New Services and Opportunities in the Telecom Industry Bruce Bowden | 15 Octobre 2004 |

Page 2 Agenda  French fixed telecoms market environment  Overview of neuf telecom  New services

Page 3 All alternatives France Telecom/Wanadoo 2003 French fixed telco market Note: excludes 4.2B Euros in revenues (from 0800, cards, public phones, annuaires, non- corporate leased lines) which added to these amounts results in ~20B Euros total market LDCOM estimates 17% 43% 41% 26% Alternatives’ share Evolving quickly in 2004

Page 4 Neuf and Cegetel are the key integrated fixed-line alternatives neuf has far superior growth profile; others like Tele2 and Free are well-positioned in their niches Note: net of intercompany revenues LDCOM estimates Evolving quickly in 2004

Page 5 Data & Internet 3.5 B€ Voice (incl. mins.) 11.1 B € Access & Subscriptions 5.4 B € French fixed telcomarket: 20 B€ New entrantsFrance Telecom Mkt. shareRevenueMarginValueMkt. shareRevenueMarginValue 20% 35% 3% (24%) 60% 50% 70% (12%) 80% 65% 95% 100% SOURCES: ART, LDCOM ESTIMATES (76%) (88%) FT holds ~75% of the fixed market and ~90% of value

Page 6 Agenda  French fixed telecoms market environment  Overview of neuf telecom  New services

Page 7  A growing alternative operator in the shrinking French fixed telco market  A profitable challenger: net income positive for 1H04  The company with the most unbundled ADSL lines in Europe  #2 fixed-line telco for French enterprises  A leading innovator in broadband services Who is neuf telecom?

Page 8 neuf has grown rapidly both organically and via acquisition  8% share of the fixed market  #1 alternative operator for ISPs and other telcos  #1 alternative operator for enterprises  #4 residential alternative operator

Page 9 Growth across all segments Résultats au 30 juin 2004, US GAAP

Page 10 CAGR = + 83 % EBITDA Net income before extraordinary asset write-downs Neuf has been profitable since inception Note: Figures in US GAAP

Page 11 Proven track record as consolidator  Chart shows pro forma key financials of neuf plus 8 acquired businesses since January 1st 2001  Pro forma revenue CAGR of 12% even during integration; revenue now re-accelerating  SG&A reduced from 61% of revenues to 26% and still shrinking  EBITDA turned around from -45% of revenues to 10.5%  Capex divided by 6; effect of one high-quality network shared by nine businesses  Chart shows pro forma key financials of neuf plus 8 acquired businesses since January 1st 2001  Pro forma revenue CAGR of 12% even during integration; revenue now re-accelerating  SG&A reduced from 61% of revenues to 26% and still shrinking  EBITDA turned around from -45% of revenues to 10.5%  Capex divided by 6; effect of one high-quality network shared by nine businesses

Page 12 Figures in US GAAP (*) Acquisitions, net of cash in companies acquired and gains on sales of assets Cash flows from operations Tangible and intangible investments Other net investments (*) Cash flows from investments Capital increases Minority interests Other financing - net of repayments Cash flows from financing Exchange rate variations Cash as of 31 December (1 329) 176 (1 153) In M€ € 200 million in CapEx in 2004 (vs. € 130 million in 2003) Neuf has been funded largely by operational cash flow and equity capital FinancingOperationsInvestmentCash CUMULATIVE CASH FLOWS FROM INCEPTION TO EOY 2003

Page 13 neuf’s shareholders

Page 14 The largest alternative broadband network Liste des villes demandée communes > 50% of the population covered

Page 15 Agenda  French fixed telecoms market environment  Overview of neuf telecom  New services

Page 16 Unbundled DSL lines are the key platform for advanced services

Page 17 Where do we go from here?

Page 18  Broadband up to 25 Mbps  Priced based on « free » backhaul  Using a technology already built into our network (same chassis, new chipset)  Commercial launch in early 2005 Virtual fiber to the home Faster

Page 19 Cheaper and deeper: VOIP Cheaper  Lower cost long-haul protocol  Lower cost for retail voice services for an alternative operator Deeper  Move from single-site to multi-site to PABX  Layer on services  Hosted PBX, IP CENTREX  Private numbering schemes  Unified messaging  Virtual offices

Page 20 Ups and downs of VOIP Advantages  Industry momentum in support of IP  Operating cost efficiency  Service complexity  Mass customisation of QoS  Incrementality of BP Drawbacks  Disruptive to the voice market (user cost of voice -70% over 5 years)  Bandwidth anarchy / parasitism  Security  Hyperactive technological advancement (ROI challenges)

Page 21 More disruptive: MVNO & F-M Convergence Penetration rate : 69.5% (+1% Q303-Q104) France is lagging behind Source : CSFB French mobile penetration rate is still relatively low with potential strong additional growth … … probably linked to low competition within market maintaining high profitability Orange48.8% SFR35.3% Bouygues15.9% Stable market share with 30-35% EBITDA return Market share Revenue (Bn€) EBITDA (Bn€) 2003 figures

Page 22 Convergence of fixed and mobile driven by customer needs  Telephony becomes personal and portable. Using a phone means more and more using a 'Mobile phone'  16% of households are now mobile only  France Telecom will launch fixed-mobile bundles before the end of the year SIgnificant mobile vs fixed line substitution  Customers expect "universal" usages :  Voic , directory, navigator, … Indoor usage of mobile phones as a continuity of service is growing (already ~30% of mobile calls)  Some customer segments need fixed-mobile integrated offers  Consumer need for more simplicity regarding telecom providers  Futur Telecom already proposes fixed-mobile bundles for the business segment  Cegetel business offer includes SFR mobile offer with bundled prices (special rates for calls between employees)  … a single customer care ? a single bill? VPN rates ? …

Page 23 Convergence of fixed and mobile driven by technology (I) Broadband Internet strong growth multiplies access points usable for mobile calls collect Emergence of IP technology enables services platforms convergence  Strong growth of mobile calls made in-house or inside workspace … Mobile phone usage by consumers On net « base station » with a 6fold lower cost than GSM / UMTS cost  Full IP networks already enable voice and data intergated services  Voic / directory available for consultation over computer or IP phone  …  Fixed and mobile network integration will add mobile sevices  Universal voic  Unified SMS / MMS  … that can be captured by fixed operator through millions of residential and corporate modems or routers

Page 24 Convergence of fixed and mobile driven by technology (II) Hybriphone technology should be available by Q Fixed PSTN & IP Network Mobile Network OSP Bluetooth/Wifi Access Point Bluetooth, WiFi GSM Hybriphone principles : HLR  Simplicity  One handset for all calls  One phone number  One voic  One bill  Pay less  Mobile minute = 6X fixed minute cost Customer value Fixed-operator value  Capture revenue (increase ARPU) & margin on mobile calls  Capture revenue & margin on mobile incoming traffic  Optimize cost structure Network interconnexion required  Same handset for all calls (indoor & outdoor)  Communications between handset and access points through short range wireless (Bluetooth or WLAN)  Access points located at home or in workspace Already tested & being implemented : BT in the UK ('Blue Phone' project) Hutchinson in Hong Kong 3

Page 25 MVNO can create major new IT platform needs  Customer relation (incl. billing)  Customer care  SIM cards (delivered by SFR)  Brand 'Neuf Telecom'  Added value services  All network  Traffic management  Minimum yearly traffic  Mobile adapted distribution & customer care  9 years contract MVNO responsibility Mobile operator responsibility MVNO requirements Not a full MVNO offer, even though mobile operator proposes to start discussion on a possible future network interconnection  No direct proposal to become MVNO yet  Commercial partnership for common offer with Neuf Telecom on the business segment (<100 employees)  VPN Fixed-Mobile  One bill, one customer care  …  Already a distribution agreement for the business segment MVNO proposal A MVNO B : a 'common offer' on the business segment

Page 26 Starting this Fall in unbundled zones 40 chains in digital quality Paired with digital terrestrial TV (Télévision Numérique Terrestre or TNT) … and a few surprises … More content-rich:

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