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Presentation

Strategic consideration

Swot analysis

Weakness

Strength

Concentrated revenue from France

Global penetration of brand awareness limited compared to a few brands

Group hit by a social crisis

Very financially indebted

Failure in the launching of new TV channels

Strong innovative community with over 180 000 employees

European market leader telecom player

Supply chain management capabilities

Extremely high brand value and good advertising

Over 190 million customers worldwide

Mobinil

Orange

Strategic situation

Opportunities

Threats

Regulatory environment

Intense competition

Concentration of industry

Corporate customers restrict their expenses in telecommunication

Growth in telecommunications services

Demand in e-health and multimedia sector

Demand for new technologies from emerging countries

Set up of fiber optic and 4G network

Orange mobile clients in 2012

One of the world’s leading telecommunication carriers

present in more than 220 countries and territories

239 million customers

sales revenue in excess of €41 billion

Orange’s rapid expansion outside of France came as a reaction to the opening of competition in the French market

Founded in 1998

First of the three mobile services operator in Egypt

Orange the biggest shareholder, owning 36% of shares

Very favorable reputation for GSM operations in the Middle East and North Africa

Orange turnover per area and activities in 2012

Why will the acquisition create

shareholder value?

Why this particular target?

Industry description: Egypt

Porter forces in France

Porter forces in Egypt

Threat of substitutes

Threat of new entrants

Threat of substitutes

Threat of new entrants

Industry description: France

- Opening of net telephony and IP alternatives

- High internet services penetration rate

- Intensification of quad-play packages

- Capital requirements

- Saturated market with a market challenger: Free

- Customer retained by historial players

-Decline in Average Revenue Per User (ARPU)

- Regulatory measures

- Opening of net telephony

Dynamic growth rate of population

Two extremely large segment markets (high and low ends)

Growth potential:

Geographically: 50M Mobinil clients in Africa

Financialy: Growing GDP despite Arabic spring

- Capital requirements

- Reputation of Mobinil as « the » GSM network operator in the Middle East and North Africa region

- Government barrier trying to protect Egyptian presence in top management

Rivalry high

Rivalry Moderate

Bargaining power of buyers

Bargaining power of suppliers

The target is a major operator on the egyptian mobile market.

- Price war between operators prevent suppliers from dragging down profitability

- Mature market segments used to seek for lower prices

- Volatile users

- Very highly concentrated offer

Bargaining power of buyers

Bargaining power of suppliers

- Price war between operators prevent suppliers from dragging down profitability

- Two extremely large segment markets (high end small in size yet big in value and low end cost-conscious yet demanding lower-end segment mass market)

- Dynamic market demographics- young populations (60% under 25 years of age)

Saturated Market

Intensification of mobile alternatives through the net

Intensification of competition since the launch of Free Mobile in 2012

Regulatory measures such as mobile terminations rates cuts

Orange

Mobinil

Legal and antitrust issues?

How approach the target?

DCF Model

The Egyptian Financial Supervisory Authority (EFSA) former CMA – Capital Market authority

The decision of the international court of Arbitration in Geneva

Friendly approach

Explained by the history of the partnership

Resolving some controling issues

DCF Model

Financial Synergies

Financing the deal

Operating Synergies

Cash deal :

The deal is abroad: more difficult to make a share deal

Orange as already provisioned the amount that will be paid in its previous books

Increase its debt capacity

The new simplified shareholding structure enables Orange to take its financial decisions

Mobinil could benefit from the good rating of Orange

Benefit from the impact of the « Arab Spring » on the Egyptian Financial

The Egyptian stock exchange dropped in 2012

Avoid Market penetration cost and benefit from local knowledge

Acquisition of various license for Mobinil service (2G, 3G)

Distribution channel : store, franchise, distributor

Marketing skills of Orange can be used to develop the product line of Mobinil

Higher growth on new client:

30 millions of client in Egypt in 2010

That represent almost the half of the 70 million of client of Orange in France

Bidding Strategy

Valuation

Orange & Mobinil deal

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