Long live voice!Long live voice!The Voice over DSL OpportunityThe Voice over DSL Opportunity

Long live voice!Long live voice!The Voice over DSL OpportunityThe Voice over DSL Opportunity

Michel PaulinSVP, Network DivisionNovember 20, 2003

2

Apr. 1998

to

2000

2000

to

Early 2001

Early 2001

to

Present

Apr. 1998

to

2000

2000

to

Early 2001

Early 2001

to

Present

Creation of LDCOM by the Louis Dreyfus Group

Launch of the infrastructure activity National and metro fiber networks Colocation and hosting centers

Launch of the network service activities Bandwidth IP connectivity and networks Switched voice services ...

Growth by consolidation of the alternative telecommunications retail sector

• Kertel (January 2001)• Fortel (Squadran) (May 2001)• Kaptech (December 2001)• Belgacom France (March 2002)• FirstMark France (May 2002)• 9 Telecom (August 2002)• Ventelo France (October 2002)• Siris (May 2003)

Mission: To be the leading alternative fixed-line telecommunications operator in France, and an enduring alternative to France Telecom

Strategy• Serve the client with

innovative, high-quality offers at the best prices• Continue to invest to ensure

the best network, reaching closer and closer to the end user•Maintain a solid financial

position through controlled, profitable growth

Mission: To be the leading alternative fixed-line telecommunications operator in France, and an enduring alternative to France Telecom

Strategy• Serve the client with

innovative, high-quality offers at the best prices• Continue to invest to ensure

the best network, reaching closer and closer to the end user•Maintain a solid financial

position through controlled, profitable growth

LDCOM Mission and HistoryLDCOM Mission and HistoryFrom infrastructure builder to full-service wholesaler to integrated telcoFrom infrastructure builder to full-service wholesaler to integrated telco

3

# of custs

.

Network Operators

Largeaccounts

Residential Hosting

Examples

Enterprise

200 70 000 1 200 000 2 000500

Channel partners include:

LDCOM is now active in all segmentsLDCOM is now active in all segments

4

LDCOM is financially strongLDCOM is financially strongGrowing revenue and profitability, decreasing investment, asset-rich, Growing revenue and profitability, decreasing investment, asset-rich, strong net cash positionstrong net cash position

(all amounts in millions of Euros ) 1998 1999 2000 2001 2002 2003E

Selected elements of P&L and cash flows

Revenue 3 38 111 182 551 1,000

EBITDA - 9 11 42 18 90

Capital expenditures 18 118 548 415 105 120

Selected elements of balance sheet (EoY)

Cash - - 149 183 539 400

Net PP&E (fixed assets) 18 145 698 1,100 1,232 1,230

Asset-backed financing - - 21 62 66 45

Deferred revenue 12 62 288 641 630 600

Employees 25 150 500 500 2,200 2,200

5

Voice is still the biggest piece, followed by subscriptionsunbundled DSL allows new entrants to attack both!

Voice is still the biggest piece, followed by subscriptionsunbundled DSL allows new entrants to attack both!

Sources: ART, Oddo Securities

French fixed telco market

0

5

10

15

20

25

1998 1999 2000 2001 2002 2003e 2004e 2005e 2006e 2007e 2008e

bil

lio

ns

of

Eu

ros

Broadband internetDial-up internetLeased lines & other dataVoice (incl. special numbers)Subscriptions

French fixed-line market is growing French fixed-line market is growing slightly thanks to high speed internetslightly thanks to high speed internet

CAGR(‘03-’08)

19%-3%

4%

-3%

2%

6

Data & Internet3.5 B€

Voice(incl. dial-up @ mins.)

11.1 B€

Access & Subscriptions5.4 B€

2002 French fixedtelco market: 20 B€

New entrants France TelecomMkt. share Revenue Margin Value Mkt. share Revenue Margin Value

20%

35%

3%

0.7

3.9

0.2

4.8(24%)

60%

50%

70%

0.4

1.9

0.1

2.4(12%)

80%

65%

98%

100%

100%

100%

SOURCES: ART, LDCOM ESTIMATES

2.8

7.2

5.2

15.2(76%)

0.32.8

2.07.2

0.15.2

17.6(88%)

Competition is still not a realityCompetition is still not a realityFT holds ~75% of market and ~90% of value via ownership of FT holds ~75% of market and ~90% of value via ownership of access and subscriptionsaccess and subscriptions

Unbundled ADSL can change this situationUnbundled ADSL can change this situation

7

Brief history of unbundlingBrief history of unbundling1998 : opening of the French telephony market to competition

Impact is immediate as prices are roughly cut in half

No significant new product development

Customers still obliged to pay monthly subscription to FT2000 : ADSL trials and unbundling negotiations with FT and ART2002 : extension of competition to access market

Summer 2002: start of deployment with first DSLAMs installed

19 December 2002 : LDCOM has unbundled 2,000 lines for our ISP customers (Claranet,

Nerim, Oreka, Maiah, ICT and 9 Online)

End 2002 : 50 million Euros invested2003

March : contract signed with Club Internet

First quarter: total investment by LDCOM reaches 100 million Euros

June : Tele2 and la Poste/FirstStream select LDCOM as supplier of ADSL

September: Connecting 1,000 new lines per day

Investment to date stands at 150 million Euros

8

With 600 installed DSLAMs, LDCOM has most With 600 installed DSLAMs, LDCOM has most aggressive deployment in France after Faggressive deployment in France after F

LDCOM Unbundled ADSL coverage

0

100

200

300

400

500

600

700

Sep-02

Nov-02

Jan-03

Mar-03

May-03

Jul-03Sep-03

Nov-03

Jan-04

Mar-04

May-04

Jul-04

UR

As

0%

10%

20%

30%

40%

50%

60%

70%

80%

% o

f in

tern

et

ma

rke

t

URAs

Residential

Enterprise

9

Driven by unbundled ADSL,Driven by unbundled ADSL,LDCOM access business is explodingLDCOM access business is exploding

LDCOM access lines

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Dec-02

Jan-03

Feb-03

Mar-03

Apr-03

May-03

Jun-03

Jul-03 Aug-03

Sep-03

Oct-03

Unbundled ADSL

Other ADSL

Other technologies(WLL, LL, etc.)

Currently provisioning 6,000 unbundled lines per weekCurrently provisioning 6,000 unbundled lines per week

10

A deep fiber network is criticalA deep fiber network is criticalto profitability in unbundled DSLto profitability in unbundled DSLExample: LDCOM Paris region networkExample: LDCOM Paris region network

11

Price trend

(100% driven by

unbundlers!)

Large-scale unbundling and deep fiber network Large-scale unbundling and deep fiber network allow high-speed internet at very low pricesallow high-speed internet at very low prices

* = only in areas unbundled by FreeSource: SVM

ADSL subscriptions

49.9

29.99

80

2728

32

44.99

39.9

29.99

24.95

18.95

40

20

30

45.52

23

0

10

20

30

40

50

60

70

80

128/64 512/128 1024/256

Speed in kbps (Downstream/upstream)

Eu

ros

/mo

nth

9Online

AOL France

Club-Internet

Free

Tele2

Tiscali

Wanadoo

9Online (with voice)

* *

12

Voice over DSL is also now a realityVoice over DSL is also now a reality

Réseau Voix

ATM 9T

New ATM

DHCP1

DHCP2

Call AgentBase abonné

Ordinateur

Téléphone

IAD

Ordinateur

Téléphone

IAD

Interco ISUP, 6 faisceaux

Unbundling ATM IPTDM

Moving toward an all-IP architectureMoving toward an all-IP architecture

13

Without VoDSL, an aggressive NATIONAL offerWithout VoDSL, an aggressive NATIONAL offerWITH VoDSL, a major shift in value for priceWITH VoDSL, a major shift in value for price

14

VoDSL selling pointsVoDSL selling points

A 2nd line Additional numbers are possible Total unbundling will allow number portability if preferred

Two pricing alternatives Unlimited local/national calls for 40€/month Local/national calls at 0.01€/minute for 27€/month

Calls to other Tout9 customers are always free

Bundle price is lower than France Telecom price for ADSL 1024 (or even 512!) alone

Allows simultaneous calls and internet access

15

Tout 9 enables future services todayTout 9 enables future services todayModem is triple-play readyModem is triple-play ready

• Enhanced voice services

• TV broadcast

• WiFi