New Scale, New LeaderRichard Moat, CFO and Deputy

Chief ExecutiveChief Executive

Summaryy

J i t V t t t d ti l• Joint Venture structure and rationale

• Sustaining leadershipSustaining leadership

• Mobilising for growthg g

3

Our aspiration is our namep

Everything …a step change in the

Everywhere …Network coverage anda step change in the

market opportunityNetwork coverage and

quality provide a superior customer experience

To capitalise on the data revolution

4

Rationale for Joint Venture

Highly competitive Hi hl kHighly competitive environment

• Highly mature market

Increasingly regulated market

• Revenue constantly under threat from regulated pricing and MTRs

Lowest margins in

regulated pricing and MTRs

• Reflection of the competitive and gEurope regulatory environment

Scale benefits allow for market investOpportunity for market transformation

Scale benefits allow for market invest, cost savings and advanced network and product offersp

5

Transaction structure - 50/50 JVBalanced contributions to JV Post closing structure

DeutscheFrance£1.25bn debt

to FT

50%50%

Deutsche Telekom

France Telecom

Orange UK Mobile

+ T Mobile UK

Orange-T-Mobile

+Orange UK Broadband

T-Mobile UK+

50% sharein 3UK

network JV

Step 1: Contributions to JV

Orange-T-Mobile UK JV£625m

Shareholder Loan

£625m Shareholder Loan

Step 1: Contributions to JV• France Telecom contributes Orange UK Mobile and Orange UK Broadband with intra-group net debt

of £1.25bn• Deutsche Telekom contributes T-Mobile UK, including its 50% stake in the network JV with 3UK, on a

cash free and debt free basiscash free and debt free basisStep 2: Partial reimbursement of debt to France Telecom• Immediately after closing, Deutsche Telekom grants a £625m shareholder loan to JV• Simultaneously, JV reimburses £625m to France TelecomPost closing:Post closing:• JV indebtedness of £1.25bn, represented by two equal shareholder loans of £625

Key governance principlesy g p p• Equal representation from France Telecom and Deutsche Telekom

– 2 representatives from each– 2 executive directors (CEO and CFO)

Boardof directors

• Deutsche Telekom nominates first Chairman of the Board

• All appointments according to principle of “best person for the job”• CEO: Tom Alexander CFO: Richard Moat

o d ecto s

Key management • CEO: Tom Alexander, CFO: Richard Moatmanagement functions

Stability and • Shareholders’ interests aligned in all respects• Governance designed to create a stable, long term ownership structure

Stability and long term commitment

• Governance designed to allow management to focus on operations• Extensive operational decision making with JV management

Operational autonomy awardedto JV

• Maximum cash flows to be channeled to the parent companiesDistribution of 90% of cash flow to shareholders

to JV

Dividend policy• Distribution of 90% of cash flow to shareholders

Benefits of the Joint Venture• Good for both companies, providing scale and the ability to compete

d i t ff ti land invest more effectively

• Major customer benefits, including access to the UK’s best network and increased investment in technology and servicesand increased investment in technology and services

• The telecoms sector as a whole will profit from innovation and advances in mobile broadband awareness and usageadvances in mobile broadband awareness and usage

• Shareholders will gain major synergies, greater investment ability and an improved customer offeringan improved customer offering

• The deal will be good for the UK economy, with the company investing around £2.5bn over 5 yearsinvesting around £2.5bn over 5 years

• A positive impact on the environment with a net reduction in phone masts and reduced energy consumption

8

gy p

Unique scale advantage

• Largest retail footprint of any operatorLargest

customer• Market leader

attracts talent

customer base

Increasing profitability potential,

• Cost benefits & purchasing powerBiggest and

with UK customer benefits

• Enables viable future investment

Biggest and best network

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Our strategyOur strategy

Driving C i l

Creating a l d il

Creating a l tf fCommercial

Leadershiplean and agile

backboneplatform for

growth

Strategy - Transforming for growth

Commercial Leadership

• Grow value and reach from our brands• Develop direct channels to market• Grow retention and loyaltyp

Lean and efficient

Grow retention and loyalty

• Create a streamlined organisation• Cost leadershipbackbone

Pl tf f

• Cost leadership• Biggest and best network

• Develop new marketsPlatform for leadership

• Develop new markets • Transform online sales/service capability• Attract, retain and develop the best people

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Unparalleled brand assets drive pinvestment efficiency

Orange “mass

• Rich portfolio of high-end devices

• All inclusive tariffspremium” • Lead on Innovation and

premium services

T-mobile“straight forward value”

• Affordable smartphones• Simple and focused tariffs• Add on services, at a price• £ marketing supportvalue

+MVNO brands

g pp

1. Incremental benefit of two brands outweighs operational cost

2. Smart targeting of brands to take advantage of l i i k t

Brand check point taking place September 2011

polarising market

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Synergies confirmed as £3.5bn+

Run-rate savings

Annual run-rate opex and net capex savings, £m

15%

Network & IT savings

Distribution & marketing savings

Other cost savings

Total opex savings

Net capex savings

Total pre-taxcashflow

Previouslysavings (post 2014)

G i

56%

15%Previously presented 145 145 155 445 100 545

Latest view 201 83 161 445 100 545+

64%100%Phasing

Gross opex savings (previously presented)

(75%)

By 2012 By 2014

Integration costs Cumulative integration costs of £675m (previously presented £600m to £800m)costs Cumulative integration costs of £675m, (previously presented £600m to £800m)

• Run rate synergies in line with previously presented numbers with: i. Network and IT savings increasing by almost 40% ii Additional investment required to support updated direct distribution strategy and focus on retailii. Additional investment required to support updated direct distribution strategy and focus on retail

• NPV of synergies confirmed at £3.5bn+

Telco 50 – IT TransformationBusiness Business TransformationTransformationDevelop staff and transform Develop staff and transform

660 IT application 660 IT application componentscomponents

Reduced timeReduced time

ppprocessesprocesses

SimplifiedSimplifiedReduced time Reduced time to marketto marketRationalisationRationalisation

Retire redundant applicationsRetire redundant applications

Simplified Simplified architecturearchitecture

3 petabytes of data 3 petabytes of data / storage / storage

(1,500 billion pages (1,500 billion pages ResourcingResourcingConsolidate operationalConsolidate operational

( p g( p gof text)of text) Improved costsImproved costs

Consolidate operational Consolidate operational outsourcingoutsourcing Great servicesGreat services

6,400 servers with 6,400 servers with Increased Increased

Integrated MultiIntegrated Multi--brand Platformbrand PlatformMultiMulti--channel sales, billing and channel sales, billing and customer managementcustomer management 50 applications50 applications

300 builds300 buildsc easedc easedagilityagility

customer managementcustomer management pppp

Data: A new landscapeData: A new landscape

Why data?

Explosive growth in

New Competition

New revenue Transform EE into UK’s most

successful mobile data company with an evolved business model,

lowest cost and best network,

customer demand opportunities

Mobile marketing,relentless go to market execution

and organisational agility Mobile payments

M2M

Voice revenues under pressure

M2M

“Everything”: more than y gvoice and text

Orange Wednesdays– Over 1.1mdownloads

Apps

Contacts backup

Available since July 2010Cloud services

Orange Shots

Orange Monkey

2k campaigns since launchMobile advertising

Every 7-series BMW sold in UK has a

T-Mobile SIM

Machine to Machine

BMW ConnectedDrive

UK’s first commercial launch of contactless mobile payments

Mobile paymentsPartnering with

Barclaycard – Q2 2011

Ecosystem in place for the industry to now monetise the opportunity

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A Network for the data revolution

2G 3G

Current site count per operator

2G

2G

2G 2G3G3G

3G 3G3G 3G 3G

Network ambitions:Be the UK market leader in 2G+3G

Deliver ‘Best Network satisfaction’

No 1 in independent benchmarkingleader in 2G+3G satisfaction benchmarking

Source: Everything Everywhere management estimates 17

Delivering the best network with goptimal synergies

Today

No. of Sites2G

14k10 2k

2014No. of Sites

-2G18k+18k

T-Mobile Everything Everywhere

-2G-3G

10.2k12k

3G pops 96.05%

Carriers 2 x 3G

-2G-3G

18k18k

3G pops 99.63%

Carriers 4 x 3G

No. of Sites-2G

13.5k13k

Orange

2G-3G

13k7.4k

3G pops 92.51%

Carriers 2 x 3G

• Capacity= No of sites x Carriers

T-Mobile & A l £ 620 EE

Annual opex £ 466m

5 i £ 200T Mobile & Orange Annual opex £ 620m EE 5 year capex saving £ 200m

10 year capex saving £ 700m+

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A UK first - National roamingg“2 networks for the price of 1”

5m opted in since Oct 2010 ‘switch on’ phase for all customers now started•5m opted in since Oct 2010 – switch on’ phase for all customers now started•100m calls and counting - enabled by dual network option•3G roaming goes live in Spring – an unparalleled data experience

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Network Integration Roadmap g p

Phase 2 Phase 3 Phase 4Phase 1

SeparateNetworks

(2G+3G)Roaming

Separate Core and Radio

2GRoamingSeparate (but connected)

RANConsolidation

Refreshed RAN infrastructureSites Decommissioned

Transparent Service Access

FullConsolidation

Single 2G and 3G RANCommon Core layerSh d S i lNetworks with Handovers

)Core and Radio

NetworksSeparate Core Shared Service layer

MVNOs

Completed Q2/11 Q3/11 Q2/13

Technology evolution, including 4G, will support Everything Everywhere’s best Network strategy while still delivering synergies

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18,000+ site network has ,significant benefits

Good for the EnvironmentGood for the Customer

• Best of both worlds – 2G national roaming launched

• Best of both worlds – 3G (from Spring 2011)

• £154m opex synergy• £700m+ capex synergy over 10

years

• 9k duplicate sites removed• 79k tonnes of CO2 saved per

annum• Network credentials fit for

Business and Wholesale

years annum

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Delivering our commitments, g ,2010 to 2014

Lean and agile Commercial backbone Platform for growthleadership

Profitability generation (EBITDA)

Service Revenue Market Share Cash deliverySynergy capture

(EBITDA)

Continuing to Double digit £3.5bn+Continual growth of absolute EBITDA g

leadg

FCF growth£3.5bn

NPV to 25%+ margin

2010 – the story so faryIntegration phase

Integration phase• Gained early approval• Incorporated in April• Leadership team in place• Dual brand stores pilot launched •Completed corporate restructure

Mobilisation phase

•Completed corporate restructure

• National roaming• Synergy capture

Financials (as at October 2010)Synergy capture

• Increasing retention (monthly churn at 1 4%)1.4%)

• Postpay net additions up 20% YoY• 43% of base on contract – up 3ppts

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2010 – The story so fary

2011 – From Integration to Mobilisation

DeliveringMobilising

• Continue underlying revenue growth

• Maintain market

• Move from integration to mobilisation

Maintain market leadership

• Grow contract t b

• 3G roaming goes live for both Orange and customer base

• Accelerate synergy capture

for both Orange and T-Mobile customers

• Complete brand p• Complete brand review

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© Everything Everywhere 2010© Everything Everywhere 2010