IDATE November 2005 Didier Lombard Chairman and CEO France Telecom

A changing world

3 Over the last few years, innovation has been driving industry transformation 5 major technology discontinuities  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  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 VoIP Unlimited offerings Unlimited offerings Price pressure on mobile Price pressure on mobile Investor Day June 2005

5 Mobile operators Fixed operators Regulated players MVNOs Internet players Industrial players Unregulated 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 2,6 Bn $

7 NExT France Telecom’s strategy for this changing world

8 NExT Vision Offer customers a N ew Ex périence in T elecom 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 TV Partnering with Warner Music Sport everywhere Exclusive soccer & rugby agreements, plus other sports TV everywhere TV bouquets & VOD avalaible through ADSL and 3G, TV, PC, and Mobile

France Telecom behaves as a responsible player driving 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 Center 17 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

14 Very high speed internet for businesses Fixed/Mobile Conv. VPN TV on ADSL 3G 2004 E-telephony Large Companies Livebox Home gateway Business Everywhere Q1 Q2 Q3 Q4 Q1 Q2 Q3 Video- telephony Talk Now (Push to talk) Innovation: delivering new products everyday Visio kiosk Live HDTV over ADSL2+ VoIP France Photo Album Instant messaging 2005 VoIP Europe EDGE LiveBox PRO Livecom Live Services Music download Premium MMS Funtones (RBT) Business Talk Emergency contatcs O KOO Internet Business pack

15 Build the future through Strategic Partnerships Spheres Objectives PersonalHomeEnterprise Access, Networks, IS, Middleware Reactivate growth Build the integrated operator Adress paradigmatic changes Innovating with industry leaders interactive mobile entertainment appliances Home gateway NGN-IMS Beyong 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

17 Winning together

18 Winning together Telecoms 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