IDATE November 2005

Didier LombardChairman and CEO

France Telecom

A changing world

3

Over the last few years, innovation has been driving industry transformation

5 major technologydiscontinuities

The customer at the center of his communications universe

Services become multi-access

Usages are simple and user friendly

Integrated operator as the incarnation of this paradigm shift

The customerdefines and

personalizehis services

Focal point isShifting fromThe network to the user

Servicesbecome

Multi-access

The customerdefines and

personalizehis services

Focal point isShifting fromThe network to the user

Servicesbecome

Multi-access

IP network Broadband everywhere Ubiquitous wireless Multi-access innovative devices Delayed and open network and IT platforms

IDATE 2003

s

4

Voice commoditization highlighted as a key challenge

Innovation is the way forward

A challenge to the established

voice business model

VoIPVoIP

Unlimited offeringsUnlimited offerings

Price pressure on mobile

Price pressure on mobile

Investor Day June 2005

5

Mobile operators Fixed operators Regulated players

MVNOs

Internet players Industrial playersUnregulated players

NOKIA

PHILIPS

Skype

New types of players entering the competition

New Competitors – New Business Models – New Strategies

Investor Day June 2005

6

Our vision has proved right

“Incumbents”

“Pure Player”“Solid results, mixed outlook” Nomura

“Outlook disappointing, as we had feared” Bernstein

November 2005 Interim Results

"The main story in the results looks like being a change in strategy to invest heavily in 2006 to generate revenue growth and protect its market share at the expense of short term EBITDA” Cazenove

November 2005 Interim Results

MVNOs

VoIP

“How the Internet killed the phone business” The Economist-Sept 05

“We believe Skype destroys $3-5 in traditional Telco revenue for every $1 it generates” Halpern-March 05

2,6Bn $

7

NExT

France Telecom’s strategy for this changing world

8

NExT

VisionOffer customers a New Expérience in Telecom services

Ambition“Become Europe’s telecom service provider of reference”

NExT From network access to services delivery

9

Consumers

NExT Give access to a new world of services

A new generation of telecom services to change everyday lives

Businesses

• Unlimited call plans• FamilyTalk• Livecom …

• Livebox• Livezoom• m-coaching …

• TV over DSL• Live Tv and mobile video• Photo transfert …

• New IP services• Connect remote employees• Connect all corporate sites …

• Project design• Solution integration• Customer service …

10

Content everywhere, multi-platforms, multi-territories: one of the key pillars of NExT

Music everywhere Unique offer across PC, mobile and TVPartnering with Warner Music

Sport everywhereExclusive soccer & rugby agreements, plus other sports

TV everywhereTV bouquets & VOD avalaible through ADSL and 3G,TV, PC, and Mobile

France Telecom behaves as a responsible playerdriving the industry

12

The NExT transformation

Simplicity, innovation, performance

Areas of transformation

● Integrate networks and IT

● Boost the Group’s innovation and marketing

● Unify and simplify customer relations

● Simplify brand architecture

● From Techno-push to Market-pull

● Strengthen operational performance

Drivers

13

Innovation: a company attitude, a recognized talent

World class R&D Center17 sites, including 9 abroad

4200 researchers

7500 patents: 450 registred in 2004

R&D investments: +20% in 2004 and 2005

France Telecom• One of the “Most innovative European telcos of 2004”, Forrester

• “Best Innovator” France 2005, Innovation & Technology category, AT Kearney

Innovation & Integration as the source of profitable growth

San Francisco

Tokyo

London

Boston Warsaw

Canton

New Delhi

Seoul

Beijing Issy les Moulineaux (8 centres in France)

14

Very high speed

internet for businesses

Fixed/MobileConv. VPN

TV on ADSL 3G

2004

E-telephonyLarge

Companies

LiveboxHome

gateway

Business Everywhere

Q1 Q2 Q3 Q4 Q1 Q2 Q3

Video-telephony

Talk Now (Push to talk)

Innovation: delivering new products everyday

Visiokiosk

Live HDTVover

ADSL2+

ADSL2+

VoIPFrance

Photo Album

Instant messaging

2005

VoIPEurope EDGE

LiveBox PRO

Livecom

Live Services

Musicdownload

Premium MMS

Funtones(RBT)

BusinessTalk

Emergency contatcsO

KOO

Internet Business

pack

15

Build the future through Strategic Partnerships

Spheres

Objectives

Personal Home EnterpriseAccess,

Networks, IS, Middleware

Reactivate growth

Build the integrated operator

Adress paradigmatic

changes

Innovating with industry leaders

interactive mobile entertainment appliances

Home gateway NGN-IMSBeyong 3G

Seamless mobility

solutions, Innovative

wireless access

networks

Seamless IP MM services

Seamless IP multimedia services

Authentication, Access security

16

In order to succeed, we need to invest heavily in networks: key factor to extend new services

Broadband access for all and everywhere• DSL, ambitious commitments, sound results : the highest density in Europe.

• Complementarity features of the Wi-Fi, EDGE and 3G networks

“ZAE” Broadband Plan (up to 100 Mbits/s) : a competitivity driver for the majors corporations and SMEs in metropolitan areas* ZAE: Zones d’Activités Economiques; Economic Activity Zones

Broadband France: Europe’s leader

Broadband access for all

70 to 89%90 to 100%

ADSL: 96% of the populationcovered at year-end 2005

MOBILE BROADBAND: 85%of the population covered

EDGE + 3G

Broadband access for all

70 to 89%90 to 100%

ADSL: 96% of the populationcovered at year-end 2005

70 to 89%90 to 100%

ADSL: 96% of the populationcovered at year-end 2005

MOBILE BROADBAND: 85%of the population covered

EDGE + 3G

MOBILE BROADBAND: 85%of the population covered

EDGE + 3G

17

Winning together

18

Winning togetherTelecoms as a key driver of economic and social development• Productivity and economic growth• Regional attractiveness and competitiveness

Investments benefiting the industrial and social ecosystem• Networks - Equipments - Contents• Services for each and everyone

Support growth and innovation • Specific infrastructure economics (fixed costs/long-term profitability)• Commitment and responsibility of all players

Adapt regulation to this new challenge • Boost investment in new technologies• Give Europe the opportunity to be a leader of this new world

19

Thank you