France Telecom-Orange vs. Free Mobile Business Strategies and Performance Comparison

1. France Telecom-Orange vs. Free MobileBusiness Strategies and Performance Comparison Juan Pablo Lasso

2. Strategies New operator, Challenger Traditional Operator, Leader • Type of Services and Pricing strategy: • Low prices - €19.90 for unlimited services and € 2.00 for 60 minutes and 60 SMS. • No terminal subsidies, SIM-only deals. New to the market. • Internet Sales only • Spectrum Acquisition • Current 3G Roaming Agreement with Orange. Costs €2 Billion for 6 years. • Got a 4G license in the 2.6 GHz band for 4G. • Will look for roaming agreement for the 800 MHz band. • Network Development • Started in January by covering 27% of the population in 3G. • Must reach 90% by 2018. Relies on roaming agreement for now. • Will look for network sharing in 4G. • Customer Segment • Just aimed to gain as many customers as possible in the beginning, relying on low prices. • Customer Relationship: Still to see what happens • Important: Free is part of Iliad, an already established fixed services provider. • Type of Services and Pricing Strategy • Traditionally, focused on high quality services, at a fairly high cost. • Decided to launch low-cost offers to stay competitive • Alternative Brand: SOSH – Prices from € 19.90 including unlimited calls and SMS. • Launched an offer to lower costs and enhance services for their “Origami” product. • Spectrum Acquisition • Was able to fight the impact of new operator by signing a 3G roaming agreement with them. • Invested Almost 1 Billion Euros in 4G Auction. Will take advantage of current roaming agreement to sign a new one with Free Mobile • Network Development • Will invest 18.5 Billion euros in their 4G network until 2013. Marseille, already with enjoys this service. • Interested in performing network sharing for 4G. • Investmend of 2 Billion euros in FTTH network. • Customer Segment • Traditionally, aims at customers who can pay more for high quality services • Now, forced to aim at customers between 18-35 years old offering low-cost services (SOSH) • Customer Relationship – Orange Care • Plan to enhance customer support – Anticipate needs, offer assisted migration to new services, wararnty, insurance and online support

3. Performance Successful Market Entry Small Revenue Decrease • Iliad’s EBITDA einitially xperienced loses due to launch investments. • Still, finished First Half of 2012 with 11% growth in EBITDA. • Successful entry will allow for extra € 250 Million in network deployment investment this year. • First Quarter 2012: • 4% Market Share. • 2.6 Million mobile subscribers. • € 97.5 Million in Revenues. • End of First Half 2012: • 5.4% Market Share. • 3.6 Million mobile subscribers. • € 320 Million in Revenues. • Forced other operators to launch low-priced alternative products. • Impacted by: • European crisis • Increase of data traffic (revenue gap) • Loss of customers to Free Mobile • Lost 201,000 customers by February 2012. • Went back to subscriber growth by June 2012 (+27,000). • Roaming agreement prevented disaster, which was experienced by SFR and Bouygues. • Revenues First half 2012: €10,826 Million • First Half 2011: €11,305 Million • EBITDA First half 2012: €3,984 Million • First Half 2011: €4,323 Million • Chrysalid Project • Reduce operational expenditures • Avoid growth in costs being faster than revenues by 2015 • Limit expenditure to € 33.5 billion until 2015