France Telecom-Orange vs. Free Mobile

Business Strategies and Performance Comparison

Juan Pablo Lasso

New operator, Challenger 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.

Traditional Operator, Leader 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

Strategies

Successful Market Entry 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.

Small Revenue Decrease 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

Performance