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 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 € 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 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 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  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