WIXLIB

IFRS 15 applied to OrangeOrange GroupInvestor RelationsJanuary 30, 2018i1

IFRS 15A new standardon revenueJanuary,1st 2018Effective date of theStandardApplied in full to priorperiodsFirst financialcommunication : Q122018A joint projectconvergencebetween IFRSand US GAAPMajor impact onTelecommunicationsector: Subsidized handsetContracts longerthan one yearUnder IFRS 15, revenuerecognition is going to bebased on thecontractwith thecustomer and not on the invoiceanymore2

Identify a contractIdentifyPerformanceObligation5 stepsapproach33Calculate thetransaction priceAn agreement between two or more parties thatcreates enforceable rights and obligationsAll the goods and services promised to a client with aneed to define if they are distinct or not distinctThe amount of consideration to which an entityexpects to be entitled in exchange for transferringpromised goods or services to the clientAllocation of theTransaction Priceto the PerformanceObligationAllocate the transaction price to each performanceobligation in an amount that depicts the amount ofconsideration to which the entity expects to be entitledin exchange for transferring promised goods orservices to the clientRecognition ofrevenue when theentity satisfies theperformanceobligationRevenue is recognized when the client obtain thecontrol of the performance obligation

Section oneAccounting impacts4

P&L impactsBeforeRevenuecorrespondedto cashreceived fromthe clientAmount (excl. VAT) permonth with a 24 monthcommitment234.99 134.99 Service revenue invoiced amountTOTALCASH(end ofcontract)1369 Equipment revenue 530 Time (enforceable period)Revenuecorresponds tovalue received bythe client The contractnTotal price of the contractAfter5534.99 Invoicedamount 530 The invoicePrice paid by the client: 530 (excl. VAT)Cost for Orange: 770 nTotal price of the contractEquipment andservice revenue24.99 224.99 124.99 Service revenueSubsidy 240 Invoicedamount 530 Equipment revenue 770 24,99 (34.99 (240 /24 months))Time (enforceable period)TOTALCASH(end ofcontract)1369

CustomerinvestmentBefore The equipment revenue is recognizedbased on billed amount at contractinceptionThe service revenue is recognized basedon billed amount over the contract periodBilling Revenue No difference between cash received andrevenue recognizedBalance sheet impacts Nothing inthe balancesheetAfterBillingRevenue66 We need torecord the gap inthe balancesheet Change in the allocation of revenue betweenequipment and serviceThe standalone value of the handset deliveredto the client is recognized in equipmentrevenue at contract inception A contract asset is recognized at inception,corresponding to the amount of the subsidygranted to the client, and will decrease over theenforceable period, as subsidy is recoveredthrough service billing.

ReallocationmechanismExample of theimpacts on P&LA historical downward trend of subsidy budget willtrigger a negative impact on total revenueThe example is based on the following assumption:- Subsidies in Y-2 equal to 100- Enforceable period of 20 months (with an equal distribution of annual subsidies per month)- Whatever the year, subsidies granted are recovered as follows: 32% in the 1st year; 56% in the2nd year and 12% in the 3rd year (Those % represent the average subsidy recovery whethersubsidies are granted in January or December of a given year)Decreasing subsidiesIncreasing subsidies100100115Stable subsidies134100100100Y-2Y-1Y8574Y-2Y-1YY-1YImpact on equipmentrevenue 74Impact on equipmentrevenue 134Impact on servicerevenue: -83,3*Impact on servicerevenue:-119,3**(100*12% 85*56% 74*32%)77Y-2Total impact onrevenue: -9,3*(100*12% 115*56% 134*32%)Total impact onrevenue: 14,7Impact on equipmentrevenue 100Impact on servicerevenue:-100**(100*12% 100*56% 100*32%)Total impact onrevenue: 0

ReallocationmechanismExample of theimpacts on balancesheetThe contact asset balance reflects the subsidypolicy of the previous periodsThe example is based on the following assumption:- Subsidy of Y-2 equals to 100- Enforceable period of 20 months (with an equal distribution of annual subsidies per month)- Whatever the year, subsidy granted are recovered as follow: 32% in the 1st year; 56% in the 2ndyear and 12% in the 3rd year (Those % represent the average subsidy recovery whether subsidyin granted in January or December of a given year)Decrease of -1YContract asset amount endof Y-268--Contract asset amount endof Y-11257,8-69,8Contract asset amountend of Y0*50,360,512,08847,6Impact on servicerevenue on year Y:-83,3m a b c*10,2TOTAL CONTRACTASSETWhen contract asset is equal to 0 it means that there is no more discrepancy between cash collected and revenuerecognized-9,3

Costs relatedto contractsBalance sheet P&L impactsBeforeCosts expensedas incurredOrCostscapitalizedAfterBeforeAccess feesSales commissions andagent fees (1)AfterCosts of obtainingand costs to fulfilla contractcapitalized andexpensed over theenforceable periodIndirect channel marketingcostsDesign, installation, connectioncost related to perf. oblig.(1) Cost related to a firm contractSpread over the enforceable period99Recognized at a point in time

Balance sheet P&L impactsAmountBuild and runBeforeBuild revenuecorrespondedto thepercentage ofcompletion bymilestonesdefined in thecontractBuild delivery *100 K 100 K 50K 50K 50K 50K 50K Time (enforceable period in years)build phaseRun phaseBuild milestone invoicedCornerstone: Is theBuild phaseindividually distinctfrom the service?AmountAfterRun milestone invoicedDistinct: No changes1010Not distinct: buildand run will berecognized as asingle performanceobligation over time40 K (100 K 100 K )/5yea rsBuild delivery *40 K 40 K 40 K 40 K 40 K 50K 50K 50K 50K 50K Time (enforceable period in years)build phasePart of build revenuePart of run revenueRun phase* With transfer of control

Non monetarytransactionsP&L impactsBeforeSome specificwholesale balancedservice agreementswith the use ofcommon activeequipment qualifiedas service contractsBalanced service agreements:- Including sharing of active equipment only- Without cash flow movements Recognition of revenues and expenses separately,for the same amount, as incurred recognition ofrevenues andexpensesAfterThose fewagreements arequalified as nonmonetarytransactions andare out of thescope of IFRS 151111 Net recognitionof revenues andexpensesRevenue53Expenses53EBITDA053m Orange53m PartnerUnder IFRS 15, the same agreements are qualifiedas non-monetary transactions No recognition of revenues and expenses (i.eaccounted on a net basis)

Summary of IFRS 15 impacts per businessRetailEquipment andservice revenueCustomerinvestmentCosts related tocontractsBuild and runNon monetarytransactions12*B to B includes Mobile enterprise in counties and OBS activitiesB to BWholesale

Our firstexpected rangeof impactsExpected impacton 2016 openingequity ofapproximately 800M 1313Expected revenueimpact on a normalcourse of businesswith a decreasing trendin subsidies around-100M Expected EBITDAimpact on a normalcourse of business witha decreasing trend insubsidies andcommission around-130M

Section twoImpacts on disclosures14

BeforeRevenuesActual presentationMobile servicesFixed servicesOther revenuesVoice servicesData servicesShared servicesRevenuesNew presentationEntreprise(excl. Mobile)IT and integration servicesInternational CarriersInternational carriers& Shared servicesAfter Fixed and mobile wholesale revenues(including visitor roaming and incoming)Convergent services Wholesale revenuesMobile services only Mass Market convergent offersFixed services onlyEquipment salesIT and integration servicesA presentation inline with the typeof offers Convergent services Fixed services Mass market andEnterprise Fixed services onlyWholesales revenuesOther revenues15A presentationbased on thenature ofrevenueMobile equipment salesStatementof Income All equipment sales Equipment Sales

BeforeAssetsAssets Total non-current assetsTotal non-current assets Trade receivablesTrade and other receivables Assets related to contracts with customersTotal current assetsTotal current assetsTotal assetsTotal assetsEquity and liabilitiesEquity and liabilities Total equityTotal equity Total non-current liabilitiesTotal non-current liabilities Trade payablesTrade and other payablesDeferred incomeLiabilities related to contracts with customers 2 Total current liabilitiesTotal current liabilitiesTotal equity and liabilitiesTotal equity and liabilitiesACTUAL PRESENTATION16NEW PRESENTATION1BalancesheetConcept ofassets relatedto contractswith customersdid not existAfterNew lines forassets andliabilitiesrelated tocontracts withcustomersAssets related to contracts withcustomers1 Contract assetCosts of obtaining a contractCosts to fulfill a contractProvision on Contract asset2Liabilities related to contracts withcustomers Anticipated spread of subsidy Deferred revenue (Subscription,telephone cards, Loyalty Programs,Connection fees, other)

BeforeThe IFRS 15 backlog only highlights customercommitments towards Orange at the closing dateand shall not be considered as an indicator offuture revenue. No disclosure ofthe backlogBacklogGiven the market practice of contracts withoutcommitment (Broadband contracts and SIMOcontracts), the IFRS 15 backlog only reflects a smallpart of Orange Retail business The relevant French exampleIn France: 30% of mobile contracts are in the scope ofIFRS 15 Backlog17AfterCompulsorydisclosure of theaggregatedtransaction priceallocated toremainingperformanceobligations Only firm contracts will be included inthe backlog calculation All firm contracts whether they includea subsidy mechanism or not Orange will disclose the backlog onlyfor firm contracts that have an initialminimal duration of more than 12months

Section threeImpacts on KPIs18

We will use 3 different ARPO in line with ourrevenue splitARPO* ConvergentWith these 3 KPIs,our main revenuestreams will be welldepicted andunderstood by theinvestors*ARPO: Average Revenue Per Offer19ARPO* MobileonlyARPO* Fixedbroadband only

From Blended Mobile ARPU to Mobile onlyARPO Let’s take an example to illustrate the reconciliation between the 2 indicators :-5 Restatement of Visitorroaming incoming-3,1 ARPUMobileIAS1832 IFRS 15impacts-1,5 ARPUMobileIFRS1528,9 Restatement of Mobile billedservice forconvergence 3,1 Restatement ofIFRS 15 impacts20NewARPOMobileonly25,5

Section fourCommunication timeschedule21

2017 Full Year results release without IFRS15 impacts21st Feb 2018Mid-March2018Beginning ofApril 201826th April 20182222 2017 full year results and 2016 comparatives withoutIFRS15 impact Guidance provided without IFRS15 impacts for bettercomparability A range of IFRS15 impacts estimates will be disclosed inthe notesCommunication of IFRS15 quantitative impacts,historical basisBalancesheet Restatement of 2017 results per quarter (revenue andEBITDA per segment) under IFRS15, on historicalbasis Restatement of 2016 FY results (revenue and EBITDAper segment) under IFRS15, on historical basisCommunication of IFRS15 quantitative impacts,comparable basis Full data book restated (2016 FY, and 2017 per quarter)Orange Polska on a standalone basis willtake different communication options, forcomparability purposes, withoutinterfering with Orange Group financialcommunicationQ1 2018 results release under IFRS15 No comparative figures (2017 and 2016)restated under IFRS15 will becommunicated First quarterly results under IFRS15, with Q1 2017comparatives Results non audited No Q1 2018 results under old standards will beprovided During 2018 period, Orange Polska willcommunicate its financial results underboth IFRS15 and the old standard

Q&A23

IFRS 15 A new standard on revenue January, 1st 2018 Effective date of the Standard between IFRS Applied in full to prior periods First financial communication : Q1 2018 Under IFRS 15, revenue recognition is going to be based on the contract with the customer and not on the