France Telecom - 2004 Results

2004 Consolidated Results Combine Accelerated Growth with Improved Operational Performance and Increased Financial Strength

Accelerated growth: consolidated revenues increased 4.1% on a comparable basis (2.2% on an actual basis) to a total of 47.2 billion euros.

Dynamic performance from wireless businesses with 63.3 million Group customers, up 13.9%, including 54 million Orange customers and sustained revenue growth of 10.4% at Orange on a comparable basis.

Continued success of broadband in France and rest of Europe with 6.3 million ADSL lines in France, 5.1 million broadband customers for the Group in Europe (up 88% in one year) and 260,000 Livebox home broadband gateways distributed in Europe.

Contained decline in fixed line revenues in France limited to 0.3% (versus a decline of 2.4% in 2003). Turning point reached in the fourth quarter 2004 for fixed-line activities in France, thanks to the take-off of broadband-enabled usage patterns and of the new offers. MaLigne tv reached a total of 75,000 clients, while the new discount-rate packages were also successful, with 617,000 customers for the unlimited call plans and 1.1 million customers for Le Plan.

Application of France Telecom's integrated operator strategy, based on three customer-centric businesses ( Home , Personal and Enterprise ) and supported by an active policy of partnerships and R&D, translating into the successful launch of new offers.

Improved operating performance: effective impact of the TOP program translating into an increase of the margin on Operating Income Before Depreciation and Amortization, up 1.2 percentage points in one year and 6.8 percentage points in two years to 38.7%.
Operating income before depreciation and amortization was 18.3 billion euros, up 7.4% on a comparable basis
Operating income before depreciation and amortization less CAPEX up 9.2% on a comparable basis to 13.1 billion euros
Operating income up 12.4% on a comparable basis to 10.8 billion euros

Increased financial strength: net debt and off-balance sheet commitments reduced by 28 billion euros in 2 years
7.8 billion euros in organic cash flow generated, underscoring the effectiveness of the Group's business model
Net debt reduced to 43.9 billion euros
2.8 billion euros in net income after minority interests
Dividend proposed to Annual General Meeting of Shareholders: 0.48 euros per share
2002-2004: France Telecom Group improves operating margins and cash generation while accelerating growth

The TOP indicator Operating income before depreciation and amortization less CAPEX (investments in tangible and intangible assets, excluding licenses) increased by 9.2% on a comparable basis and 7.5% on an actual basis to 13.1 billion euros, an improvement of 1.1 billion euros for 2004 on a comparable basis. This improvement reflects increased control over operating and investment expenses, in line with TOP program objectives to substantially improve the Group's processes.