5% of MobilCom,
the percentage used since 1 January 1998 to account for the Group's investment
in MobilCom under the equity method.
Pro forma information
In the pro forma consolidated income statements, goodwill is amortised over a
period ranging from 5 to 20 years depending on the nature of the business. On
a pro forma basis, amortisation of goodwill amounted to euro 367 million in
2000, euro 364 million in 1999 and euro 364 million in 1998.
The equity in net loss of affiliates included in the pro forma consolidated
income statements amounted to euro 400 million in 2000, euro 221 million in
1999 and 30 million in 1998 as follows:
Year ended 31 December
(in millions of euro) 2000 1999 1998
--------- -------- --------
Pro forma (unaudited)
--------------------------
Wind (337) (244) (46)
MobilCom (62) 23 16
BITCO (1) - -
-------- -------- --------
Total (400) (221) (30)
===== ===== =====
BITCO, an entity in which the Group has a significant influence, has been
accounted for under the equity method with effect from its acquisition by
Orange plc on 12 September 2000. It had no significant operations prior to
that date.
13. NON CONSOLIDATED INVESTMENTS
(in millions Gross Provision Net
of euro) % Value Value
------ -------- --------- ---------
KPNO 50.0 121 - 121
Connect Austria 17.5 109 - 109
Optimus 20.0 105 - 105
BPL 26.0 47 - 47
HTG 100.0 6 - 6
Other 43 (3) 40
----- -------- ---------- ---------
Total 431 (3) 428
===== ===== ======= =====
In July 2000, as part of the acquisition of Orange plc by France Telecom, and
given the commitments with respect to the European Union, the Group exited the
trust through which it held a 50% shareholding in KPNO. Consequently, the
interest in the Belgian operator is reflected in the consolidated balance
sheet at its equity method carrying value as at 31 July 2000 under the heading
"Non consolidated investments".
Similarly, as the interest in HTG is to be disposed of, the German entity is
presented under the heading "Non consolidated investments" at its equity
method carrying value as at 29 December 2000, the date it was transferred to
the Company under paragraph 215 of Rule 99-02.
KPNO and HTG had a negative contribution to the consolidated shareholders'
equity of euro 137 million and euro 48 million, respectively, at 31 December
2000. Future gains resulting from the sale of these two entities will be
reflected through equity, in accordance with paragraph 215 of Rule 99-02.
MORE TO FOLLOW
MSCBIGDXBDDGGBB
Orange (LSE:OGE)
Historical Stock Chart
From Jun 2024 to Jul 2024
Orange (LSE:OGE)
Historical Stock Chart
From Jul 2023 to Jul 2024
