NUMERICABLE-SFR 2015 REGISTRATION DOCUMENT

Transcription

NUMERICABLE-SFR
Corporation (société anonyme) with share capital of €438,245,303
Registered office:
1, Square Béla Bartók
75015 Paris
2015 REGISTRATION
DOCUMENT
In accordance with Article 212-13 of the AMF General Regulations, the French version of this
Registration Document was filed with the Autorité des Marchés Financiers (the “AMF”) on June
16, 2016 under number R16-056. The Registration Document may be used in support of a
financial transaction if supplemented by a transaction note that has received approval from the
AMF. It was prepared by the issuer and is the responsibility of its signatories.
In accordance with the provisions of Article L. 621-8-1-I of the French Financial and Monetary
Code, the document was filed after the AMF had verified that it was complete and
comprehensible and that the information it contained was consistent. This does not imply
authentication by the AMF of the financial and accounting items presented.
Copies of this document are available from Numericable-SFR, 1, Square Béla Bartók, 75015 Paris,
France. This document is also available on the Numericable-SFR website (www.numericablesfr.com) and AMF website (www.amf-france.org).
2015 REGISTRATION DOCUMENT
1 Information About the Group and its Activity .......................................................................... 3
1.1 General Presentation
4
1.2 Group activity and strategy
8
1.3 Regulation of electronic communication services and networks
26
1.4 Presentation of activities
44
1.5 Research and development, patents, licenses
66
2 Risk factors .............................................................................................................................. 67
2.1 Risks relating to the Group’s business sector and markets
70
2.2 Risks relating to the Group’s business activities
75
2.3 Risks relating to the financial structure and profile of the Group
82
2.4 Regulatory and legal risks
84
2.5 Market risks
91
2.6 Insurance
96
2.7 Legal and arbitration proceedings
96
3 Social, environmental, and societal information ................................................................. 103
Scope
104
Methodology of the non-financial information process
107
Organization of internal control
107
Protocol
108
3.1 Social information
109
3.2 Environmental information
123
3.3 Societal information
131
3.4 Cross-reference table(s)
143
Report by one of the Statutory Auditors, appointed as independent third party, on the
consolidated human resources, environmental and social information included in the
management report
146
4 Corporate governance ........................................................................................................... 149
4.1 Administrative and management bodies
150
4.2 Interests and compensation
159
4.3 Corporate governance and internal control
166
5 Comments on the financial year .......................................................................................... 175
5.1 Analysis of the Group’s results of operations
176
5.2 Analysis of the Group’s financial position
189
5.3 Recent acquisitions and disposals
208
5.4 Recent events
208
5.5 Predictable changes and future outlook
211
5.6 Forecasts or earnings estimates
211
5.7 Company results for the last five years
212
5.8 Dividend distribution policy
212
6 Financial information ............................................................................................................. 213
6.1 Consolidated financial statements
214
6.2 Notes to the consolidated financial statements
219
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2015 REGISTRATION DOCUMENT
6.3 Statutory Auditors’ report on the Consolidated Financial Statements
300
6.4 Annual financial statements
302
6.5 Notes to the consolidated financial statements
306
6.6 Statutory Auditors’ report on the annual financial statements
328
6.7 Press release of first quarter 2016
330
6.8 Interim condensed consolidated statements as of March 31, 2016
332
7 General information about the Company and its share capital .......................................... 355
7.1 Information about the Company
357
7.2. Share capital
358
7.3 Charter and Articles of Association
364
7.4 Information about the Company’s share capital and shareholder base
372
7.5 Related party transactions
378
7.6 Major contracts
383
8 Additional information ........................................................................................................... 387
8.1 Person responsible for the Registration Document and declaration
388
8.2 Persons responsible for auditing the financial statements
389
8.3 Third-party information and statements by experts
390
8.4 Publicly available documents
390
8.5 Cross-reference tables
391
2
1
Information About the Group and its Activity
1
Information About the
Group and its Activity
1.1
1.2
1.3
1.4
1.5
General Presentation ........................................................................................................... 3
1.1.1 Key figures
3
1.1.2 History
3
1.1.3 Group structure
4
Group activity and strategy................................................................................................. 7
1.2.1 Market and sector information
7
1.2.2 Group's strength and competitive advantages
8
1.2.3 Strategy
22
Regulation of electronic communication services and networks .................................. 26
1.3.1 European regulatory framework applicable to electronic communications
26
1.3.2 French regulatory framework applicable to electronic communications
28
1.3.3 Regulation of the content of electronic communication
41
1.3.4 Tax regime applicable to distribubtors of audiovisual services
42
1.3.5 Consolidation of the French electronics communications market
43
Presentation of activities................................................................................................... 45
1.4.1 Consumer activities (B2C)
45
1.4.2 Business activities (B2B)
52
1.4.3 Operator activities
56
1.4.4 Activities of Société réunionnaise du radiotéléphone (SRR)
57
1.4.5 Activities of SFR Collectivités
56
1.4.6 Activities of equity associates
59
1.4.7 Network and real estate
59
1.4.8 Seasonal nature of the activity
67
1.4.9 Suppliers
67
Research and development, patents, licenses ................................................................ 68
1.5.1 Research and development
68
1.5.2 Intellectual property
68
1.5.3 Licenses, usage rights, and other intangible assets
68
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1
1.1
1.1
General Presentation
1.1.1 Key Figures
in millions of euros
12/31/2015
12/31/20141
Change
(in %)
112,039
11,436
-3.5%
 B2C
7,595
7,888
-3.7%
 B2B
2,116
2,223
-4.8%
 Wholesale
1,328
1,325
0.2%
Adjusted EBITDA2
3,860
3,213
20%
Revenues
Adjusted EBITDA ratio
35%
28%
+7 pts
CAPEX
1,856
1,894
-2%
Adjusted EBITDA - CAPEX
52%
2,004
1,319
Net income
682
-146
Debt to equity ratio
3.7
3.6
1
2
Proforma data for the fiscal year ended December 31, 2014 showing the impact of the acquisition of SFR Group and Virgin Mobile as if
those transactions had occurred on January 1, 2014.
See Section 6.2 Note 7 “Reconciliation of operating income to adjusted EBITDA.”
1.1.2 History
Numericable-SFR Group is the result of the merger in 2014 of SFR and Numericable Group, aimed at creating a French
market leader in the convergence of very high-speed fixed-line and mobile services.
1.1.2.1 History of Numericable
Numericable dates back to the creation of cable networks in France, installed partly in response to the government's
Cable Plan in the early 1980s and partly by local authorities. In 2005, Ypso France, owned by Altice and private equity
fund Cinven, after acquiring the cable businesses of France Telecom Cable, TDF Câble and NC Numericable, became
the largest French cable operator. In 2007, Ypso brought all its cable activities under a single brand (Numericable), and
Altice and Cinven acquired Completel. Completel was created in 1998 to take advantage of the opportunities in the B2B
sector arising from the progressive liberalization of the European telecommunications market.
In November 2013, Numericable Group successfully placed its initial public offering (IPO) on Euronext Paris.
On November 27, 2014, Numericable Group acquired 100% of the share capital of SFR from Vivendi, which thereby
became a 20.3% shareholder in the renamed Numericable-SFR Group, alongside the majority shareholder Altice with
59.7%.
In December 2014, the Company acquired 100% of the share capital of Omer Telecom, Virgin Mobile France’s holding
company.
In May 2015, Vivendi sold its entire stake in the Company, half of which was bought back by the Company and half by
Altice.
1.1.2.2 History of SFR
Founded in 1987, SFR has progressively grown to become an integrated operator with diversified services in telephony
and fixed-line and mobile Internet across the entire telecoms market including consumer, business and operator
segments.
In 1987, Compagnie Générale des Eaux created SFR (Société Française de Radiotéléphone), which became the initial
player in the liberalized mobile market. In 1999, Compagnie Générale des Eaux, now renamed Vivendi, restructured its
telecommunications activities to create the SFR-Cegetel Group.
In 2003, with the merger of Cegetel and Télécom Développement, SFR-Cegetel Group became the biggest private fixedline telecom operator in France (topping the historic operator France Telecom).
In 2004, SFR-Cegetel Group was the first operator to launch a package on its new 3G mobile telephony network.
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1
1.1
In 2005, SFR-Cegetel Group disappeared as such, through the merger of its subsidiary Cegetel and Neuf Telecom,
which now became Neuf Cegetel. That year also saw the demerger of SFR from its fixed-line activities, formerly Cegetel,
now Neuf Cegetel.
In 2007, SFR launched its first ADSL package and bought out the fixed-line activities of Télé2 in France.
In 2008, SFR became the majority shareholder in Neuf Cegetel by buying up Louis Dreyfus Group’s stake, thus also
becoming the second largest global telecoms operator in France.
In 2011, Vivendi bought Vodafone's 44% stake in SFR, thereby increasing its control of SFR to 99.99%.
In November 2012, SFR was the first operator to offer 4G in France to consumers and businesses.
In November 2014, the merger of SFR and Numericable Group saw the birth of Numericable-SFR Group.
1.1.3 Group Structure
The simplified organizational chart below shows the Group’s legal structure as of the filing date of this Registration
Document.
The percentages shown in the chart denote the percent of share capital held.
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1
1.1
(1) Numericable-SFR holds the entire share capital of SFR SA with the exception of 10 shares.
Numericable-SFR – 2015 Registration Document
6
1
1.1
1.1.3.1 Significant Subsidiaries
The Company’s principal direct and indirect subsidiaries are described below.
 Société Française du Radiotéléphone - SFR is a limited liability corporation with share capital of €3,423,265,598.40.
Its registered office is located at 1 square Béla Bartók, 75015 Paris, France and it is registered with the Paris Trade
and Companies Register under number 343 059 564. SFR is a telecommunications operator active in mobile
telephony and fixed-line and mobile Internet markets, targeting the B2C, B2B and wholesale segments. The
Company owns 100% of SFR (excluding 10 SFR shares held by a minority shareholder).
 NC Numericable is a French simplified joint stock company with share capital of €78,919,817.50. Its registered office
is located at 10, rue Albert Einstein, 77420 Champs-sur-Marne, France and it is registered with the Meaux Trade and
Companies Register under number 400 461 950. The Company indirectly holds 100% of the share capital and voting
rights of NC Numericable. NC Numericable operates the Group’s cable networks and markets the following services:
broadcasting of television programs, telephony, high-speed Internet and video on demand (VOD).
 Completel is a French simplified joint stock company with share capital of €146,648,525.88. Its registered office is
located at 1 square Béla Bartók, 75015 Paris, France and it is registered with the Nanterre Trade and Companies
Register under number 418 299 699. The Company indirectly holds 100% of the share capital and voting rights of
Completel. Completel is a telecommunications operator specialized in high-speed and ultra-high-speed Internet for
businesses, the public sector, operators and service providers. In 2011, Completel acquired B3G, a leading French
provider of IP Centrex services, and Altitude Télécom, a telecommunications operator active primarily in western
France.
 Société Réunionnaise du Radiotéléphone – SRR is a limited partnership with share capital of €3,375,165. Its
registered office is located at 21 rue Pierre Aubert, -97490 Sainte Clotilde, France and it is registered with the Trade
and Companies Register of Saint-Denis de la Réunion. SRR operates in Réunion and Mayotte in the B2C and B2B
markets. This company distributes its mobile, fixed-line and Internet services under the SFR brand. In Mayotte its
services are distributed via its subsidiary, Société Mahoraise du Radiotéléphone (“SMR”). SFR owns 100% of SRR.
 SFR Service Client is a corporation with share capital of €150,000. Its registered office is located at 12 rue JeanPhilippe Rameau, 93634 Saint-Denis Cedex, France and it is registered with the Bobigny Companies Register under
the number 413 512 013. It is a wholly owned subsidiary of SFR. SFR Service Client is in charge of customer
relations in the B2C segment and provides support for B2C distribution of the SFR brand. As such, it provides
customer relationship services either directly or via subcontractors. These services mainly include call centers, billing,
customer communication and after-sales care.
 SFR Collectivités is a corporation with share capital of €50,152,492. Its registered office is located at 12 rue JeanPhilippe Rameau, 93634 Saint-Denis Cedex, France and it is registered with the Bobigny Trade and Companies
Register under number 419 753 587. It is a wholly owned subsidiary of SFR. SFR Collectivités was specifically set up
to work with local authorities in supporting the deployment strategy for the Group’s networks and services in their
area. The company has been awarded several public service contracts for the building and operation of
telecommunications infrastructure. These contracts are awarded by local authorities that want to extend broadband
coverage and provide local businesses with high-performance infrastructure. Generally valid for 15 to 20 years, these
public service contracts set targets in terms of deployment, service offering and prices. Investment subsidies are
generally granted by local authorities to improve the economic balance of the projects. SFR Collectivités has created
several special purpose entities specifically to manage these contracts.
 SFD is a corporation with share capital of €6,000,000. Its registered office is located at 41 rue Delarivière Lefoullon,
92807 Puteaux, France and it is registered with the Nanterre Trade and Companies Register under the number 410
358 865. Its purpose is to distribute the SFR offering to SFR stores. On December 8, 2015, SFR Participation
exercised all its call options on Somart and OBC. The Company currently owns 100% of SFD.
 Compagnie d’Investissements Diversifiés - CID is a corporation with share capital of €70,037,865. Its registered office
is located at 12 rue Jean-Philippe Rameau, 93634 Saint-Denis Cedex, France and it is registered with the Bobigny
Trade and Companies Register under number 414 754 739. CID owns the company Cinq sur Cinq, which distributes
the SFR offering to SFR stores. CID also owns Futur Telecom, a provider of communication solutions aimed at small
and medium-sized companies, and Connect Assistance (2SIP) which carries out home installation. On December 8,
2015, SFR Participation exercised all its call options on Somart and OBC. The Company currently owns 100% of
SFD.
 SFR Business Solutions (formerly Telindus) is a simplified joint stock company with share capital of €43,929,984. Its
registered office is located at 12 avenue de l’Océanie, 91940 Les Ulis, France and it is registered with the Evry Trade
and Companies Register under number 348 505 256. SFR Business Solutions is one of the main players in the
French telecom integration and ICT market and is the largest Cisco distributor in France. SFR Business Solutions is
set to increase the Group’s presence in the telecom integration market and will offer new services to its business
customers.
 Numericable US is a simplified joint stock company with share capital of €37,608,579. Its registered office is located
at 1 square Bela Bartok 75015 PARIS, France and it is registered with the Paris Trade and Companies Register
under number 801 376 161. The Company indirectly holds 100% of the share capital and voting rights in Numericable
US, which in turn holds 100% of the share capital and voting rights in Numericable US LLC, a company incorporated
in the USA, whose registered office is at 901 N. Market St, Suite 705, Wilmington, County of New Castle, Delaware
19801, USA. Numericable US and Numericable US LLC were created on March 26, 2014 for the purpose of financing
the SFR acquisition.
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1
1.2
Group activity and strategy
 Omea Telecom SAS is a simplified joint stock company with sole shareholder and share capital of €1,026,396. Its
registered office is located at 12/14 rue Belgrand, 92300 Levallois-Perret, France and it is registered with the
Nanterre Trade and Companies Register under the number 495 028 987. The company is a mobile virtual network
operator (MVNO) active in the retail mobile telephony market. It offers a range of mobile and fixed telephony services
marketed under the Virgin Mobile brand.
 Numergy is a company offering all economic actors remotely accessible and secure IT infrastructure capable of
hosting data and applications (“cloud computing services”), with enhanced security and confidentiality. Since the sale
by Bull and the Caisse des Dépôts of their entire stake in SFR Participation in January 2016, the Company indirectly
holds 100% of the share capital and voting rights in Numergy.
In terms of operating businesses, the Group’s most significant subsidiaries are SFR, SRR, SFR Service Client, SFR
Collectivités, NC Numericable, Completel, Omea Telecom and SFR Business Solutions.
1.1.3.2 Equity investments
As of the date of this Registration Document, the Group holds the following direct and indirect equity investments:
 50% of the share capital and voting rights of Infracos. Under the terms of a memorandum of understanding signed on
January 31, 2014, SFR and Bouygues Telecom defined the terms of an agreement to share part of their mobile
networks that would enable them to offer their respective customers better-quality services at an optimized cost (see
Section 7.7 “Major contracts” of this Registration Document). To this end, SFR and Bouygues Telecom have formed
a special purpose entity, initially tasked with optimizing the number of sites, and subsequently with managing the
portfolio of consolidated sites.
 49% of the share capital and voting rights of La Poste Telecom. In 2011 SFR and La Poste created a joint subsidiary,
La Poste Telecom, of which they own 49% and 51% respectively. This company is an MVNO active in the retail
mobile telephony market. It offers a range of mobile telephony services, which since May 23, 2011 have been
marketed under the La Poste Mobile brand via La Poste’s branch network;
 30% of the share capital and voting rights of Synérail and 40% of the share capital and voting rights of Synérail
Construction. Synérail is the project company awarded the GSM-R partnership agreement by Réseau Ferré de
France for the design, construction, deployment, operation, maintenance and financing of the GSM-R mobile
telecommunications network developed for rail communications and applications. The remainder of Synérail is owned
by Vinci, AXA Infrastructure and TDF. Synérail Construction was chosen by Synérail to build the network. The
remaining shares of this company are held by Vinci Energies.
All other equity investments of the Group are classified as “other financial assets” in the Group's consolidated financial
statements. These can be found in Chapter VI, Section 1.1 “Consolidated financial statements of the Group as of
December 31, 2015” of this Registration Document.
1.2
1.2.1 Market and sector information
France is the third-largest telecommunications market in Europe, with revenues of approximately €40 billion in 2015
(Source: Paul Budde Communication Pty Ltd, www.budde.com.au; 2015 annual earnings releases). Although the Group
operates in all sectors of the French telecommunications market, its activities are centered on very high speed fixed-line
Internet, pay-TV and next-generation B2B mobile services (advanced data services, IP VPN, hosting and cloud
services).
France is one of the largest European markets in terms of access to fixed-line high speed Internet, with nearly 26.9
million fixed-line high speed subscriptions as of December 31, 2015 (Source: ARCEP). Having a broader bandwidth is
becoming increasingly important for B2C subscribers. With only 15.9% of broadband lines in France being very high
speed as of December 31, 2015 (Source: ARCEP), a smaller percentage than in a great many European countries,
access to very high speed Internet continues to grow fast. As of December 31, 2015, 5.6 million households were eligible
for very high speed optical fiber to the home (FTTH), which corresponds to a 12% increase in one quarter, and a 38%
increase year-on-year. (Source: ARCEP).
In the mobile market, the total number of SIM cards continues to increase, from 79.9 million cards as of December 31,
2014, to 81.8 million subscribers as of December 31, 2015 (Source: ARCEP). This growth has been supported by an
increase in the rate of penetration of cell phones, smartphones and tablets, and the growth of quadruple-play offers.
Nevertheless, the value of the French mobile market declined after the fourth mobile telephony operator entered the
market in early 2012, having as a consequence, among other things, a drop in the pricing of mobile offers in France. As
of the date of this Registration Document, the prices for mobile subscriptions in France had reached levels that were
among the lowest in Europe for comparable offers.
In the B2C and B2B segments, data usage has increased and data needs have become more complex, as the next
generation services require higher speeds and bandwidth capacity.
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1.2
1.2.1.1 B2C Market
The Group is present in metropolitan France and thus handles a population of approximately 66.6 million residents as of
December 31, 2015 (Source: INSEE).
The French B2C Internet access segment is a mature one, with 26.9 million fixed-line high speed Internet subscribers as
of December 31, 2015 (Source: ARCEP).
In terms of very high speed Internet access, which the ARCEP defines as Internet access for which the peak download
speed is greater or equal to 30 Mbps, the French market nevertheless presents a relatively low rate of penetration, with
only 15.9% of households having very high speed Internet access as of December 31, 2015 (Source: ARCEP). The
Group estimates that such under-penetration could constitute an attractive opportunity for growth, as B2C subscribers
are beginning to favor higher speed and bandwidth capacity for their Internet use.
The French high speed Internet access market is one of the most competitive in Europe, with significant unbundling and
strong incumbent competitors. The Orange fixed-line network includes a local exchange serving the entire French
population, and the unbundling allows other DSL access providers to access it at a price that is regulated by ARCEP.
According to ARCEP, as of December 31, 2015, more than 90% of the French population was able to access competitive
retail offers thanks to unbundling, which makes France one of the European leaders in that area (Source: ARCEP). All
operators reputed to exert significant influence are required to offer unbundled access to their local loop and associated
infrastructure under non-discriminatory conditions, which leads to increased competition on the market. See “Regulations
- Asymmetric regulation of fixed-line telephony markets and high speed and ultra high speed markets".
Competition in the B2C market has intensified, as the president of Bouygues Telecom announced in December 2013 his
intention to launch a price war on fixed-line Internet offers in 2014, following Free's ads for its 4G offers and the results of
its competitors. Bouygues Telecom introduced a triple play offer at €19.99 per month in February 2014, and in July 2014
launched a FTTH offer at €25.99 including tax, per month, with no commitment in terms of duration. In March 2015, Iliad
announced the release of a new triple play box under Android TV™, the mini 4K, at the price of €29.99 per month, with
no commitment in terms of duration.
As of December 31, 2015, Orange, Free (Iliad) and Bouygues Telecom reported a volume of subscribers to broadband
services of 10.7 million, 6.1 million and 2.8 million, respectively (Source: announced in those companies’ 2015 annual
earnings releases).
The French B2C mobile telephony market is a mature market, even though it has experienced significant changes in
recent years, with the entry of a fourth mobile telephony operator in January 2012. The penetration rate of mobile
telephony in France (including M2M SIM cards, i.e. cards for communicating devices) has been increasing for years, but
has recently stabilized with a penetration rate of 117%, 122% and 124% at year-end 2013, 2014 and 2015, respectively
(Source: ARCEP).
1.2.1.1.1
Sector Convergence
The convergence of the B2C segment in France is the result of consumers’ desire to receive multimedia and
telecommunications services from a single operator and at an attractive price. In response, operators offer television,
high speed Internet and fixed-line telephony services, which are grouped into bundled offers known as “double play” (two
services provided together), “triple play” (three services - telephone, Internet, television - provided together) or
“quadruple play” (telephone, Internet, television and mobile telephony provided together). “Quadruple play” offers have
been available on the French market since 2009 (Bouygues Telecom). SFR and Orange introduced “quadruple play”
offers in 2010, Numericable followed in 2011 and Free did the same in 2012.
These bundled service offerings allow multimedia and telecommunications service providers to satisfy the
communication and entertainment needs of consumers, and draw new subscribers thanks to the improved value of the
offers.
The fiber-optic/two-way cable networks are particularly adept at supplying triple play services that require wide
bandwidth. Initially designed to transmit significant amounts of data, the hybrid fiber and coaxial cable network of the
Group, which is based on FTTB technology, allows it to provide high speeds to the customer, regardless of distance.
Conversely, the actual speed of the DSL networks varies according to the distance from the access point to the local
loop, as the speed decreases as the geographic distance from the subscriber compared to this access point increases
(the maximum speeds noted are for customers located within one kilometer of the nearest access point). In order to
increase and standardize the speed of its networks, Orange has started investing in the construction of an FTTH
network. Iliad and SFR also began to roll out FTTH networks. As of December 31, 2015, approximately 1.4 million
subscribers were connected to FTTH networks (Source: ARCEP).
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1.2
1.2.1.1.2
a)
High speed Internet
Introduction
High speed Internet access, often referred to simply as “high speed Internet,” is a high speed data Internet connection.
Recommendation I.113 of the Standardization Sector of the International Telecommunication Union (ITU) defines
“highspeed Internet” or “broadband” as a transmission capacity that is higher than the primary speed of the ISDN, which
is approximately 1.5 to 2 Mbps. France, with 26.9 million high speed Internet subscribers as of December 31, 2015
(Source: ARCEP), is one of the largest high speed Internet access markets in Europe. However, in terms of very high
speed Internet access, the French market has a relatively low penetration rate, with just 15.9% of households having
very high speed Internet access as of December 31, 2015 (Source: ARCEP). The Group estimates that these low
penetration rates constitute an attractive growth opportunity for the Group as a reliable very high speed Internet access
provider. Smartphones and tablets are proliferating, and as they are increasingly used for multimedia functions, B2C
subscriptions require both more bandwidth (to adapt to the increased average number of screens per household) and
quicker download speeds (to adapt to the use of multimedia services).
The main high speed Internet access technologies are DSL (VDSL2) and fiber optics/cable. Digital analog modems,
Internet access via electric cable and local wireless loop technology are likewise available in France, although to a lesser
extent.
b)
Main distribution platforms - DSL, VDSL2, fiber optics and cable
DSL is the leading high speed Internet access platform in France, with 22.1 million subscribers as of December 31, 2015,
and representing approximately 82% of the total French high speed and very high speed market (Source: ARCEP). This
situation is the result of several factors: the regulatory environment which encouraged competition for DSL thanks to
unbundling and regulated wholesale prices; the relatively recent consolidation of cable activity in France and the weak
cable connection level (only 29.2% of French households at December 31, 2015); the fact that the modernization of
cable networks is relatively recent; and the relatively low levels of roll-out of fiber optics.
DSL currently offers consumers a maximum speed of 28 Mbps, while cable currently offers consumers a maximum
speed of 200 Mbps. Subscribers may experience average speeds that are slower than the maximum advertised. In
particular, DSL speed depends on the distance between the local loop access point and the home.
The Group’s network uses both FTTH technology and FTTB technology. FTTH technology, which requires a fiber link
directly to the subscriber, currently offers consumers a maximum speed of 1 Gbps. The major difference between the
FTTH networks and the fiber/cable network (FTTB) lies in the fact that for FTTB, the vertical connection (within the
building) to the subscriber uses a coaxial cable.
The roll-out of FTTH networks in France began slowly. Installation of this type of technology represents an investment of
capital and time, and requires civil engineering and cabling work, be it horizontally to increase the number of residents
covered, or vertically within buildings. The government considers the FTTH networks to constitute a significant part of its
long-term investment plan, and in February 2013 announced an FTTH roll-out program (for which cable technology is not
eligible) of €20 billion (invested by private operators and local and regional authorities) and the objective of providing very
high speed Internet access to 50% of the population by 2017, and to the entire country by 2022. The government will
provide a €3.3 billion subsidy package, a portion of which comes from the Investments for the Future Program
(Programme des Investissements d’Avenir), which is managed by France's General Commissariat for Investments and
governed by the 2015 Budget Act. Since July 2015, a total of €1.49 billion in subsidies has been invested under this
program. Various local and regional authorities have already agreed on subsidies to network operators for installing
FTTH connections. This trend should continue, as certain departments, municipalities and regions, such as Hauts-deSeine, Amiens and Louvin, for example, have entered into public-private partnerships to encourage such investments. As
of December 31, 2015, France had a total of 1.4 million very high speed Internet subscribers via FTTH, a +52.7%
increase in one year. The Group signed agreements with Orange, as did Free, relating to the roll-out of fiber optics in
less dense zones of France. In accordance with the conditions established by ARCEP, third party operators may likewise
have access to the infrastructure used by an operator, including by co-financing projects, for their own very high speed
Internet offers.
VDSL2 technology is an alternative solution. DSL networks may be improved, and a portion of them have already been
improved, thanks to the VDSL2 technology, which the government authorized for use in April 2013, and which provides
average bandwidth speeds of up to 50 Mbps (Source: ARCEP). More particularly, the roll-out of VDSL2 only requires the
addition of VDSL2 cards in the DSLAMs that were already rolled out, and does not entail any physical intervention at the
subscriber's home. Moreover, the deployment of this technology has accelerated since October 2014, given the
favorable opinion of the copper experts committee, which has allowed VDSL2 to be marketed, starting from that date, in
indirect distribution on all lines from an MDF on Orange’s local copper loop. As of December 31, 2015, about 5.3 million
homes were eligible for VDSL2 (Source: ARCEP).
As of December 31, 2015, very high speed subscribers represented approximately 15.9% of all high speed Internet
subscribers (Source: ARCEP), but the Numericable Group was the top player on this market. With its modernized
network and set-top boxes, the Group currently offers cable customers Internet speeds of up to 800 Mbps.
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The following table shows a breakdown of high speed and very high speed Internet services in France from December
31, 2014 to December 31, 2015 (Source: ARCEP):
Q4, 2014
Q1,
2015
Q2,
2015
Number of high speed and very high speed subscribers on fixed-line
networks
25.971
26.175
26.274
26.575 26.865
Number of high speed subscribers
23.006
22.829
22.651
22.694
22.6
22.533
22.353
22.175
22.19
22.09
0.47
0.476
0.476
0.503
0.51
2.965
3.345
3.624
3.882
4.265
of which FTTH subscribers
0.933
1.038
1.141
1.253
1.425
of which very high-speed (100 Mbps) subscribers
0.893
0.963
1.011
1.135
1.2
of which very high-speed (30 and 100 Mbps*) subscribers
1.139
1.344
1.472
1.493
1.64
(in millions)
of which xDSL subscribers
of which other high-speed subscribers
Number of very high speed subscribers
*
Q4,
2015
including VDSL2 subscribers with throughput ≥ 30 Mbps
Change in the number of high speed and very high speed subscribers
Net Growth year-on-year, in millions
Net Growth year-on-year, in %
Net growth over the quarter, in millions
Absolute Growth over the quarter, in millions**
*
**
Q3,
2015
Q4, 2014
Q1, 2015
Q2, 2015
Q3, 2015
Q4, 2015*
1.1.028
0.947
0.866
0.92
0.9
4.10%
3.80%
3.60%
3.40%
3.40%
0.316
0.203
0.1
0.301
0.29
1.3
1.25
1.15
1.5
1.5
Provisional results.
Data rounded to the nearest 12,500.
As of December 31, 2015, the Group had 6.3 million Internet subscribers, including 4.5 million DSL subscribers, and 1.8
million FTTB and FTTH subscribers.
The Group is likewise in competition with operators who use alternate technologies for high speed Internet access, such
as mobile 3G and 4G Internet. As of September 30, 2015, there were a total of 71.8 million SIM cards on the French
market (including 69.6 million “active” cards) and, as of September 30, 2015, 46.7 million active mobile 3G subscribers
(Source: ARCEP). The Group, along with Orange, Bouygues Telecom and Free, also rolled out offers based on
4G/Long-Term Evolution (“LTE”), which allow quicker high speed mobile Internet service to be provided. In October
2011, Orange, SFR, Bouygues Telecom and Free obtained licenses for the spectrum range of 2.6 GHz, adapted to the
roll-out of the 4G/LTE networks. The Group, along with Orange and Bouygues Telecom, already announced it had
reached one million 4G subscribers each. Free’s 4G offer launched in December 2013.
Moreover, alternative Internet access technologies could be introduced in the future. These technologies should further
increase competition, or could lead operators to increase their investment costs to make additional upgrades.
Competition in these alternative technologies, specifically in terms of pricing, could become more intense in the future.
1.2.1.1.3
a)
Pay-TV
Introduction
The French pay-TV market is one of the largest in Europe. As with other European markets, the behavior of B2C
consumers of television services in France is increasingly centered around digital, innovative, HD, Ultra-HD, and 3DTV
television services, as well as interactive television services such as VOD, which require large bandwidth, along with bidirectional distribution platforms.
b)
Broadcast platforms
In France, television signal broadcasting platforms include satellite, IP (DSL/FTTH), the Group's cable network, terrestrial
systems (DTT), and OTT. TV viewers who have the appropriate television equipment may receive signals and watch
programs on approximately 25 television channels free of charge (with no subscription) through DTT. In order to have
access to more channels or content, TV viewers must subscribe to pay-TV services. The pay-TV market in France is
divided between standard pay-TV, in the form of packages of standard channels, in other words DTT channels, as well
as low added-value channels, and premium pay-TV in the form of premium channel offers, which are specialized in
sports, cinema and other thematic channels. The incumbent operators of pay-TV must confront growing competition in
free television (including DTT) and other alternatives to pay-TV (“over-the-top” or OTT and catch-up TV), although the
competitive advantage of pay-TV (excellent quality programming and premium services) and the loyalty of the existing
subscriber base have contributed to its sustainability (low price sensitivity and weak churn).
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The growth of IPTV has transformed the market, offering the possibility of providing pay-TV services that go beyond the
traditional cable and satellite methods (which is limited by the impossibility of installing a satellite dish on the facade of
buildings in certain areas, such as the center of Paris).
Even though pay-DTT (which now concerns only the Canal+ Group) currently represents a low share of pay-TV,
providers of pay-DTT could in the future be able to offer a larger selection of channels to a broader audience at a price
that is lower than the one billed by the Group for its cable television services.
The Canal+ Group distributes its offers on all broadcasting platforms: DSL, DTT, satellite and the cable network of the
Group (in the latter case, only for channels that belong to Canal+, called Les Chaînes Canal+, excluding CanalSat). The
Canal+ Group has two additional offers: a premium offer consisting of Les Chaînes Canal+ and a multi-channel package
known as CanalSat. These two supplementary offers may be subscribed to individually or together. The Canal+ Group
has developed numerous services with high added value to its offerings, such as CanalPlay (TV on-demand not
available by satellite but available on the Group's cable network), HD and even multi-screen broadcasting. As of
December 31, 2015, Canal+ Group had 11.2 million subscribers, and 5.7 million individual subscribers in metropolitan
France (Source: 2015 Vivendi income statement). The Canal+ Group has negotiated agreements with broadcasters on
the broadcasting platforms to which they hold rights. As NC Numericable has not yet granted rights to Canal+ Group for
its platform, Canal+ cannot negotiate rights over that platform. NC Numericable is thus negotiating its own agreements
with the broadcasters. Nonetheless, following the decision in March 2015 by the Competition Authority, confirmed by the
Council of State in a Judgment on March 21, 2016, Canal+ Group can participate in the bidding and acquire exclusive
rights to broadcast programs by content providers, in particular on NC Numericable’s cable network. Canal+ Group has
also recently acquired the exclusive right to broadcast Eurosport and most Disney channels in France. Additionally, in
February 2016, Canal+ and BeIN Sports announced they had signed a draft exclusive broadcasting agreement, which is
currently awaiting Competition Authority approval.
With regard to Canal+ Group, the Group's cable pay-TV offers are above all in competition with the CanalSat offers, as
the content of their offers is similar (the content of the Canal+ channels is exclusive to the Canal+ Group). There are
several CanalSat offers: CanalSat Panorama (approximately 90 channels, €24.90 per month) and CanalSat Grand
Panorama (the panorama channels + the Cinema Series channels, €39.90 per month). There are also “Totale” packages
(series, family entertainment and sports) that include the Canal+ channels - as well as CanalSat Series Cinema,
CanalSat Panorama, CanalSat Sports and other options and channels at €59.08, €64.80 and €49.90, respectively. The
Multisports and BeIN Sport channels are not included but may, along with other channels, be added as an option.
CABLE
The Group is the only major cable operator in France, with 99% of the cable television market (Source: Paul Budde
Communication Pty Ltd, www.budde.com.au). The income from cable network operators primarily comes from
subscription costs paid by subscribers for services provided. The Group estimates that direct access to its subscribers
will allow it to identify and respond locally to their demand for specific products and services more easily, and thus to
better serve them. The services provided by the cable networks feature easy-to-use technology, installation that is
adapted to equipment at subscribers’ homes, and reliable secure signals which are directly broadcasted to their homes.
Cable television subscribers can access the customer services provided by the cable operator upon request. Cable also
offers subscribers a high quality of service, including excellent image quality, multiple HD channels, 3D compatibility and
VOD offers.
In view of the market trend toward grouped offers for multimedia and telecommunications services, the market share in
cable television should benefit from the capacity of cable to provide triple-play services that benefit from a broad
bandwidth, high speed and bi-directional capacity.
As of December 31, 2015, the cable network is limited.
SATELLITE
Satellite holds an important place on the French television market, in particular for premium products. Satellite
subscribers may opt for free satellite television or pay satellite television. Satellite operators broadcast digital signals
directly to television viewers at the national level. To receive the satellite signal, TV viewers must have a satellite dish,
satellite receiver and a TV set-top box. They must also have a “smart card” to access subscription and premium
television services that are broadcast by satellite. Satellite operators of free TV have no contractual relationship with
television viewers and thus do not collect any subscription fees or other royalties.
Satellite broadcasting presents a certain number of competitive advantages compared to cable television services, in
particular a wider range of available programs on a larger geographic zone, in particular in rural areas. Conversely, the
Group estimates that satellites are less widely available in urban areas due to restrictions on the installation of satellite
dishes. The Group considers that satellites also present the following disadvantages compared to cable: (i) high initial
costs of obtaining and installing a dish; (ii) lack of regular maintenance services which, conversely, are provided by cable
operators; and (iii) the vulnerable nature of the reception of satellite signals to external interference, such as unfavorable
weather conditions.
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DSL/VDSL2
Triple and quadruple play offers from the Group are primarily in competition with DSL offers from Orange, Free and
Bouygues Telecom, which are currently offering television services to subscribers connected to the Group’s network by
using high speed DSL Internet connections, and with CanalSat, which offers premium pay-TV on DSL and satellite
networks. Even though DSL technology covers a potentially larger customer base (covering, for Orange, its local loop,
and for the others, the part of Orange’s local exchange which was unbundled), the Group estimates that the superiority of
its fiber optic/cable technology in terms of quality, reliability and richness of content will allow it to challenge this
statement in the years to come in the areas where the Group has rolled out its fiber optic/cable network. See “- Group
network.” The Group considers that DSL television presents a disadvantage as compared to cable: the addition of
television services on a DSL network has the effect of saturating the network and decreasing the available bandwidth for
the other services offered, in particular high speed Internet services which require broad bandwidth. However, the roll-out
of VDSL2 could attenuate the effects of this disadvantage.
PAY DIGITAL TERRESTRIAL TELEVISION
The Group’s cable television services are likewise in competition with the pay-digital terrestrial television (DTT)
operators, such as the Canal+ Group. DTT currently offers only a limited number of channels, and no interactive
television service, providing above all free television, although the quality of the image provided is good.
OTT AND OTHER EMERGING TECHNOLOGIES
The Group is faced with growing competition for alternative methods for broadcasting television services other than
through traditional cable networks. For example, online content aggregators that broadcast “over-the-top” (“OTT”)
programs on a high-speed network, such as Amazon, Apple, Google and Netflix, have already become competitors and
are expected to grow stronger in the future. Connected or “smart” TVs facilitate the use of these services.
OTT refers to high speed broadcasting of video and audio content without the Internet access provider being involved in
the control or distribution of the program (its role is limited to transporting IP packages,) as opposed to the purchase of
video or audio programs from an Internet access provider such as VOD video services or IPTV. Outside France, OTT
has had great success. The extent of the competition these alternative technologies will exert on the Group’s cable
television system in France is not yet known. In particular, OTT in France is affected by the “media chronology” in
France, which forced subscription VOD services to comply with a minimum period of 36 months between when a film
comes out in France and when it becomes available in a subscription VOD catalog, although this does not apply to series
or films that are not shown in theaters.
Netflix launched offers in France on September 15, 2014, offering a one-month free trial and then flat fees beginning at
€7.99 per month for standard definition screens, and up to €11.9 per month for four HD-quality screens. Bouygues
Telecom and Orange have signed agreements with Netflix under which their respective subscribers may directly access
unlimited on-demand video service on their television via a Netflix subscription as of November 2014 (Source: Bouygues
Telecom and Orange.fr website releases). The television offer with Google Play under the Group's “SFR” brand also
includes access to Netflix.
The Canal+ Group is offering CanalPlay, which is similar to Netflix’s offer. CanalPlay is available for €7.99 a month for a
computer, tablet or smartphone, and for €9.99 a month for a television, tablet and smartphone (on Free, Bouygues
Telecom, Apple TV and Xbox 360), with a one-month free trial.
Apple TV is also a competitor, and allows content to be broadcast on the television, with access to available content on
iTunes and at other providers (CanalPlay, YouTube).
Google TV is also available, either directly on certain televisions, or with a set-top box, and offers on-demand content as
well as access to applications such as YouTube. There are also other VOD service providers, such as Jook and Filmo
TV.
Other technology and/or content providers could have offers in the future in France. For example, Amazon offers content
in the United States but not yet in France.
The offers of these providers or of other providers of content and/or technologies could significantly increase the
pressure for competition in the French market, impacting the prices and structure of the offers. Nevertheless, such
technologies could contribute to increasing the demand for very high speed Internet access services that are offered by
the Group.
1.2.1.1.4
a)
Telephony
Fixed-line telephony
Traditional switched voice lines have been on the decline for several years, being gradually replaced by VoIP lines and
mobile telephony. More generally, fixed-line telephony has become a basic product, which is now generally grouped
under multi-play offers. The fixed-line services have consequently become dependent on a quality high speed Internet
offer. Flat rates for fixed-line telephony have become the market standard.
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The fixed B2C telephony market in France is also facing the pressure exerted by alternate operators, with the decrease
in the prices of mobile telephony and interconnection rates, as well as alternative access technologies and other Internet
telephony methods offered on high speed Internet connections. The Group is expecting competition to be increasingly
intense in the future, in particular in terms of pricing.
Fixed-line and mobile telephony traffic in the third quarter of 2015 was approximately 1% lower than in the same quarter
the previous year (Source: ARCEP).
b)
Mobile telephony
France is one of the largest mobile telephony markets in Europe. As of September 30, 2015, there were a total 81.8
million SIM cards in France (including M2M), representing a 123.8% penetration rate in the French population (Source:
ARCEP), a figure that has consistently increased over the past few years. The historically low mobile telephony
penetration rate, combined with the drop in market prices, has led to a significant increase in mobile telephony
subscriptions. This growth has been sustained by the subscription contract segment, which increased by nearly 4.2% in
volume in 2014 between the third quarter of 2014 and the third quarter of 2015, whereas the prepaid contracts segment
declined by 12.9% over the same period (Source: ARCEP). The increase in the subscription contract segment and the
decline in the prepaid contracts segment are primarily due to customers’ desire to change offers to the benefit of
postpaid. The income from mobile services in the retail market declined between 2011 and 2014, going from €18.9 billion
in 2011 to €14.6 billion in 2014 (including M2M) (Source: ARCEP). The drop in this income that was noted during the
2012-2014 period is primarily attributable to two effects:
 drops in rate are primarily a consequence of the arrival of a fourth mobile network operator, Free, in January 2012.
This intensification in competition had the effect of making mobile offer rates in France among the lowest in Europe at
the date of this Registration Document. This trend is particularly found on the retail market, but has repercussions for
the business and wholesale markets too;
 call termination fees fell by 60% between 2011 and 2013, and then stabilized (Source: ARCEP - Major Files - call
terminations). Nevertheless, in the future, the impact that a potential decrease in these rates could have on the
income of operators should be limited, given the particularly low level achieved in France as compared to the rest of
Europe (€0.76 for a mobile voice call termination in metropolitan France from January 1, 2016 for all operators and
€0.74 starting January 1, 2017 - Source: ARCEP - Major Players - call terminations); approximately €0.152 on
average for the rest of Europe as of July 31, 2015 - Source: Body of European Regulators for Electronic
Communications/“BEREC”). The drop in income drawn from roaming, which is linked to the reduction in wholesale
and retail fees for intra-Europe roaming, also had an impact on the sector’s revenues. This drop should continue in
the upcoming years, due to the expected decreases in roaming fees, which simultaneously result from regulatory
changes and commercial offers from operators.
MARKET SEGMENTATION
Historically, there were only three mobile network operators in France: Orange, SFR and Bouygues Telecom. Iliad was
granted the fourth mobile license in 2009, and launched a mobile telephony service in January 2012 under the brand
name Free. Free’s entry disturbed the market, intensifying competition due to its price-setting strategy, which introduced
new reduced-price commercial offers onto the market. Before Free’s entry, the majority of subscription contracts were
based on limited usage (e.g.: four hours of communications) and subsidized cell phones. Free primarily introduced
packages without cell phones, which contained limited outsourced services, while providing unlimited data and
communications offers (3G) at a very low cost (€19.99/month for its key offer). The mobile telephony market is currently
very competitive in France, with the launch of new 4G offers, a declared hostility between competitors (specifically after
the launch by Free and B&You of 4G offers at the same price as 3G offers) and the development of low-cost brands.
Other competitors also introduced low-price brands, such as B&You (Bouygues Telecom) and Sosh (Orange). SFR also
adapted its strategy by launching its low-cost “SFR RED” brand. Free quickly gained market share, having attained
approximately 11.7 million mobile customers as of December 31, 2015, and a market share of approximately 17%, four
years after its commercial launch (Source: 2015 Iliad results presentation).
The French mobile market is also characterized by a significant share of subscription services, i.e., 58.7 million as of
September 30, 2015 (excluding French overseas territories and M2M SIMs - Source: ARCEP). This is primarily due to
prepaid offers being replaced by low-priced postpaid offers (e.g.: €2 per month) with a small number of communication
hours (e.g.: two hours of communication) and no Internet.
Over the past few years, MVNOs such as NRJ Mobile and La Poste Mobile have also used mobile operator networks to
sell mobile products that bear their own brand names. The migration of customers to MVNOs seems to have stabilized,
with MVNOs representing a combined market share of 10.8% of the mobile market in France as of September 30, 2015
(Source: ARCEP).
As of December 31, 2015, Orange, Bouygues Telecom and Iliad (Free) reported a total of 28.4 million, 10.9 million and
11.7 million mobile customers, respectively (Source: the companies’ 2015 annual earnings releases), even though the
total number of customers of MVNOs on the market reached 7.5 million as of September 30, 2015 (Source: ARCEP).
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1.2
PRICE-SETTING DYNAMICS
In the past few years, the increased competition on the French mobile market has resulted in a drop in market prices.
Consequently, the average income per user went down nearly 18.4% between the end of 2012 and September 30, 2015
(Source: ARCEP), primarily due to the change in offers of certain subscribers to the benefit of postpaid services. After
this drop, mobile prices in France have been among the lowest in Europe. The mobile telephony prices in France are
particularly low given the low density of the population, which requires significant investments to offer sufficient national
geographic coverage.
4G/LTE
The French market has historically been slower than other European markets in terms of mobile data consumption.
Despite the high concentration of postpaid subscriptions, the market has been historically slower as concerns data
services. Recently, this trend has changed, insofar as the operators have begun to launch 4G offers at reduced prices.
Free was the first operator to introduce 4G at no additional cost in December 2013. Other operators on the market
aligned their prices for 4G with those of Free, with all mobile network operators now offering similar all-inclusive 4G
packages at an opening price of €20 per month.
MOBILE CALL TERMINATION RATES
Mobile call termination rates have been reduced by regulators across Europe. In France, ARCEP announced in 2011
that it would reduce mobile call termination rates (symmetrically for the main operators, which did not include Free
because it had not yet launched its commercial operations). In late June 2011, Orange and SFR billed €0.03 per minute
while Bouygues Telecom billed €0.034. The new regulations required operators to reduce the rate to €0.02 per minute
from July 1, 2011, €0.015 from January 1, 2012, €0.01 from July 1, 2012, €0.008 from January 1, 2013 and €0.0078 from
January 1, 2015. Consequently, France has one of the lowest mobile call termination rates in Europe, with a limited
margin for new rate reductions; in comparison, the average rate in Europe is €0.0169 as of July 2014 (Source: Body of
European Regulators for Electronic Communications).
MOBILE SPECTRUM AND NETWORK COVERAGE
Mobile communications are provided through the use of a set of frequencies which the regulator allocates to the various
operators. Currently, the four main operators benefit from a varied frequency spectrum, ranging from 800 to 2,600 MHz,
which allows all 2G, 3G and 4G technologies to be offered.
Four main network operators were thus present on the mobile service market in metropolitan France as of September
30, 2015, with the various virtual network operators (MVNOs) representing a market share of 10.8% (Source: ARCEP).
The operating licenses for the spectrum in France are generally granted for a period of twenty years, and the operators
can only use the technology covered by the license on each band of the spectrum. The other operators have very similar
positions on the spectrum bands, which allows them to effectively compete in all of the technologies. The most recent
spectrum auctions were for 700 MHz in November 2015. On November 24, 2015, in its Decision 2015-1454, ARCEP
accepted SFR’s bid for the 700 MHz 2*5 MHz band. The authorization to use the frequencies was issued by ARCEP on
December 8, 2015, Decision 2015-1569.
Technological developments
On mobile networks, in order to accompany the strong growth of mobile Internet, operators have committed, in line with
the evident desire of the public authorities, to the development of very high speed mobile infrastructure, which will
supplement the 3G coverage already used. In fall 2012, certain operators opened their fourth generation networks (4G)
by using different frequencies (800 MHz, 2,600 MHz or 1,800 MHz). 4G allows much higher speeds and capacities to be
offered (up to theoretical download speeds of 100 Mbps) than those of the previous generation 3G+ (HSPA+: theoretical
download speeds of up to 42 Mbps).
1.2.1.2 B2B Market
Following the liberalization of the French telecommunications market in 1996, a large number of telecommunications
operators penetrated the B2B segment, offering fixed telephony services, fixed-line Internet access, data access links
and, more recently, cloud computing services. The large corporate customers B2B market is very competitive and
includes among its main players Orange, SFR, Bouygues Telecom, Completel, as well as international players. The
market for other accounts is dominated by Orange, which competes with local players.
The expectations of B2B customers differ from those of B2C subscribers. B2B customers demand that services be
extremely reliable, and that they be able to be quickly reestablished in case of failures (generally subject to financial
penalties). B2B customers also require symmetrical bandwidth speeds, while B2C subscribers are generally satisfied
with asymmetrical speeds which provide quicker download times but slower uploads. B2B customers also demand
increased security and are able to impose penalties (monetary or other) on operators if the contractual conditions are not
respected. These requirements have an impact on the technological solutions offered to B2B customers, and explain the
higher prices for the B2B segment.
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1
1.2
The penetration of mobile Internet is increasing for the B2B market, specifically with more and more smartphones with a
flat rate plan including data. In terms of fixed connectivity, the B2B market is now characterized by a growing penetration
of fiber optics, which is linked to an increase in data consumption.
Customers’ expectations are increasingly for convergent offers combining competitive services: fixed-line telephony,
which is increasingly converging with data via VoIP, mobile telephony and Internet access (with an increasingly strong
demand for very high speed access). These converging offers are specifically intended for micro-businesses and SMEs
seeking all-in-one solutions.
They participate in the development of unified communications services for businesses and are characterized by the
convergence of mobile and fixed-line telephony, and the development of collaborative tools (professional messaging
service, instant messaging, videoconferencing, sharing tools).
Beyond business services, the operators with a presence on the B2B market offer adjacent and supplementary services,
including unified communications services and collaboration tools, as well as call center services or Internet presence
management, and managed security services, whether hosted or not, which accompany Internet protocol (IP)
communications services and remote work (including online backup, firewall, management and protection of secure
access terminals to resources located in a business network).
In terms of connectivity, the market features a growing penetration of fiber optics, which is linked to the increase in data
consumption.
1.2.1.2.1
Voice
The B2B segment for voice call services is extremely sensitive to price trends; customers are well informed and contracts
are relatively short-term (one year). Being able to face the competition efficiently depends in part on the density of the
network, and certain competitors of the Group have a broader and denser network.
In recent years, the B2B market has experienced a structural change marked by a move from traditional switched voice
services to VoIP services.
1.2.1.2.2
Data services
In the B2B segment, for data services, being able to transfer large amounts of data and to have access to the newest
technologies is extremely important to customers. On the data market, consumption has significantly increased and,
currently, customers are often looking for combined infrastructure and software solutions.
Price pressure has been strong in this competitive market. Conversely, the use of data transmission services has
significantly increased. The Group is expecting the demand for data services and B2B bandwidth to continue growing,
specifically due to the following factors:
 the convergence between voice call and data services, such as VoIP, which leads to greater demand for solid
network solutions;
 an increase in the use of smartphones with a flat rate including data;
 the centralization of IT equipment for businesses with operations at several sites, including the combining of servers
at a single site, which increases the connectivity needs of peripheral sites of these businesses;
 the emergence of new professional applications, such as videoconferencing;
 larger businesses’ demand for quicker access, growing virtualization, data centers and improved security services;
 the increase of digitalization in public administrations;
 greater use by medium-sized businesses of complex data services, such as cloud computing; and
 professionals’ increased use of internal wireless networks.
Customers are currently seeking to optimize and streamline their needs as much as possible through the use of data
centers. Large corporations have a tendency to seek out specialized network solutions to control their chain of services
end-to-end, and often have their own infrastructure. Other businesses are even more likely to act based on their needs:
(i) with “infrastructure as a service” (or IaaS/cloud) solutions to meet their needs in terms of data availability, storage
and security. “Infrastructure as a service” can now offer these businesses data storage and safety solutions which
would otherwise be too costly; or
(ii) with a tailored and secure infrastructure up to the “middleware” (“software as a service”) level.
The Group is currently facing competition from software providers and other IT providers of data and network solutions,
and the line between them and the suppliers of data infrastructure and solutions like the Group has become increasingly
blurred. Partnerships between IT providers and infrastructure providers are becoming more and more common, and are
an additional source of competition.
16
1
1.2
Particular growth is expected in data-hosting outsourcing services. The complexity and growing management costs of IT
systems are in effect pushing businesses to turn towards cloud solutions. This refers to a set of resources and services
that are provided remotely, and which are thus accessible, for the user, in a flexible manner, on various terminals.
Operators have already developed partnerships on “independent” cloud projects on French territory. This so-called
“independent” cloud is intended for administrations as well as private French businesses. It should allow sensitive
information such as personal administrative data, information linked to e-health or even financial information requiring
maximum security, to be stored.
The B2B market also includes the Internet of Things. The Internet of Things covers a set of connected objects: in the
broad sense, this includes communication terminals, but also inert objects, equipped, for example, with RFID chips, and
machines on which built-in electronic systems equipped with SIM cards have been installed (M2M). These connected
objects and machines are being developed in a certain number of adjacent markets for uses in specific sectors, such as
home automation, health and security, but also energy and transportation, which are at the heart of digital city projects.
Accordingly, in France, the number of M2M SIM cards has gone from 3.4 million in late 2011 to 6.9 million in late 2013, to
10 million as of September 30, 2015 (Source: ARCEP).
1.2.1.2.3
Customers
The B2B segment is also defined by the different needs of customers, which vary according to a business’s size. The
major businesses are sophisticated customers and are very sensitive to price trends. Speed, capacity, security and
reliability are also very important. They have a tendency to unbundle services, and frequently subject them to invitations
to bid. The smallest businesses are more likely to group them and ascribe more importance to the provider’s proximity.
1.2.1.3 Wholesale market
The wholesale telecommunications market includes three sectors: voice call connectivity wholesale services (voice), data
connectivity wholesale services, and dark fiber infrastructure wholesale services. The wholesale segment of voice
services includes fixed-line and mobile call termination services, as well as interconnection for operators whose switched
voice network is underdeveloped or nonexistent. The wholesale data services segment includes the transportation of
data for operators whose network is underdeveloped or nonexistent, as well as mobile network services for MVNO
operators. The new dark fiber optic infrastructure wholesale market, based on the sale of fiber optic connections, with no
service linked to voice or data, is being developed in parallel with the roll-out of FTTH and 4G, and primarily involves
horizontal optical fiber links and connection to the backbone. The Group’s major competitor on the French wholesale
communications market is Orange. The Group is likewise in competition with conglomerates of telecommunication
operators and construction businesses, such as Covage, Vinci, Eiffage and Axiom (which can put optical fiber cables in
their construction works in order to them rent them on the wholesale market) as well as with public infrastructure
networks.
In France, Orange holds a leading position in the wholesale telecommunications market and in the wholesale data
market, in which local operators play an important role.
1.2.1.3.1
Voice
The wholesale market for voice call services is extremely volatile. Operators generally launch invitations to bid annually
and choose the provider only according to availability and prices, due to the lack of difference in terms of quality of
services between operators in the voice call services sector. Competition consequently primarily occurs for the prices
and density of the network, as well as based on the flexibility of operators and their capacity to offer tailored solutions to
their customers. On the wholesale voice segment, pricing is generally based on the increased cost pricing model, with
interconnection rates established by ARCEP. The regulated interconnection rates have decreased as the
telecommunications sector has matured. See “Regulation - The European regulatory framework of electronic
communication.” The wholesale voice market likewise includes wholesale resales for MVNOs and mobile roaming:
 Wholesale resales for MVNOs: The provision of end-to-end mobile services for MVNOs is a major issue for
operators, and the degree of competition for these services has intensified in recent years. The MVNO wholesale
market has evolved, especially after the signing of the first “Full MVNO” contracts in 2011. The status of “Full MVNO”
allows virtual operators (for example, NRJ Mobile) to issue their own SIM cards, to have access to the central
database managing subscribers’ rights, as well as to certain elements of the network backbone. This model offers
MVNOs greater control of services and increased commercial autonomy, but also entails higher costs for them (rollout, technical maintenance). Moreover, the MVNO agreements have affected the flows of traffic and have led to an
increase in the volumes of fixed-line telephony traffic to mobile, which generates higher wholesale prices. In
particular, Free’s arrival onto the mobile market in January 2012 has led to a significant increase in call volume from
mobile to fixed lines, as well as intra-mobile.
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 Mobile roaming: In order to continue offering mobile communication services outside of their country of origin,
operators also negotiate roaming agreements. The communication services within the European Union are subject to
price caps on both the retail and wholesale markets. In France, mobile roaming services exist between national
operators on so-called “white zone” geographical regions, in which a single operator has rolled out a network and
takes in the traffic of other network operators. The roll-out of the mobile network as well as the welcome services
related thereto are supervised by ARCEP.
1.2.1.3.2
Data services
The wholesale market for data services is less volatile than the vocal call services market. Competition is primarily
dependent, aside from price, on the quality of services and technological advances.
1.2.1.3.3
Infrastructure
The wholesale market for dark fiber optic infrastructure is more open than the voice connectivity and data wholesale
markets, given that the provision of these services does not require having a dense national network, and does not
include any service that would require technical expertise. For example, certain cities in France have constructed their
own local fiber optic networks and are consequently wholesale providers of infrastructure (i.e., they rent the optical fiber
to telecommunications operators).
The growth of the wholesale market is a result of the growth in the demand for network capacity, which has significantly
increased in recent years.
Another French market trend consists of developing public-private partnerships between local authorities and
infrastructure operators to install or modernize FTTB networks or roll out vertical FTTH/FTTO networks. The Group has
already been selected and hopes to be selected again in the future as the entity in charge of constructing certain new
networks or improving the existing ones. See “Wholesale infrastructure services”
Operators and consortia of operators and construction businesses have also begun to roll out their FTTH vertical fiber
networks in residential buildings in order to rent the usage right from these networks to other telecommunications
operators in conformity with the so-called status of building operators through public-private partnerships with local
authorities, among other means. The Group intervenes in this area thanks to the relationships it has built from its public
services activity, since this is one way of maintaining and building relationships with its customers.
1.2.2 Group’s strengths and competitive advantages
The Group believes that it has the following advantages:
1.2.2.1 Main alternative operator with strong positions
in all segments of an attractive telecommunications market
France is the third largest telecommunications market in Europe, with revenues of approximately €40 billion in 2015
(Source: Paul Budde Communication Pty Ltd, www.budde.com.au; 2015 annual earnings releases). Despite strong
growth in volume, the French telecommunications market has recently experienced a drop in value, essentially due to
price pressures in the mobile telephony market, following the arrival of a fourth player in 2012, and the drop in regulated
call termination rates. The Group has large market shares in the main segments of the French telecommunications
market, where it is thus the main competitor of the incumbent operator. With annual revenues of €11,039 million in 2015,
the Group is the leading alternative telecoms operator in Europe.
The Group operates in the B2C, B2B and Wholesale segments and offers a wide range of customer services, including
premium Internet access, mobile telephony products and content.
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1.2.2.1.1
Fixed-line B2C market
France is one of the largest European markets for high and very high speed Internet access, with approximately 26.9
million high and very high speed fixed-line subscriptions as of December 31, 2015 (Source: ARCEP). The high and very
high speed fixed-line market has experienced strong growth in recent years, due to a growing coverage of households,
which has led to a 3.4% increase in subscribers in 2015 (Source: ARCEP). The Group is the second largest operator in
the high and very high speed fixed-line market, with 6.4 million fixed-line high speed and very high speed customers,
which together represent 23.6% of the total market for fixed-line high and very high speed Internet access (Source:
Group’s estimates based on ARCEP data). It is also the leader in the very high speed segment in France, with 1.8 million
subscribers, representing, as of December 31, 2015, 41.9% of the 4.3 million very high speed fixed-line subscribers in
France (Source: Group’s estimates based on ARCEP data). For the fiscal year ended December 31, 2015, France still
had relatively low penetration in the fast-growing very high speed segment (including cable and fiber-to-premises), with
only 15.9% of total high speed connections being very high speed, according to ARCEP. This figure is significantly lower
than the average penetration of Internet access by cable and FTTH, which is 28% in Western Europe, 59.2% in Belgium
and 64.1% in the Netherlands, two countries with high penetration rates (Source: IDC). IDC forecasts that very high
speed Internet connections (cable and FTTH) in France will grow annually by 35% between 2015 and 2018, to represent
34% of all consumer Internet connections by 2018. The Group believes that it is well placed to benefit from this growth.
The Group takes advantage of its high quality fixed-line network, and the brand image and distribution capacities of SFR,
to meet the growing demand for speed and bandwidth, with “multiple play” offers at competitive prices on the fixed-line
B2C market.
1.2.2.1.2
Mobile B2C market
Through its brand SFR, the Group is the second largest mobile telephony operator in France, with 15.1 million B2C
customers at December 31, 2015, as compared to 16.2 million at December 31, 2014 (Source: Group estimates). This
market was significantly disrupted by the arrival of a fourth operator in January 2012, which intensified the overall level of
competition in the market and is exerting significant pressure on ARPUs. After a sharp drop in prices in 2013 and 2014,
postpaid mobile packages became among the lowest-priced in Europe, before downward price pressure eased in 2015.
The mobile B2C market in France is split into (i) premium offers aimed at subscribers looking for access to subsidized
cell phones, physical distribution, customer support services, value added services and content services, (ii) basic offers
aimed at subscribers who are more cost-sensitive, self-sufficient and looking only for a SIM card, and (iii) a shrinking
segment of prepaid subscriber services. The Group is targeting the premium market of postpaid subscriptions with its
“Formules Carrées” plans, the basic mobile telephony market with its “RED” offers, and the prepaid market with a range
of attractively priced prepaid products available with the “SFR La Carte” plan. As of December 31, 2015, more than 83%
of the Group’s customers on the B2C mobile telephony market had subscription offers. The combination of the Group’s
very high speed cable/fiber network and its 3G+ and advanced 4G networks allows the Group to offer attractive flat rate
“quadruple play” packages, which meet the growing demand for speed and bandwidth coming from multi-screen
households, for usage both in and outside the home.
1.2.2.1.3
Pay-TV
The French television market is one of the largest in Europe. The Group provides its customers with premium content,
including a large choice of high-definition channels, catch-up TV channels, the biggest video on-demand (VOD) catalog
in France (via “Zive,” a brand-new service launched in November 2015), integrated OTT video services, and
groundbreaking social media applications. Altice, a Group shareholder, acquired exclusive rights to broadcast and
distribute top sports starting in 2016, such as the Barclays Premier League (English soccer championship), the French
basketball championship, World Cup Skiing, and Premier League rugby matches. The Group feels that its high-quality
pay-TV content programming can be an important differentiating factor in its offering of bundled and convergent
products.
1.2.2.1.4
B2B Market
The French B2B telecommunications market has experienced a structural change in recent years, with traditional
switched voice services declining and VoIP services growing in both number and complexity. In particular, the data
service needs of medium-sized businesses have changed. They are now bigger in terms of bandwidth and complexity.
Subscribers’ high speed needs favor players with solid network coverage, as is the case for the Group, thanks to its
dense capillary network, comprised of 160 metropolitan loops, and the direct fiber connection from this network to the
main sites of its subscribers, providing them with symmetrical high speeds and reliable service. In line with the
development of market needs, the Group has also developed cutting edge data solutions, among others, “infrastructure
as a service,” along with IP VPN services. The Group is the largest operator in the B2B market after the incumbent
provider. It continues to take advantage of its commercial network and sales force to increase its market share in this
segment and target adjacent market segments such as cloud computing services and M2M (machine-to-machine)
communications.
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1.2.2.1.5
Wholesale Market
In the wholesale telecommunications market, the Group is able to provide solutions at attractive prices for the short-term
needs of operators, thanks to the extent of its network. It can generate strong margins by capitalizing on its cost
structure. This includes selling fiber optic connections and circuits to international or local operators with sub-networks in
France, leasing indefeasible rights of use (“IRUs”) and bandwidth capacity on its network, along with the sale of point-topoint connections to other national operators, for example radio transit sites for the roll-out of 3G and 4G. The Group
expects growth in these sectors, due to the increase in world data traffic and the migration of existing technologies
towards Ethernet technologies and fiber technologies, and the need for greater bandwidth and the construction of a
growing number of antennas in line with the roll-out of the 4G coverage by operators. The Group is the second-largest
operator next to the incumbent operator, in both the mobile and wholesale telephony markets, thanks to its significant
wholesale capacities in fiber (Source: Group estimates). The Group has connections to incumbent operators of French
MVNOs (Mobile Virtual Network Operators), such as La Poste Mobile, and fixed-line voice network operators (Bouygues
Telecom), as well as to leading international players. It also intends to continue to promote its responsive and adapted
wholesale offers, so as to fully take advantage of its network infrastructure and maximize the return on its network
assets.
1.2.2.2 Competitive advantage in terms of networks, in each of its markets thanks to
the strong complementarity of its fixed-line and mobile networks,
at the cutting edge of technology
The Group believes that its fixed-line network gives it an advantage in the French market. With regard to the current
infrastructure of operators in the telecommunications sector, the Group’s network is the only end-to-end alternate central
network in France to have a local loops (“last mile”) infrastructure, and is supplemented by its DSL presence and its
interurban FTTB and FTTH network. This highly advanced fiber network provides high speed downloads and is
supported by a powerful backbone. In B2C, the Group has the most extensive FTTB and FTTH network in France,
connecting more than 7.7 million FTTH and FTTB jacks as of December 31, 2015, as compared to 6.5 million at the
previous year-end. The Group intends to expand its FTTH and FTTB network to more than 22 million FTTH and FTTB
jacks by 2022. The acquisition of SFR has allowed the Group to significantly grow the penetration of very high speed
services, particularly by cross-selling cable plans to existing SFR DSL subscribers.
The Group believes it has one of the most extensive and advanced mobile networks of any alternative French player.
The Group’s network covers more than 18,500 active 2G radio sites, including 17,300 sites that underlie 3G coverage.
SFR was the first French operator to offer 4G technology to home and business customers. As of December 31, 2015,
the 4G offered by the Group covered more than 64% of the French population. The Group intends to extend its 4G
network coverage to 99% of the France’s population by 2020. It has now renewed a great many of its masts, upgrading
them with “Single-Ran” radio network access technology, compatible with 2G, 3G and 4G standards on the same
network by using fiber optic transmission. The Group believes that this will allow it to reduce infrastructure maintenance
and capex costs, and ensure its infrastructure quality in the long term. The combination of the Group’s vast fixed-line
network and its high-quality mobile network allows it to meet the fast growing data demands of mobile phones, by
guaranteeing high speed fiber optic “backhaul” services when connecting to single-RAN mobile networks.
Due to the high level of investments made, and thanks to the fact that it is the owner of local networks, MAN exchanges
and a backbone, the Group is benefiting from an advantage in terms of costs compared to alternative competitive
operators, which should be supported in part by the networks or technology of other operators, to provide their services.
The fact that it is the owner of the bulk of its networks also provides the Group with more ability than its competitors to
control costs, to very precisely determine costs of the additional capital expenditures, and to generate significant
margins. The Group believes that it will be able to maintain this cost advantage provided its alternative competitors do
not significantly invest in or expand their networks.
1.2.2.3 The Group is the main provider of very high speed multi-play services in its
markets, with high added-value offerings for French subscribers, providing
opportunities for additional sales of fixed-line and mobile services
Relying on a technologically advanced network and on innovative offerings, the Group has leading positions as concerns
the “multiple play” offers, combining differentiated pay-TV, very high speed Internet access, fixed-line and mobile
telephony services. The Group is convinced that its strong position in pay-TV, high speed telephony and fixed-line
telephony services, along with its ability to offer advanced mobile telephony services, gives it the opportunity to increase
the penetration of its premium and “multi-play” packages. The Group also believes that by implementing this bundled
product strategy and by increasing the penetration of “triple play,” it will be able to increase the average revenue per user
(the ARPU) of its cable and/or FTTB services. The Group’s very high speed “quadruple-play” offers have also reduced
cancelations in relative terms (i.e., the rate of subscription cancelations in this segment being lower than the rate of total
cancelations).
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Very high speed Internet: The Group can provide, to its customers who use its cable network to access very high
speed Internet, with throughputs currently between 100 Mbps and 1 Gbps, the fastest speed generally available in the
French market. The Group’s network was specifically constructed and updated to face its subscribers’ growing demands
for speed and bandwidth. Following the acquisition of SFR, the Group offered, and continues to offer, to SFR fixed-line
subscribers the possibility of signing up for a cable/fiber package. This would allow it to significantly increase its
penetration rate on the Group’s network, reduce last-kilometer rent costs, and create additional sales opportunities.
Complete premium pay-TV content: The Group sees itself as able to offer its subscribers important advantages in
terms of content. It maintains direct and long-term relationships with the primary providers of content and television
channels, and is currently the only high speed provider that is contractually able to offer pay content with single flat-rate
billing (a position it shares with CanalSat). The Group’s offerings will include a wide range of high-definition channels, as
well as the largest video-on-demand (VOD) catalogs on the market, with more than 30,000 programs available. The
Group has just launched a new subscription VOD service, “Zive Premieres,” which includes a vast catalog of HD and
4K/UHD content. Zive Premieres benefits from Altice’s 20 years of experience in providing media content as well as from
its international footprint and its ability to sign agreements with the biggest French and international production
companies, which will allow it to offer a truly comprehensive, partner-based, media catalog. Altice has also acquired the
exclusive broadcasting rights to certain top sports content in France, including the English Barclays Premier League
soccer championship, which will benefit the Group.
Advanced mobile telephony services: The Group offers its customers access to one of the most advanced 4G mobile
plans on the market, offering faster connection and less waiting. The Group has also upgraded and simplified its
consumer packages, with “SFR Carré” targeting customers that require premium products, subsidized cell phones, a
physical distribution network, and customer service, while the “SFR RED” offers target SIM-only customers, and are
more attentive to costs than to the provision of services.
Fixed-line telephony: The Group will continue to include fixed-line telephony services in its “multi-play” packages.
1.2.2.4 The renown of the SFR brand and the Group’s retail distribution networks
serve as a base for future growth
The Group believes that the renown of the SFR brand and its retail distribution networks should allow it to take
advantage of its significant fixed-line and mobile infrastructure, as well as its product offers, which are the best in their
class, to stimulate growth.
Strong brand image: The Group considers the SFR brand to be recognized by its customers for the reliability of its
network and for the high quality of its excellent customer service.
Multichannel distribution network: The Group also has a solid B2C distribution network, including physical channels
and digital channels. Its physical distribution channels include a vast network of outlets, including 850 physical stores (via
distribution contracts) as of December 31, 2015. The Group believes that its outlets offer an attractive in-store
experience, by providing advice before people buy devices and services, regarding subscriptions and customer support,
after-sales and complaint management. The Group’s online platform supplements the physical stores through addedvalue services (technical support, information circulars) and through its online boutique, which serves as a showcase for
all of its product offers and as a primary distribution channel for the “SFR RED” offers. The Group’s multichannel network
relies on customer service and support teams, who offer a complete range of services covering all customer needs (such
as complaint management, technical support, and loyalty and sales programs).
1.2.2.5 Cash flow generation
The Group generated €3,860 million adjusted EBITDA and incurred expenses net of investment in the amount of €1,856
million in the fiscal year ended December 31, 2015. It believes that its vast and diversified customer base, as well as its
monthly subscription structure, give it a certain level of predictability regarding future cash flows. The Group also believes
that its ability to generate cash is a direct result of its rigorous focus on cost control and organizational efficiency, as well
as on a prudent investment policy. The Group forecasts an increase in investment expenses in future years, as it invests
in its fixed-line and mobile network to achieve its fiber and 4G coverage targets.
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1.2.2.6 Experienced management and the support of a reference shareholder, as
well as a proven history of creating synergies and integration
Experienced management that has proven its integration abilities: The Group’s management has extensive
experience in the cable and telecommunications sector, in particular in the French market. The Group was created
following a successful combination of several cable assets in France, which the Group’s existing management and
controlling shareholder, Altice, successfully consolidated by making a completely integrated profitable company.
Furthermore, in 2007, the Group bought Completel and clearly improved its profitability, all while allowing it to grow
significantly. Michel Combes has been the Group’s Chairman and Chief Executive Officer since September 2015. In
January 2016, the Group announced that Michel Paulin would join SFR as its Chief Executive Officer. However, following
the strategic project for the global convergence of telecoms/media-content/advertising, the Group considered it
preferable to keep Michel Combes as the Company’s Chairman and Chief Executive Officer and to appoint Michel Paulin
to take on the role, effective May 9, 2016, of Managing Director in charge of the Telecom division, and Alain Weill as
Managing Director in charge of the Media/Advertising division. This decision was announced on May 9, 2016. Thierry
Lemaître was the Group’s Chief Financial Officer from May 2010 until the appointment of Jean Ruby to that position on
May 23, 2016.
Strong shareholder support: The Group’s controlling shareholder, Altice N.V. (“Altice”), has extensive investment
experience in the international telecommunications market. Altice also has a solid history of interesting acquisitions and
value-creating purchases demonstrating operational excellence. Various acquisitions made by Altice, for example in
Benelux, Portugal and Israel, emphasize its capacity for successful integration and ensuring growth of adjusted EBITDA,
including successful fixed-line and mobile convergence strategies. Altice is supported by an entrepreneur shareholder,
Patrick Drahi, its founder who, as acting Chairman of the Board of Directors, has 20 years of experience in the ownership
and management of companies in the cable and telecommunications sector. Patrick Drahi successfully rolled out, among
other projects, the French cable and telecommunications market at Numericable and Completel. Altice currently holds
77.77% of the Group’s share capital and 77.76% of its voting rights.
1.2.3 Strategy
In line with the vertical integration initiatives observed in the United States and UK, the Group decided to introduce a
telecom-content convergence approach in France. The goal is to create the leading content operator in France, and to
differentiate itself by providing customers with “the best of both worlds” (telecoms and content), otherwise known as the
best ATAWADAC (Any Time, Any Where, Any Device, Any Content).
For the Group, this means:
Differentiating through content, loyalty vectors, and gain of massive market share;
Investing in the most efficient networks and technologies;
Ensuring an exceptional and simple customer experience.
The Group will offer its customers a differentiating value proposition in fixed-line as well as mobile services; at the same
time, it will reaffirm its position as the benchmark operator in corporate digitization.
Lastly, SFR will seek to grow its operating margins and cash flows by making the most of Group synergies and
operations expertise.
1.2.3.1 Differentiate through content, loyalty vectors, and gain of massive market
share
On April 27, 2016, the Group announced it had bought Altice’s 49% non-controlling interest in NextRadioTV, a leading
French information group covering general news, sports, economics, high-tech and discovery (including the brand
leaders BFM and RMC). This transaction was in the form of an acquisition of Altice Group’s 75% stake in Altice Content
Luxembourg, which had itself taken a 49% stake in NextRadioTV Group in December 2015 as part of the strategic
partnership between Altice and Alain Weill.
As of the completion date of May 12, 2016, the price paid by SFR amounted to €635 million corresponding to (i) €334
million for the Company to buy the convertible bonds issued by Groupe News Participations subscribed by Altice
Content, (ii) €123 million in shareholder loans, (iii) €166 million for the Company to acquire 75% of the shares held by
Altice Content in Altice Content Luxembourg, and (iv) €11 million accrued interest on the convertible bonds and
shareholder loans. The deal values NextRadioTV at an enterprise value of €741 million, which corresponds to the
enterprise value adopted by Altice in its takeover bid filed in December 2015, but adjusted for the purchase of N23 in the
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meantime. The Altice takeover bid price amounted to €37 per NextRadioTV share and €23.28 per convertible bond
(BSAAR);
It should be noted that NextRadioTV has the option of obtaining control after 2017 subject to obtaining the necessary
regulatory approvals.
In this transaction, SFR adhered to the partnership agreement signed by Altice Group with Alain Weill’s holding company
(News Participations) defining the relations between the parties in Altice Content Luxembourg. SFR substituted Altice
Group in the promises of cross-purchase/sale signed on December 3, 2015 relating to News Participations’ 25% stake in
Altice Content Luxembourg (exercisable from 2018, unless Alain Weill steps down from his position). It should be noted
that the applicable price in the event of a sale at the initiative of News Participations is calculated using a formula that is
based on the level of activity of Altice Content Luxembourg, includes no minimum guarantee to News Participations, and
reflects, transparently, a price similar to that proposed in the takeover bid for NextRadioTV filed in December 2015.
The promise of sale agreed by News Participations of its 51% stake in Groupe News Participations also remains in force,
as well as the shareholders’ agreement defining the relations between the parties in Groupe News Participations. This
promise of sale, exercisable from March 31, 2019 (subject to obtaining the applicable regulatory approvals), would allow
SFR to acquire 100% of Groupe News Participations and NextRadioTV.
The Group has also acquired the entire share capital of Altice Media Group France. The transaction values Altice Media
Group France at an enterprise value of €241 million, which is 4.5 x EBITDA, adjusted for the synergies and deferrable
losses of Altice Media Group France.
Altice Media Group France is a leading, diversified and profitable media group in France, covering more than 20 major
titles in France, including iconic names such as Libération, L’Express, L’Expansion, L’Étudiant, and Stratégies. Altice
Media Group France also operates the international i24 News channel and is the second-largest digital news publisher in
France. Altice Media Group France is also a leading events operator in France with, notably, the Salon de l’Étudiant, an
annual fair for prospective students of universities and colleges, which has been attracting two million visitors a year for
over 30 years.
These transactions were financed by Numericable-SFR Group’s existing resources and credit granted by the seller Altice
Media Group France in the amount of €100 million. On a pro forma basis, these two transactions increased the Group’s
debt ratio from 3.8 to 3.9 as of the end of 2015.
Both these transactions are considered to be regulated agreements. They were approved by the Board at its meeting of
April 26, 2016. The contract to acquire NextRadioTV was signed on May 12, 2016 and will be submitted to the General
Meeting for ratification on June 21, 2016. However, the contract to acquire Altice Media Group France was not signed
until May 25, 2016, so it was not possible to submit it, due to insufficient notice, to the General Meeting of June 21, 2016.
This agreement will therefore be submitted to the General Meeting convened to approve the 2016 financial statements.
These acquisitions form part of SFR’s convergence strategy to strengthen its SFR content offering.
With the equity consolidation of Group Altice entities specializing in content (AMG, NextRatioTV), the new strategy is
based on setting up three mutually complementary leading divisions at Numericable-SFR Group:
A Telecoms division: SFR Telecoms
A Media division: SFR Médias
An Advertising division: SFR Publicité
The Group intends to invest in content, and to achieve optimal positioning in this field.
To this end, it will position itself in an extensive range of content around five main themes aimed at providing the best of
the convergence:
Press, having now set up SFR PRESSE allowing unlimited access to a rich, diversified and high-quality range of
magazines and dailies;
Sports, with, initially, a set of five exceptional channels dedicated to sports, as well as the app SFR SPORT;
News, with the leading TV news service provided in France, drawing on BFM TV, BFM Business and i24 News,
and soon supplemented by two new channels: BFMTV Sport and BFMTV Paris
Entertainment, with an enhanced entertainment schedule, SFR PLAY, which will offer notably, in addition to the
biggest dedicated channels, the enhanced SVOD ZIVE service
Family, with SFR FAMiLY! package allowing multi-device households to share content in a way that is
innovative, economical and simple to operate
The Group will rapidly integrate the content bricks of its offers - fixed-line as well as mobile - with the dual objective of
differentiating its offers, and ensuring the widest possible broadcasting of Group content.
The Group intends to become a major purveyor of content in France - for its customers, as well as for its competitors’
customers.
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1.2.3.2 Invest in the most efficient networks and technologies
To support its telecom-content convergence strategy, the Group wanted to invest in its network infrastructure, which is
necessary for end-to-end control of a content-based differentiating experience.
The Group intends to offer its customers a fixed-line/mobile convergent network featuring the fastest throughputs,
highest quality and maximum degree of intelligence. At the same time, the Group intends to be a major player in the
transition to very high-speed broadband in France.
The Group intends to operate and continue to modernize its quality network in order to respond in all markets to the
growing needs for high and very high-speed throughput and fast and reliable access to the network. In addition to its
ground-breaking content, the Group intends to continue to offer innovative products and services to generate growth and
optimize user experience.
The Group believes that its FTTB and FTTH network is the most advanced very high-speed fixed-line network in France,
capable of giving subscribers a richer user experience and making the most of the expected growth in demand for
bandwidth, while optimizing the Group’s cost structure. In 2015, the Group announced its project to develop its newgeneration FTTB and FTTH network with the goal of servicing 22 million households by 2022, versus the 7.7 million at
December 31, 2015. This project aims at ensuring its position as the leading FTTH and FTTB service provider in France.
At the same time, the Group is counting on capitalizing on its mobile network, in particular its 4G network at the cutting
edge of technology, to roll out its telecoms-content convergence strategy. In particular, it intends to offer to its
subscribers the most attractive “quadruple play” packages in the market. When the third quarter 2015 results were
announced, the Group stated its intention to extend its 4G network coverage to 90% of the French population by 2017. In
the fourth quarter of 2015, the Group was the leading operator in France in terms of setting up 4G sites (Source: ANFR)
and as of the date of this Registration Document, the Group believes that the level of capital investment completed
should allow the projected roll-out schedule to be followed and this goal to be achieved.
1.2.3.3 Ensure an exceptional and simple customer experience
In keeping with its telecom-content convergence strategy, which is firmly customer-focused, the Group intends to make
the customer central in its decision-making, with a view towards systemically optimizing and simplifying the customer
experience.
The Group intends first to offer its customers an exceptional and differentiated experience, marrying the best of the world
of content with the best of the world of telecoms.
In terms of simplification, the Group will work particularly on the following issues:
- Simplifying the commercial catalog
Simplifying usage, both ergonomically and in terms of accessibility
Simplifying the customer’s everyday experience
SFR intends to reinvent the customer path, notably by making mobile services the core relationship between customer
and usage, and generally between the customer and the Group.
1.2.3.4 Offer our customers a differentiating value proposition in fixed-line as well
as mobile services
1.2.3.4.1
In fixed-line services
The Group’s strategy consists of continuing to grow its penetration of the “multi-play” market. The Group intends to offer
to its new and existing subscribers the best bundled “triple-play” and “quadruple-play” packages in the French market, by
accelerating its infrastructure investment and by capitalizing on its telecom-content convergence strategy, with the
inclusion of rich and differentiating content bricks into its fixed-line offers.
The Group believes that its subscribers will increasingly be demanding bundled products and that it can achieve the
higher ARPU (average revenue per user) and lower cancelation rates that are characteristic of “quadruple-play”
subscribers.
Converting part of SFR’s fixed-line customer base to cross-sell offers that include fiber and premium content is a major
challenge for the Group. The Group also intends to capitalize on its excellent brand image and on its network of stores
and outlets to grow its market share by capturing new subscribers looking for faster throughput.
1.2.3.4.2
In mobile services
To tackle recent changes in the mobile telephony market, SFR has significantly simplified its business model and
customer offering.
24
1
1.2
Following the arrival of a new mobile telephony operator offering very basic yet economical services, the Group
significantly simplified the structure of its mobile telephony offers and adapted its new plans to the changing needs of its
customers. The number of plans offered decreased by half, both in the B2C and B2B markets. At the same time, SFR
revisited and streamlined its network of stores to focus on the best locations.
The Group has also extended its offering to all mobile telephony market segments in France, with its “SFR Carré” plans
aimed at the premium postpaid market segment and “SFR RED” aimed at the growing “no frills” market.
The Group believes it is now fully ready to win new mobile customers by accelerating investment in infrastructure and
advanced technologies (4G in particular), and by capitalizing on its telecom-content convergence strategy, with the
inclusion of rich and differentiating content bricks into its mobile offers.
1.2.3.5 Reaffirm its position as the benchmark operator in corporate digitization
The Group is responding to the growing B2B demand for new generation services (for example: unified communications,
Cloud) characterized by the ability to deliver both high service levels and higher margins. The Group has the
infrastructure (advanced very high speed networks, datacenters), as well as a comprehensive range of services rolled
out to meet this change.
To seize the opportunity for fast corporate digitization, the Group’s B2B sales structure, the Group, has introduced the
following:
 A structure set up as six Business Lines, permitting each one in its particular field to exercise end-to-end control of
the solutions offered to B2B customers, from design to operation:
-
Unified Communications
-
Datacenter & Cloud
-
Internet of Things (IoT)
-
Security
-
Customer Relations
-
Corporate Network
 The forging of strong partnerships to meet customer needs as effectively as possible (e.g.: partnership with Sigfox in
the Internet of Things)
 Pooling of Altice Group assets to enhance the services portfolio and achieve economies of scale (e.g.: Cloud, IoT
platform)
1.2.3.6 Grow operating margins and cash flows by making the most of Group
synergies and operational expertise
The Group achieved operating synergies resulting from the acquisition of SFR on November 27, 2014. It envisages
generating further synergies by:
(i)
investing in the Group’s fiber optic network to migrate existing SFR DSL subscribers to the Group’s own
network and reduce the need for third-party network services;
(ii)
continue improving and streamlining operational processes and reducing IT costs by investing in new
platforms;
(iii)
integrating SFR’s sales entities into the Group’s, by optimizing the Group’s sales channels and simplifying
its portfolio of brands;
(iv)
achieving additional productivity gains in procurement by using the Group’s bargaining power to drive down
supply prices;
(v)
further reducing overheads.
Rolling out the Group’s telecom-content convergence strategy could also generate further synergies.
The Group’s business is subject to laws and regulations governing the telecommunications sector and the information
society in France and in the European Union.
25
1.3
1.3
1
Regulation of electronic communication services and networks
Regulation of electronic communication services and
networks
1.3.1 European regulatory framework applicable
to electronic communications
The European regulatory framework is based on the following five directives, set out in the “2002 Telecommunications
Package” of the European Union, which applies to the seven relevant markets, as defined by Recommendation
2007/879/EC of December 19, 2007, of the European Commission:
 Directive 2002/21/EC of March 7, 2002 on a common regulatory framework for electronic communications networks
and services (the “Framework Directive”);
 Directive 2002/19/EC of March 7, 2002 on access to, and interconnection of, electronic communications networks
and the associated resources (the “Access Directive”);
 Directive 2002/22/EC of March 7, 2002 on universal service and users’ rights relating to electronic communications
networks and services (the “Universal Service Directive”);
 Directive 2002/20/EC of March 7, 2002 on the authorization of electronic communications networks and services (the
“Authorization Directive”);
 Directive 2002/58/EC of July 12, 2002 on the processing of personal data and the protection of privacy in the
electronic communications sector (the “Directive on privacy and electronic communications”).
In addition to the 2002 Telecommunications Package, the following legislation also applies to the telecommunications
sector:
 Directive 2002/77/EC of September 16, 2002 on competition in the markets for electronic communications networks
and services (the “Competition Directive”);
 Directive 2009/140/EC of November 5, 2009 amending the “Framework,” “Access,” and “Authorization” directives;
 Directive 2009/136/EC of November 25, 2009 amending the “Universal Service,” “Privacy and Electronic
Communications” directives and Regulation 2006/2004/EC on cooperation between the national authorities tasked
with overseeing the implementation of consumer protection legislation;
 Directive 2009/114/EC of September 16, 2009 amending Directive 87/372/EEC of the Council on the spectrum bands
to be reserved for the coordinated introduction of pan-European digital public cellular terrestrial mobile
communications in the Community;
 Directive 2014/53/EU of April 16, 2014 on the harmonization of the legislation of Member States on the commercial
availability of radio equipment and repealing Directive 1999/5/EC;
 Directive 2014/61/EC of May 15, 2014 on measures aimed at reducing the cost of rolling out high speed electronic
communications networks;
 Regulation 2887/2000/EC of December 18, 2000 on unbundling access to local loops;
 Regulation 1211/2009/EC of November 25, 2009 establishing the Body of European Regulators for Electronic
Communications (“BEREC”);
 Regulation 2015/2120/EC of November 25, 2015 laying down measures concerning open Internet access and
amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks
and services (the “Open Internet Access Regulation“;
 A Regulation relating to the general protection of personal data which is soon to be published in the Official Journal of
the European Union, which will replace Directive 95/46/EC of October 24, 1995 on the protection of individuals with
regard to the processing of personal data and the free movement of such data (the “Personal Data Protection
Directive”);
 Regulation 531/2012/EC on roaming on public mobile communications networks within the Union (the “Roaming
Regulation”);
 Regulation 2015/2352/EC of December 16, 2015 setting out the weighted average of maximum mobile termination
rates across the Union.
The Open Internet Access Regulation sets new ceilings on retail roaming rates in Europe charged by mobile operators
with effect from July 1, 2014 to April 29, 2016, as well as after April 29, 2016. The Roaming Regulation also abolished
roaming charges from June 15, 2017 and called for a review of wholesale rates. The report reviewing wholesale rates in
the roaming market, intended for the European Parliament and Council, is scheduled to be submitted on June 15, 2016.
26
1.3
1
From April 30, 2016
July 1, 2014
to April 29, 2016
Eurorate
Voice (retail)
Voice (wholesale)
SMS (retail)
SMS (wholesale)
Data (retail)
Data (wholesale)
Ceiling:
Additional roaming
charges
Outgoing calls (per minute)
€0.19
€0.05
Incoming calls (per minute)
€0.05
€0.0114
(per minute)
€0.05
€0.05
Per message
per Mb
€0.06
€0.02
€0.02
€0.02
€0.20
€0.05
€0.05
€0.05
National price +
Additional charges
€0.19
€0.06
€0.20
The Open Internet Access Regulation introduced network neutrality principles. Article 3 lays down the following network
neutrality principles:
 The right of end users to access and distribute content, supply and run applications and services, and use terminals
of their choice, regardless of the location, origin or destination of the information, content, applications or services, via
their Internet Service Provider; and
 When providing Internet access services, providers of those services must treat all traffic equally, without
discrimination, restriction or interference.
Both these principles are subject to the following exceptions:
 Respect of judgments rendered by the courts and tribunals;
 Protection of network integrity and security; and
 Reasonable network traffic management to alleviate temporary congestion and in exceptional circumstances.
It also reinforces the obligation on operators to ensure transparency. In particular, operators have to disclose more
information in customer contracts (for example, the impact of traffic management techniques used by ISPs, the realworld impact of ceilings or usage limits, real-world throughput speeds, etc.).
The principle of network neutrality is also central to the “Digital Republic” Bill passed into law by France’s National
Assembly on January 26, 2016 and scheduled for Senate review in April 2016. The Bill requires operators to provide
equal non-discriminatory access to all services and appoints the French national electronic communications and postal
services regulator ARCEP to oversee compliance with this principle.
Digital single market
On May 6, 2015, the European Commission published Communication COM 2015/0192 setting out its “Digital Single
Market Strategy for Europe.” This strategy has three pillars: (i) provide improved access to online services for consumers
throughout Europe, (ii) create conditions conducive to the development of digital networks and services, and (iii)
maximize the growth potential of Europe’s digital economy. Following the adoption of Regulation 2015/2120 on
September 11, 2015, the European Commission launched a public consultation on the 2002 Telecommunications
Package (as amended in 2009).
On January 19, 2016, the European Parliament adopted a Resolution entitled "Towards a Digital Single Market Act.” In
this Resolution, the European Parliament hails the European Commission’s Digital Single Market Strategy, but also
expresses its concerns regarding the divergent approaches taken by EU Member States in regulating the Internet and
the "sharing economy.” The Resolution addresses the need to expand consumer choice and to remove obstacles for
innovative young companies. The Resolution also addresses copyright, the regulation of the telecoms sector, VAT rules,
audiovisual media, digital skills, online administration, and workers’ rights.
In terms of telecoms sector regulation, the Resolution:
 underscores the key role of private investment in high speed and very high speed communication networks that are
conducive to the growth of digital services and need to rely on a stable EU regulatory framework that allows all
participants to invest, including in rural and remote locations;
 reminds Member States of their commitment to finish rolling out their high-speed networks by 2020 with a minimum
throughput of 30 Mbps; and
 underscores the need to ensure that end-user rights as set out in telecom regulations are consistent, proportionate
and appropriate.
27
1.3
1
1.3.2 French regulatory framework applicable
to electronic communications
Most French measures implementing the European regulatory framework governing electronic communication are
covered by the French Postal and Electronic Communications Code (CPCE). The French Consumer Code also governs
relations between electronic communication services providers and consumers. In addition to many consumer protection
rules that do not apply specifically to electronic communications, the “Chatel Act” updated the French Consumer Code to
protect consumers who use mobile and Internet technology (Articles L.121-84-1 et seq.) Furthermore, the government in an implementing decree published on March 25, 2016 on the provision of pre-purchase information to consumers on
the technical features of access to fixed-line Internet - set out the conditions governing the use of the term “Fiber.” The
effective implementation and oversight of the European regulatory framework in every Member State is the responsibility
of the National Regulatory Authorities (NRA).
1.3.2.1 National Regulatory Authorities
1.3.2.1.1
ARCEP
In France, the NRA for electronic communications is ARCEP, which was formed in January 1997. ARCEP is an
independent administrative authority tasked with regulating the electronic communications sector, managing
administrative procedures, defining access conditions, roaming connections, calculating costs and contributions to
universal service, regulating rates and the allocation of spectrum band user rights.
In order to exercise its functions, powers and duties, ARCEP has various powers and specifically regulatory power,
control power, power to settle disputes, power of consultation, and sanction power. ARCEP decisions may involve
asymmetric regulations (i.e., that apply only to operators who dominate their market) or symmetric regulations (i.e., that
apply to all operators). Certain symmetric regulatory decisions need to be approved by the Ministry for electronic
communications.
Law 2015-990 of August 6, 2015 to promote economic growth, business, and equal opportunity (the “Macron Law”) gave
ARCEP new powers and missions, including the ability to require operators to amend their mobile network sharing
agreements, when necessary to achieve regulatory objectives. ARCEP is required to publish a report showing the value
of each mobile operator’s investment in the roll-out of new infrastructure. The authority also assesses their compliance
with radio network sharing agreements.
1.3.2.1.2
Competition Authority
The French Competition Authority is an independent administrative authority in charge of overseeing competition under
Article L. 461-1 of the French Commercial Code. It is tasked with identifying anti-competitive market practices, monitoring
market concentration, and issuing advisory opinions.
As part of its mission to identify anti-competitive practices, under Articles L. 464-1 and 2 of the French Commercial Code,
the Competition Authority has the power to (i) impose fines, (ii) require companies to cease practices, (iii) accept
undertakings to eliminate anti-competitive practices, and (iv) issue emergency injunctions in certain cases. Under Article
L. 464-8 of the French Commercial code, an appeal can be lodged against these decisions (in itself not having
suspensive effect) with the Paris Court of Appeal, within one month. An appeal can be brought against the ruling of the
Paris Court of Appeal of Paris in the Court of Cassation within one month.
In its role of controlling concentrations, in accordance with Articles L. 430-1 et seq. of the French Commercial Code, the
Competition Authority must give advance authorization to concentrations between sufficiently large businesses. It has the
power to (i) authorize the concentration, (ii) ban it, or (iii) impose prior conditions. Under Article R. 311-1 of the Code of
Administrative Justice, the parties concerned can lodge an appeal (in itself not having suspensive effect) for annulment
or reformulation, with the Council of State, within two months.
In its advisory role, in accordance with Articles L. 462-1 et seq. of the French Commercial Code, the Competition
Authority provides opinions on the function of the markets at the request of the government, parliament, courts and
tribunals, or legal entities representing public interests, or at its own initiative. There is no appeal against opinions
rendered.
1.3.2.1.3
Conseil Supérieur de l’Audiovisuel (French broadcasting regulator)
Created by Law 89-25 of January 17, 1989, the national broadcasting regulator (CSA) strives to protect audiovisual
communication freedom in France. Law 86-1067 of September 30, 1986, amended on numerous occasions, makes it
responsible for protecting minors, respecting pluralistic expression of opinions, organizing election campaigns on radio
and TV, enforcing rigorous information processing standards, allocating spectrum bands to operators, respect for human
dignity, and the protection of consumer rights.
28
1.3
1
As regards spectrum allocation, the CSA is responsible for the administration and allocation of radio and TV frequencies.
It is also responsible for planning the wireless frequencies used by radio stations, issuing spectrum licenses, and
planning and allocating broadcasting channels for digital terrestrial television operators.
Should this lead to licensing disputes, the CSA acts as a mediator between the broadcasters and the producers or their
agents, or the corporate bodies that they represent.
The CSA may offer recommendations to broadcasters and distributors of audiovisual communication services regarding
compliance with the principles laid down in the Law of September 30, 1986 cited above. It has the power to penalize
broadcasters and service distributors who do not comply with those principles.
On March 8, 2016, a bill to strengthening media freedom, independence and pluralism was adopted at first reading by
France’s National Assembly. Should it be passed into law, it would affect, among other things, the CSA’s power to
regulate TV channel transfers.
1.3.2.2 General regulatory framework applicable to network operators
and providers of electronic communication services
Under Articles L. 33-1 and D. 98-3 to D. 98-13 of the CPCE, any entity operating a network or providing an electronic
communication service to the public must comply with certain general obligations relating to portability of numbers, the
regulation of added-value services, the publication of service quality surveys, and the financing of a universal service.
1.3.2.2.1
Number portability
Portability is a service offered by an electronic communications operator that enables its subscribers to keep their
telephone number if they change operators. Under Articles L. 44, D. 406-18 and D. 406-19 of the CPCE, all operators of
fixed-line and/or mobile services to end users are required to offer number portability.
In January 2009, the major operators, including members of the Group, set up for this purpose the Association for the
Portability of Fixed-Line Numbers (Association de la Portabilité des Numéros Fixes) to share the data needed to ensure
number portability.
ARCEP Decision 2013-0830 of June 25, 2013 laid down new obligations for operators targeting end users, particularly in
terms of consumer information and service quality. This was gradually implemented by October 1, 2015.
As regards the portability of mobile numbers, the initial regulatory mechanism underwent several modifications aimed at
establishing a maximum time period for switching, to improve customer service and guarantee subscriber information.
ARCEP Decision 2012-0576 of May 10, 2012 specifies the procedure for applying for portability of mobile numbers.
In its Decree 23-10-2013 of November 1, 2013, the French government approved the ARCEP Decision of June 25, 2013,
which specifies the portability procedures for fixed-line numbers. The ARCEP decision establishes the following
obligations on operators in the consumer market:
 The time period for transferring a number from one operator to another is reduced to three business days, provided
access is available;
 The rules for compensation in the event of delay or problems processing a number transfer request must be clearly
stated;
 the information provided to subscribers during the number transfer process must be harmonized; and
 in October 2014, a quarantine period was introduced to permit a number to be transferred up to 40 days after the
account is canceled.
On October 1, 2015, an operator identity code (Relevé d’Identité Opérateur or “RIO”) similar to the one that already
exists for the portability of mobile numbers was created for fixed-line operators, and a special tool was implemented to
facilitate the identification of subscribers and number transfers between operators.
The procedure was also modified for the business services market:
 The time period for transferring a number from one operator to another is reduced to seven business days, provided
access is available;
 for better business customer information, fixed-line operators must make available all the technical and contractual
information required to switch operators while keeping the same fixed-line number;
 service is maintained until the number is effectively transferred. If the contract expires before the transfer, the former
operator must extend the service for the fixed-number concerned until it is effectively transferred;
 since October 2014, a quarantine period has applied; and
 since October 1, 2015, operators may jointly choose to extend the RIO-based controls imposed on the retail market,
to all or part of the business services market.
To obtain their RIO, users can dial the free number 3179 from their fixed line. They will be told their RIO and it will be
confirmed in writing by the method of their choice (SMS, email or post).
29
1.3
1.3.2.2.2
1
Regulation of added-value services (AVS)
ARCEP Decision 2012-0856 of July 17, 2012 modifies the retail pricing principles for calls made to short or special
numbers. It aims to simplify the retail pricing of such calls and to prevent certain abusive practices. Originally scheduled
to come into effect January 1, 2015, this decision introduces a general pricing structure on the model “C+S” which
explicitly distinguishes two components of the retail price billed to the caller: (i) the rate C for the underlying telephone
communication set by the outgoing operator, and (ii) the rate S for the added-value service set by the provider of that
service.
ARCEP Decision 2012-0661 of June 10, 2014 postponed the effective date of the AVS pricing reform to October 1, 2015.
Since October 1, 2015, businesses and public services have three types of numbers for supplying their services: free
numbers, normal rate numbers, and higher-rate or “premium” numbers.
Transparency to consumers will be guaranteed by the obligation to identify calls to higher-rate numbers on detailed
telephone bills as well as a reverse look-up directory created by the operators and service providers (a dedicated website
has been set up: infosva.org).
Transparency is improved by the graphic presentation of prices, introduced by the reform, which uses a different color for
each of the three types of numbers: green for free numbers, gray for normal-rate numbers, and red for higher-rate
numbers.
1.3.2.2.3
Publication of surveys of service quality
Decision 2013-0004 of January 29, 2013 imposes on operators with more than 100,000 subscribers the obligation to
publish on their website (i) measurements of quality of access to fixed-line services by type of access (every quarter) and
(ii) measurements of the service quality of fixed-line telephony services (every six months).
In July 2014, ARCEP introduced a survey monitoring the coverage and quality of mobile telephony services. On July 30,
2015, ARCEP published the conclusions of that survey aimed at evaluating the service quality of mobile operators in
metropolitan France. The highest overall score was obtained by Orange, scoring above average on 153 indicators
covering telephony, SMS and data services. The Bouygues Telecom and SFR results were similar to each other overall,
scoring above average on 52 and 42 indicators. Free Mobile, whose 3G network was still being rolled out, obtained a
much lower score on a considerable number of indicators and was above average on only 9 indicators. In addition to the
publication of the quality of mobile and fixed-line services and of access to them, ARCEP continued its work in 2015,
publishing its new half-yearly report on the quality of Internet-access services in metropolitan France. On December 18,
2015, ARCEP published its latest conclusions regarding mobile coverage (2G, 3G and 4G) provided by four operators
(Source: ARCEP). 2G and 3G coverage are uniformly high (more than 80% in all cases and more than 90% in most
cases) for each of the operators as well as in terms of population coverage and geographical coverage. However, 4G
coverage is lagging. Regarding 4G coverage in population terms, Orange tops the list (76%), followed by Bouygues
Telecom (72%), SFR (58%) and Free (52%). Only 28% of the geographical territory was covered by the Orange network
(24% for Bouygues Telecom, 18% for Free and 15% for SFR).
ARCEP Decision 2015-0833 of July 7, 2015, modifying the system for monitoring quality of access to fixed-line services,
came into effect on January 1, 2016.
Additionally, Law 2015-990 of August 6, 2015 on economic growth, activity and equality of opportunity amended Article
L.33-12 of the CPCE, giving ARCEP greater latitude in establishing indicators of service quality and network coverage of
electronic communication services. Although these indicators have been implemented by the operators themselves, they
are currently subject to supervision by independent bodies selected by ARCEP, the costs of which are directly supported
by the operators concerned.
1.3.2.2.4
Financing of universal service
In accordance with Law 2003-1365 of December 31, 2003, operators are required to ensure that the provision of
universal service is designated on the basis of a tendering procedure. The tendering procedure is administered by the
Ministry in charge of electronic communications. All operators intending to bid as a universal service provider in France
must disclose their financial and technical resources, and the cost of their services, in their submission.
Orange was selected by the tendering process launched in 2013 for connection and telephony services, to run until
November 2016. A different operator may be selected at that time. Yellow Pages was selected by the tendering process
launched in 2011 to supply a directory of subscribers in paper format until December 2014.
In accordance with Articles L. 35 et seq. of the CPCE, the universal service obligations include (i) the universal electronic
communication service; (ii) complementary services to the universal electronic communication service; and (iii) missions
of general interest under the scope of electronic communication, as regards defense and security, public research and
further education. The universal electronic communication service includes (a) a connection to a fixed-line network open
to the public and a high quality telephone service, including fax communication and data communication, at sufficient
speeds to enable Internet access and the free routing of urgent calls, all at a reasonable price, (b) an information service
and directory of subscribers, and (c) specific measures in favor of end users with disabilities.
Law 2015-990 of August 6, 2015 on economic growth, activity and equality of opportunity removed access to public
telephone boxes from the scope of universal service.
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1.3
1
A universal provider is no longer selected for information and directory services, given the competitive nature of that
market.
Each year, ARCEP calculates the net cost of the universal service and sets up shared financing between the electronic
communications operators to cover any excessive charge to the designated provider for the period concerned. ARCEP
sets operators’ contributions (provisional and then definitive) prorated to their revenue over the period concerned.
ARCEP Decision 2015-0346 of April 21, 2015 sets the definitive valuation of the net cost of universal service and
operators’ contributions for 2013, and ARCEP Decision 2015-1441 of December 24, 2015 sets operators’ provisional
contributions for 2016.
SFR’s provisional contribution for 2016 was €7,473,099.
1.3.2.3 Asymmetric regulation of fixed-line telephony markets
and high and very high speed fixed-line markets
1.3.2.3.1
Analysis of fixed-line telephony markets
Market analysis is the cornerstone of the asymmetric regulation framework applicable to operators with a dominant
market position. Asymmetric regulation targets the market segments (mainly wholesale markets) where competition
distortions and dominant positions have been identified. In compliance with the Framework Directive, Regulation (EC)
1211/2009 establishing BEREC and Articles L. 371 to L. 381 of the CPCE, ARCEP is required, under the supervision of
the European Commission and BEREC, and on the basis of the recommendation of the French Competition Authority, to
(i) define the relevant markets in France, (ii) analyze those markets and identify businesses that exercise significant
influence over those markets, and (iii) decide whether or not to impose on those businesses appropriate regulatory
obligations to address the competition issues identified.
1.3.2.3.2
Analysis of the high and very high speed fixed-line market
ARCEP Decisions 2014-0733, 2014-0734 and 2014-0735 of June 26, 2014 are devoted to the fourth analysis cycle of,
respectively, the wholesale market in access to physical infrastructures constituting fixed-line local loops (market 4), the
French wholesale market in access to high and very high speed services (market 5), and the wholesale market in
capacity services (market 6), for the period mid-2014 to mid-2017. These decisions define the asymmetric regulation of
the high and very high speed fixed-line market and apply only to Orange, identified as the only operator exercising
significant influence over those markets. As such, Orange is subject to specific obligations regarding access (unbundling
the local copper loop and access to its infrastructures) and must in particular grant reasonable and non-discriminatory
access at rates (prices) that comply with applicable regulations.
The unbundling of Orange copper lines is the main action strategy for the regulation of the sector. It is thanks to
unbundling that multiservice offers such as “triple-play” (for telephone lines with sufficient bandwidth) have developed in
France.
Unbundling requires heavy investment by operators. Operators’ geographical coverage expands only gradually.
Complementing unbundling, alternative operators have sometimes, on an infra-national basis, used wholesale offers of
DSL run by Orange that enable them, to date, to market Internet access services and telephone services over the entire
territory in retail markets.
This new framework defines reinforced obligations to non-discrimination in application of the recommendation made by
the European Commission on September 11, 2013 as regards obligations of non-discrimination and consistent cost
calculation methods to promote competition and encourage investment in high speed.”
On November 12, 2015, ARCEP submitted a framework pricing proposal for 2016 and 2017 for public consultation for
access to Orange’s local copper loop. This proposal envisages the following pricing changes:
Pricing changes
(in euros)
Rate 2015
Rate 2016
Rate 2017
9.05
9.1
9.45
Total cost of unbundling
56
50
50
Termination
20
15
15
135
105
105
Monthly rate for unbundling
After-sales service
On December 28, 2015, Orange reduced its 2015 wholesale monthly unbundling rate from €9.05 to €8.78 with
retroactive effect from August 2015. This rate will be applied until the adoption of ARCEP’s decision on price ceilings for
2016 and 2017.
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1.3
1
On December 1, 2015, ARCEP submitted a framework pricing proposal for public consultation, for general access to the
local copper loop (bitstream) in France for 2016 and 2017. This proposal envisages the following pricing changes:
Pricing changes
(euros)
Monthly rate for general single channel access
Rate 2015
Rate 2016
Rate 2017
12.53
12,.63
12.93
As announced in late 2015 and in accordance with the objectives defined in its strategic analysis, on February 16, 2016,
ARCEP issued three Decisions (2016-0206, 2016-0207 and 2016-0208) introducing ceilings on the main unbundling
rates for Orange’s bitstream product as well as for wholesale sales of access to telephone services (VGAST) and
associated outgoing call services. In particular, the monthly wholesale rate for total unbundling is capped at €9.10 from
March 1, 2016 and at €9.45 from January 1, 2017.
1.3.2.4 Asymmetric regulation of voice call termination markets and specific
regulatory framework for very high speed services over optical fiber
1.3.2.4.1
Analysis of fixed-line voice call termination markets
ARCEP Decision 2014-1485 of December 9, 2014 is devoted to the fourth analysis cycle of the wholesale market in
fixed-line voice call termination and mobile voice call termination for the period January 1, 2015 to December 31, 2017.
As regards fixed-line voice call termination (market 3), all fixed-line telephony operators are considered to exercise
significant influence over the termination market covered by their respective networks. This Decision imposes price
control obligations on each operator and sets the following ceilings on fixed-line voice call terminations:
 until December 31, 2014, capped at €0.8/min, corresponding to the last ceiling imposed by the previous market
analysis;
 from January 1, 2015, capped at €0.79/min for a period of one year;
 from January 1, 2016, capped at €0.78/min for a period of one year; and
 from January 1, 2017, capped at €0.77/min for a period of one year.
1.3.2.4.2
Specific regulatory framework for very high speed services over optical fiber
Law 2008-776 of August 4, 2008 stipulates that any entity that (i) installs or has installed a very high speed electronic
communication fiber optic line in an existing building or (ii) uses a very high speed electronic communication fiber optic
line for an end-user must meet all reasonable requests from operators for access to that line. With the exception of the
cases defined by the regulating authority, this access must be provided in a transparent and non-discriminatory manner
from a point outside the boundaries of the private properties concerned so as to allow other operators to connect to it on
reasonable economic, technical and access terms. Refusal to allow access must be justified.
ARCEP has set out the regulatory framework and the principles laid down in Article L. 34-8-3, in a series of decisions
and recommendations published since December 2009.
These decisions set out the rules for sharing the terminal part of FTTH networks, i.e., downstream of the sharing point, in
very densely as well as outside very densely populated areas, in particular specifying obligations on the operator of the
building to make information available to the commercial operator.
Decision 2009-1106 of December 22, 2009, for example, defines very densely populated areas as municipalities with
population dense enough to make competition possible in terms of infrastructures, and states that the list of
municipalities falling into this category may be adjusted as necessary.
ARCEP Decision 2015-0776 of July 2, 2015 specifies and reinforces obligations on building operators: they must
guarantee the availability, traceability and the non-discriminatory nature of the information provided to commercial
operators.
Additionally, Article 117 of Law 2015-990 of August 6, 2015 on economic growth, activity and equal opportunity
introduced the status of “fiber optic zone” (zone fibrée) that can be obtained when the installation and exploitation of a
fiber optic network open to sharing is sufficiently advanced to trigger measures facilitating the transition to very high
speed services, i.e., when services can be migrated from a local copper loop to a local optical loop.
The request to obtain that status must be made by the operator who rolls out the new fiber optic network, or by the local
authority that set it up under Article L. 1425-1 of the General Code of Regional Authorities. The Minister for Electronic
Communications will grant this status based on ARCEP’s recommendation. (this Article defines the conditions under
which regional authorities may intervene in the electronic communications sector.)
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1.3
1
On February 18, 2016, ARCEP set up a Market Watch (“Observatory”) on the roll-out of mobile networks in sparsely
populated areas and officially notified Bouygues Telecom and SFR to comply with the upcoming deadline for 4G
coverage in sparsely populated areas. ARCEP also decided to closely monitor 4G roll-out by Bouygues Telecom and
SFR in all sparsely populated areas in France. ARCEP approved the draft agreement between the four operators (as
part of the program to cover urban centers introduced since the Macron Law) in order to ensure 2G and 3G coverage in
the country’s urban centers.
At this stage, terms and conditions for applying this new fiber optic zone status have not yet been defined (have not yet
been published).
1.3.2.5 Specific regulatory framework for mobile operators
1.3.2.5.1
a)
Obligations regarding networks and frequencies
Conditions on authorizations to use frequencies
Article L. 33-1 of the CPCE authorizes mobile operators to use frequencies to establish and operate 2G, 3G and 4G
networks. These frequencies are usable under the terms and conditions set by European directives (for the 900 MHz
band) and by implementation decisions of the European Commission (for other frequency bands). These texts are
supplemented by the harmonization decisions of the Electronic Communications Committee (ECC) of the European
Conference of Postal and Telecommunications Administrations (CEPT), and the recommendations for the coordination of
neighboring radio frequencies. At national level, ARCEP sets the technical conditions for the use of certain bands of
radio frequencies.
b)
Schedule for allocating new frequencies
Following the allocation of the frequencies in the 700 MHz band, new frequency bands may be allocated in France in the
years ahead (15 GHz band, descending orbit, and 2.3 and 3.4 GHz bands). No schedule for allocating new frequencies
has been announced as of the date of this Registration Document.
c)
Reallocation (refarming) of 4G frequencies
The 1800 MHz band is one of the two bands historically used by 2G networks. The current plan is to gradually reallocate
it to 4G services to boost efficiency. Consequently, the licensing conditions for mobile operators have to be modified to
remove the existing restrictions that allow it to be used solely for 2G.
To make this band technologically neutral and prepare it for the use of 4G services, in March 2013 ARCEP issued a
guidance memo on the introduction of technological neutrality for the 1800 MHz band (defining the method for early
adoption of technological neutrality, i.e., before May 25, 2016, under Order 2011-1012 of August 24, 2011 transposing
Directive 2009/140/EC, or earlier if the license holders for that band request it).
ARCEP brought the provisions of this guidance memo into effect when Bouygues Telecom applied to have the
technological restrictions on its license lifted. Consequently:
 Bouygues Telecom was authorized to use 4G at 1800 MHz from October 1, 2013 by ARCEP Decision 13-0514 of
April 4, 2013.
 Free Mobile was authorized to use technologically neutral frequencies at 1800 MHz by ARCEP Decision 14-1542 of
December 16, 2014.
 Orange and SFR were authorized to roll out 4G networks in the 1800 MHz band from May 25, 2016, by ARCEP
Decisions 2015-0975 and 2015-0976.
Consequently, from May 25, 2016, the 1800 MHz band will be allocated as follows (Source: ARCEP):
A decree is expected shortly to set the level of 4G fees in the 1800 MHz band.
d)
Sharing
As ARCEP points out in Opinion 2012-1627 of December 20, 2012, although infrastructure competition is important for
ensuring lively competition and a high level of investment, network sharing is not incompatible with this competitiveness
objective. In a context of increased competitive pressure, and when investments remain considerable, particularly for the
deployment of 4G, network sharing may, for the operators, constitute a way by which to reduce their costs and provide
users with benefits in terms of the extension of coverage and improved quality of service.
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1.3
1
Network and frequency sharing is encouraged and even legally required in France through numerous specific
mechanisms that have the common goal of boosting mobile coverage in the country:
 the “white zones” program that began in 2003 under the guidance of the Ministry for Territorial planning and ARCEP
to enable 2G network coverage in the city centers of approximately 3,300 municipalities;
 a 3G network infrastructure-sharing agreement in compliance with ARCEP Decision 2009-0328 of April 9, 2009,
signed on February 11, 2010 by three mobile operators (SFR, Orange and Bouygues Telecom), which stipulates that
installations on the 3G network be shared by mobile operators in the less densely populated areas of the country.
This agreement was signed on July 23, 2010 and an agreement with Free Mobile setting out the methods for its
deferred inclusion into this mechanism; and
 the sharing obligations resulting from the authorizations to use the 4G frequencies that stipulate that their owners
must jointly share the networks and frequencies in the 800MHz band so as to cover, within a maximum of 15 years
(January 2027), the city centers of municipalities situated in white zones;
 incentives for frequency sharing resulting from the authorizations to use 4G/5G frequencies in the 700 MHz band
(Bouygues Telecom, Free Mobile, Orange and SFR) that stipulate that their owners must cover, within a maximum of
15 years (January 2027), the city centers of municipalities situated in white zones, to encourage them to formulate
framework agreements including timelines and procedures for implementing frequency sharing in the 700 MHz band.
ARCEP Decision 2014-0625-RDPI of May 27, 2014 launched an administrative review of the four mobile network
operators regarding their obligations to provide 3G coverage in less densely populated areas of the country, in
accordance with the 3G network infrastructure sharing agreement for those areas. Article L.34-8-5 inserted in the CPCE
by Law 2015-990 of August 6, 2015 on economic growth, activity and equal opportunity provides for a new agreement
between central government, regional authorities and mobile network operators for coverage of sparsely populated
areas. In anticipation of this agreement, a memorandum of understanding was signed by the mobile operators in May
2015, whereby they undertake to roll out 2G to all white zones by the end of 2016 and 3G by mid-2017.
Apart from these specific provisions, the conditions in which the network or sharing agreements can, generally, be
implemented by mobile operators are laid down by the French Competition Authority in an opinion of March 11, 2013.
On January 31, 2014, SFR and Bouygues Telecom announced they had signed an agreement to share part of their
mobile networks (see Section 7.7 of this document “Major Contracts - Agreements regarding wireless networks Bouygues Telecom Agreement”). In a press release on January 31, 2014, ARCEP welcomed this agreement, provided it
fulfills three conditions: (i) preservation of operator commercial and strategic autonomy, (ii) no eviction of certain market
competitors and (iii) improvement of the services supplied to users as regards coverage and quality of service. The
agreement is subject in the case of Orange (who signed it on April 29, 2014) to approval by the French Competition
Authority. Approval is still pending.
e)
Roaming
Roaming is another form of sharing infrastructures between operators, under the scope of which an operator welcomes
the customers of another operator on its network. Only the frequencies of the host operator are used here.
Roaming is implemented in France through several sets of specific measures including, in particular: (i) the “white zones”
program mentioned previously, which began in 2003; and (ii) the ruling on the right to roaming for 2G and 4G of Free
Mobile.
Free Mobile’s 3G license gives it roaming rights on the network of one of the three 2G operators until January 2016. In
March 2011, Free Mobile signed a 2G roaming agreement with Orange (subsequently extended to 3G) valid until the end
of 2018. On January 12, 2016, using its new powers under the Macron Law, ARCEP set an anticipated expiry date for
the agreements signed between Free Mobile and Orange:
 For 3G services, these agreements should expire between the end of 2018 and the end of 2020.
 For 2G services, these agreements should expire between the start of 2020 and the end of 2022.
Free Mobile also has 4G roaming rights on the SFR network, whereby it obtains two blocks of 4G frequencies in the 800
MHz band.
On November 26, 2015, the Commission launched a public consultation to review wholesale pricing in the domestic
roaming market, the reasonable use policy, and the viability mechanism cited in the roaming regulations, as amended by
Regulation 2015/2120.
f)
Latest information regarding Overseas Departments and Territories
Overseas roaming refers to the possibility of using one’s mobile phone subscription when traveling in French Overseas
Departments and Territories that are not covered by the initial operator. The process is identical to international roaming
when, for example, a French user travels abroad or when a foreign user comes to France.
On January 21, 2016, ARCEP sent an opinion to the government on roaming charges in French Overseas markets. In
2015, the government asked ARCEP for an official clarification of the concerns over Law 2015-1268 updating overseas
rights. A provision was subsequently inserted in the CPCE to discontinue roaming charges for mobile phone calls and
texts (SMS) for users traveling between metropolitan France and its Overseas Departments and Territories, effective
May 1, 2016. ARCEP believes this new provision will greatly destabilize the Overseas markets.
34
1
1.3
Law 2015-990 of August 6, 2015 on economic growth, activity and equal opportunity amended the CPCE to grant new
network-sharing powers to ARCEP. ARCEP may now, after consulting the French Competition Authority, require existing
agreements to be amended to specify their geographic scope, their duration and the terms and conditions of
performance. On January 12, 2015, ARCEP published draft guidelines for public consultation, to clarify for operators the
consequences of those changes to the legal framework.
1.3.2.5.2
a)
Complementary regulatory framework applicable to mobile operators and
symmetric regulation based on market analyses - Mobile voice call termination
and SMS call termination
Complementary regulatory framework for mobile operators
In addition to the general obligations on all operators using a network or providing an electronic communications service
to the public (as specified in Articles L. 33-1 and D. 98-3 to D. 98-13 of the CPCE), mobile operators have additional
obligations specific to them.
The Macron Law added Article L. 34-8-5 to the CPCE, whereby the French central government, regional authorities and
mobile operators may formulate an agreement defining the coverage conditions for areas that currently have no mobile
service. Such an agreement would define the conditions under which regional authorities may, having identified a lack of
private initiatives, make certain types of infrastructures available to service providers so that they can provide 3G mobile
services in inadequately covered areas.
ARCEP Decision 2012-0855 on the reorganization of the number series beginning with 06 and 07 provides for the
creation of a range of extended 14-digit numbers in metropolitan France, and a ban effective January 1, 2016 on the use
in metropolitan France of 10-digit numbers for Machine-to-Machine (M2M) communications.
Due to problems experienced by operators in implementing this decision and after finding that the annual pace of mobile
number allocations was slowing, although not calling into question the risk of saturation due to the growth of M2M
demand, ARCEP Decision 2015-1295 of October 22, 2015 authorizes operators who request to do so to defer the ban on
using 10-digit mobile numbers for M2M communications until June 30, 2017.
In addition to these general obligations, mobile operators are also governed by symmetric regulations based on the
market analyses conducted by ARCEP.
b)
Analysis of mobile voice call termination markets
The regulation of mobile voice call termination rates has led to a steady and substantial drop in the ceilings on these
prices over the course of time, as illustrated in the following table showing how they have changed for operators in
metropolitan France:
In eurocents (hundredths
of a euro)
Orange
SFR
Bouygues Telecom
2002
2003
2004
2005
2006
2007
2008
July 1,
2009
July 1,
2010
20.12
17.07
14.94
12.5
9.5
7.5
6.5
4.5
3
27.49
24,67
17.89
14.79
11.24
9.24
8.5
6
3.4
July 1,
2013
January
1, 2015
January
1, 2016
January
1, 2017
0.8
0.78
0.76
0.74
Free Mobile
MVNO as such
In eurocents (hundredths
of a euro)
July 1, 2011
to
December 30,
2011
January 12,
2012
to
June 30, 2012
July 1, 2012
to
December
30, 2012
January
1, 2013
2
1.5
1
0.8
Orange
SFR
Bouygues Telecom
Free Mobile
MVNO as such
1.6
1.1
Source: ARCEP
35
1.3
1
ARCEP Decision 2014-1485 of December 9, 2014 is devoted to the fourth analysis cycle of the wholesale market in
fixed-line voice call termination and mobile SMS call termination for the period January 1, 2015 to December 31, 2017.
As regards fixed-line voice call termination (market 7), all fixed-line telephony operators are considered to exercise
significant influence over the termination market covered by their respective networks. This Decision imposes price
control obligations on each operator and sets the following ceilings on mobile voice call terminations:
 until December 31, 2014, capped at €0.008/min for operators in metropolitan France and €0.01/min for Overseas
operators, corresponding to the most recent caps set by the previous market analysis;
 from January 1, 2016, capped at €0.0076/min for a period of one year; and
Currently, the voice call termination rates of all regulated operators in France comply with the European Commission
Recommendation of May 7, 2009 on the regulatory treatment of fixed and mobile call termination rates in the European
Union: they are symmetrical and aim to ensure incremental long-term costs for an effective, generic operator.
Due to ARCEP’s fast implementation of this recommendation, France has one of the lowest mobile voice call termination
rates in Europe.
c)
Analysis of mobile SMS call termination markets
ARCEP’s regulation of SMS call termination markets has led to a steady and substantial drop in ceilings on SMS call
termination rates of regulated operators in metropolitan and overseas France, as illustrated in the following table:
In eurocents (hundredths of a euro)
Orange and SFR
Bouygues Telecom
Operators in Reunion-Mayotte
French West Indies & Guyana
As of
As of
As of
As of
As of
As of
Aug 1,
2006
Oct 1,
2010
Jul 1,
2011
Jan 1,
2012
Jul 1,
2012
Jan 1,
2013
3
2
3.5
2.17
1.5
3
1
2
3
1
2
Source: ARCEP
ARCEP’s fourth analysis cycle of wholesale markets in fixed-line voice, mobile voice and SMS call terminations,
launched in 2013, envisaged maintaining the SMS call termination rates regulations for a further three years, and
ARCEP submitted those regulations for approval to the European Commission on October 28, 2014.
However, in its observations of November 28, 2014, the European Commission expressed serious doubts regarding this
proposal to regulate SMS call termination markets. It therefore launched an in-depth two-month investigation and
discussions with ARCEP and BEREC (fact-finding stage).
At the end of this two-month period, discussions did not result in any consensus regarding competition risks or the
regulations to implement to prevent them. Consequently, on January 29, 2015 ARCEP announced that it was
withdrawing its proposal to regulate SMS call termination rates but that it would nonetheless continue its work in
overseeing these markets.
36
1.3
1.3.2.5.3
a)
1
Individual obligations resulting from authorizations to use Group frequencies
Authorizations to use Group mobile frequencies
The table below summarizes the authorizations to use the mobile frequencies pertaining to SFR, specifying for each
bandwidth of frequencies what technology is currently authorized, the quantity of frequencies attributed to SFR, the
ARCEP decisions or decrees and the grant and expiration dates.
Band
Allocations
700 MHz
No. 15-1569
800 MHz
No. 12-0039
Modifications
No. 06-0140
No. 08-0228
No. 10-0399
No. 11-1018
No. 12-0281
No. 15-0976
approved July 18,
2001
approved January
7, 2002,
December 3, 2002,
December 16,
2003
No. 01-0647
No. 01-0972
No. 01-1195
No. 02-0052
No. 03-0201
No. 04-0069
900 MHz
1,800 MHz
2.1 GHz
Quantity
Technologies
Allocation date
Expiry date
2 ⋅ 5 MHz
4G, 5G
12/8/2015
12/8/2035
2 ⋅ 10 MHz
4G
1/17/2012
1/17/2032
2 ⋅ 10 MHz
2G, 3G
2 ⋅ 23.8 MHz
2G
3/25/2006
3/25/2021
2 ⋅ 14.8 + 5
MHz
3G
8/21/2001
8/21/2021
2.1 GHz
No. 10-0633
2 ⋅ 5 MHz
3G
6/8/2010
6/8/2030
2.6 GHz
No. 11-1171
2 ⋅ 15 MHz
4G
10/11/2011
10/11/2031
The numbers in the above table reflect the quantities of frequencies allocated to SFR in 2015. Those numbers will
change in 2016 in line with ARCEP Decision 15-0976 of July 30, 2015 for the 1800 MHz band.
 x 21 MHz to 1800 MHz, from January 1 to March 14, 2016;
 x 28.1 MHz to 1800 MHz, from March 15 to May 24, 2016;
 2 x 20 MHz to 1800 MHz, from May 25, 2016.
SFR is authorized to use 4G in the 1800 MHz band from May 25, 2016 by ARCEP Decision 15-0976 of July 30, 2015.
In addition to the general obligations and symmetrical regulations described above, there are also individual obligations
arising from the commitments made by SFR when it was allocated various frequencies.
These individual obligations mainly include the following:
b)
3G coverage commitments
The table below summarizes the commitments to ensure 3G coverage applicable to SFR:
Maturity
Coverage obligation (in terms of % population coverage)
December 31, 2010
December 31, 2011
December 31, 2013
88%
98%
99.3%
Source: ARCEP
By means of Decision 2014-0624-RDPI dated May 27, 2014, ARCEP began an administrative inquiry concerning SFR in
order to ensure compliance with its commitments made in relation to the last due date for the roll-out of its third
generation mobile network, ensuring 99.3% coverage. ARCEP has not yet published the results of its review of SFR’s 3G
coverage.
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1.3
c)
1
Coverage commitments in very high speed mobile
The schedule given below summarizes the roll-out obligations envisaged by the SFR 4G licenses on the 700 MHz, 800
MHz and 2.6 GHz bandwidths:
Maturity
10/11/2015
1/17/2017 10/11/2019
40%
(800 MHz)
In the primary deployment
area
(18% of the population and
63% percent geographically
1/17/2022 10/11/2023
1/17/2024
1/17/2027
90%
(800 MHz)
97.7%
(800 MHz)
50%
(700 MHz)
92%
(700 MHz)
90%
(800 MHz)
In each department
95%
(700 MHz)
75%
(2.6 GHz)
60%
(2.6 GHz)
98%
(800 MHz)
Across the whole
of metropolitan France
99.60%
(800 MHz)
98%
(700 MHz)
99.60%
(700 MHz)
100%
(700 MHz)
Primary road arteries
National rail network
97.70%
(700 MHz)
95%
(800 MHz)
90%
(700 MHz)
25%
(2.6 GHz)
12/8/2030
(*)
60%
(700 MHz)
80%
(700 MHz)
90%
(700 MHz)
60%
(700 MHz)
80%
(700 MHz)
(*) Obligation not stated in the authorizations but automatically resulting from the obligation to cover 99.6% of the metropolitan population.
Coverage commitments in the primary deployment area must be met by using 800 MHz and 700 MHz frequencies. Other
coverage obligations can be met by using any very high speed mobile frequency allocated to SFR.
In its Decision 2016-0244-RDPI of February 18, 2016, ARCEP officially notified SFR to comply with its 4G coverage
commitment by January 17, 2017. SFR’s coverage in January 2016 was only 8% and would have to be 40% by 2017.
d)
MVNO (Mobile Virtual Network Operators) hosting commitments
When proceeding to attribute the residual frequencies of the 2.1 GHz bandwidth, SFR undertook to host MVNOs on its
network in accordance with conditions “that did not unjustifiably restrict the objective of competition on the wholesale
market of MVNO hosting and the commercial autonomy of the MVNOs on the retail market.”
Moreover, under the scope of its 4G license on the 800MHz bandwidth, SFR specifically undertook as follows:
(i) to grant “reasonable requests for hosting on a very high speed mobile network open to the public”;
(ii) to supply the MVNOs it hosts on its network with “hosting at reasonable economic conditions, specifically with regards
to the prevalent conditions on the wholesale and retail markets on which SFR operates, and compatibly with the
exercise of effective, fair competition on these markets”; and
(iii) to propose “an offer based on full MVNO architecture” consisting of the supply of access to its local radio loop “in
conditions enabling its effective use and particularly in non-discriminatory conditions in terms of quality of service with
respect to that from which SFR benefits for its own services.”
e)
Free Mobile roaming rights in the 800 MHz band
in the primary deployment area
SFR, which has a cumulative authorization over two blocks of the 800MHz bandwidth must allow Free Mobile, if it should
make a reasonable request to this end, to benefit from roaming where the 2.6 GHz network of Free has reached (i)
coverage of 25% of the population and (ii) if Free Mobile does not already benefit from a roaming agreement on the very
high speed mobile network of another owner of frequencies in the 800 MHz bandwidth. This right concerns 4G in the
primary deployment area of the 800 MHz bandwidth, namely 18% of the population and 63% of the territory.
38
1.3
1
1.3.2.6 Legal status of networks
1.3.2.6.1
General considerations
A telecommunications network mainly consists of physical infrastructures (conduits, network heads, switches) in which
the telecommunications equipment (e.g., cables) are installed. These components may be governed by various laws and
regulations. As the Group’s physical infrastructure is built on public or private property owned by third parties, it has
entered into concessions, operating agreements, public domain occupation agreements, and leases with various owners.
The Group also has rights of way and indefeasible rights of use (IRU) with landowners. The Group has also signed
agreements to use Orange infrastructures.
The Group has built its network by buying and combining entities that have built up their networks under various
regulatory arrangements. Those entities operated under a combination of the regulatory frameworks described below.
Telecommunications equipment may belong directly to telecom operators or to third parties, and multiple telecom
operators can occupy and use the same infrastructure.
In compliance with Articles L. 2122-2 and L. 2122-3 of the General Code of Property of Public Persons, regional
authorities can terminate these agreements for the occupation of the public domain at any time, as long as they can
prove that said action is in the public interest. Also, upon the expiry of a public domain occupancy agreement, the
occupant may be contractually obligated to (i) return the entire network to the regional authority concerned, in certain
cases in return for payment corresponding to the fair market value of the network, although in other cases for free, (ii)
remove the entire network at the occupant’s cost or at the cost of the regional authority concerned, (iii) transfer the
network to other operators approved by the regional authority concerned, (iv) buy the network. In accordance with the
law applicable to such agreements, when long-term leases expire, the infrastructure and equipment occupying the public
domain revert to the regional authority.
1.3.2.6.2
a)
Specifics of cable networks
Networks using Orange infrastructure
In 1982, the French government launched the Cable Plan (introduced by the laws of July 29, 1982 and August 1, 1984).
In accordance with the Cable Plan (Plan Câble), the cable network was initially built by the French government before
being transferred to Orange, the incumbent telecommunications operator in France. The network was originally operated
by certain privately and publicly funded local entities, which Numericable Group later acquired. Via these acquisitions,
Orange granted the Group various indefeasible rights of use (IRU) to its infrastructures, mainly conduits. These IRUs to
Orange infrastructure were granted at different times and each time for a 20-year period. The first renegotiation of these
rights with Orange is scheduled for 2019. For a description of the indefeasible right of use Orange granted to the Group,
see Section 2.4 of this document, “Risk factors - The legal status of the network is complex, and in certain cases subject
to renewals or obstacles.” In compliance with ARCEP Decision 2008-0835 of July 24, 2008, Orange published, on
September 15, 2008, a technical and commercial offer made to telecommunication operators allowing them access to
the civil engineering infrastructure of the local wire-based loop, pursuant to which such operators could roll out their own
fiber networks in Orange’s conduits.
b)
“New Deal” Plan
In 1986, the government launched the New Deal Plan (Plan Nouvelle Donne) (Law 86-1067 of September 30, 1986
relating to freedom of communication). This new regulatory framework authorized regional authorities to install their
networks or to have them built by private companies. A number of private entities subsequently acquired by the Group
were commissioned to build these networks and obtained occupancy and usage rights, as well as concessions to
operate these networks for 20 to 30 years.
The New Deal Plan does not provide for the use of standard contracts. Consequently, ambiguities have appeared
regarding network ownership in some long-term contracts between telecom operators and regional authorities. One of
the main sources of ambiguity lies in “public service delegation contracts.” In a public service delegation contract, the
infrastructure and equipment used to provide public services are considered to be returnable assets, i.e., assets that
revert free of charge to the regional authority when the corresponding contract expires.
Law 2004-669 of July 9, 2004, which transposes the 2002 Telecommunications Package into French law, bans regional
authorities from granting exclusive contractual rights to build and/or operate a network. In addition, Law 2008-776 of
August 4, 2008 authorizes regional authorities to grant network access rights to the Group’s competitors, even if that
contradicts the regional authorities’ contractual obligations in agreements signed with the Group. In a report of July 2007,
ARCEP found that the classification of these contracts could only be definitively categorized on a case-by-case basis
according to each contract’s language. However, the contracts signed with private operators and regional authorities
after 1990, pursuant to the authorization granted to municipalities as part of the New Deal Plan (Plan Nouvelle Donne) by
Law 90-1170 of December 29, 1990 to municipalities to use telecommunications networks directly could be classified as
public service delegation contracts and therefore incorporate the concept of returnable assets (returnable to regional
authorities when the contract expires).
39
1.3
1
To clarify the compliance requirements for agreements signed before Law 2004-699 came into effect, in May 2010 the
Group proposed to ARCEP that ownership of the civil engineering infrastructure in such agreements (i.e., ducts) be
transferred to regional authorities and that the existing telecommunications equipment and cables accrue to the Group in
consideration of that transfer.
This proposal led to the standardization of transactional agreements, which included the Group’s proposal. Under these
new standardized agreements, the Group also obtained non-exclusive rights to use its own telecommunications
equipment in conduits in the public domain and where ownership had reverted to regional authorities. The non-exclusive
nature of these rights also allowed the Group’s competitors to install and use their own equipment in these conduits.
See Section 2.4 of this document “Risk Factors - The legal status of network is complex and in certain cases subject to
renewal or challenge” for a description of the risks associated with the legal status of the Group’s network.
1.3.2.7 Regulation of audiovisual services
The transmission and broadcasting of radio and television services (whatever the transmission means used) come under
the scope of the 2002 Telecommunications Package and are therefore subject to the control of the NRAs.
The regulatory powers of the national broadcasting regulator (CSA) were extended by Law 2004-669 of July 9, 2004 and
Law 2013-1028 of November 15, 2013 to cover all radio, TV and audiovisual on-demand media regardless of the
transmission or broadcasting method. As a distributor of radio, TV and audiovisual media on-demand services, the
Group is required to make certain declarations to the CSA regarding its activities.
Under Articles 42-1 and 42-2 of Law 86-1067 of September 30, 1986, the CSA may penalize operators who breach
regulations. These sanctions may include the mandatory suspension of broadcasting services plus a fine of up to 3% of
the annual revenue of the operator concerned, or 5% in the case of repeated breaches.
As a distributor of audiovisual services, the Group is subject to the regulatory obligations for the supply of mandatory
(“must-carry”) services requiring a supplier of services by cable, satellite or ADSL to provide certain audiovisual services
on its network.
These service obligations are governed by Articles 34-2, 34-4 and 34-5 of Law 86-1067 of September 30, 1986.
Article 34-2 stipulates that all networks operating outside the terrestrial frequencies allocated to CSA must provide the
following TV channels to subscribers free of charge: France 2, France 3, France 5, Arte, TV, France Ô and La Chaîne
Parlementaire. Additionally, as part of its digital packages, France 4 must also be provided free of charge. Excluding
satellite plans, distributors must make local public broadcasting programs delivering local news available to their
subscribers.
Under Article 34-4 of Law 86-1067 of September 30, 1986, all French private terrestrial TV channels (for example, TF1
and M6) may require their programs to be broadcast by distribution network operators (cable, satellite, ADSL and mobile
devices) and the latter must authorize access to decoders and list the programs of those channels in their program
guides. In its Decision 2004-497 of July 1, 2004, the French Constitutional Council confirmed that, under this Article,
private TV channels are entitled to access decoders and distributor’s program guides.
Article 34-5 requires that digital electronic communication networks broadcast all the regional programs of France 3.
The CSA is also authorized to regulate the content of services distributed in France. Specifically, Article 15 of Law 861067 of September 30, 1986 establishes that the CSA must publish rules to protect children from programs considered
as a danger to their physical and mental health. Consequently, the CSA has adopted strict rules for the embedding of
specific logos in programs considered inappropriate for minors. As an operator and distributor of television services, the
Group complies strictly with these rules.
1.3.3 Regulation of the content of electronic communication
1.3.3.1 Content of online services and liability of players
in the Internet market
Provisions relating to the liability of Internet Service Providers are set out in the CPCE.
Law 2010-476 of May 12, 2010 also introduced legislation to facilitate competition and to regulate online gaming, and
games in general. Law 2011-267 of March 14, 2011 on guidance and programming to enhance Internal security requires
ISPs to block access to certain websites and online content, for example, illegal gaming websites or child pornography,
when asked to do so by the Online Gaming Regulator or France’s Interior Ministry.
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1.3
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1.3.3.2 Copyright and Internet
In accordance with Law 2009-669 adopted on June 12, 2009 to promote the broadcasting and protection of creativity on
the Internet, a specific system of “graduated responses” has been introduced to limit illegal downloads. An independent
and autonomous body, Haute Autorité pour la Diffusion des Oeuvres et la Protection des Droits sur Internet [High
Authority for Dissemination of Works and Proteciton of Rights on the Internet] was set up to handle and send out emails
to individuals downloading illegal online content. On October 28, 2009, Law 2009-1311 was adopted to complete the
graduated response system by establishing that in the event of repeat offenses, the court could apply a fine or even
suspend access to the Internet by the individual responsible for the illegal downloading. This latter sanction was,
however, eliminated by Decree 2013-596 of July 8, 2013.
Measures aimed at modernizing copyright rules (in particular, Directive 2001/29/EC) to taking into account the digital
revolution and new consumer behaviors were announced by the European Commission as part of its ambitious
legislative program aimed at creating a single digital market. The “Digital Single Market Strategy for Europe,” defined in
the Commission communication of May 6, 2015, identifies the key areas requiring legislative action to set up a more
modern copyright framework in Europe and improve access to digital content, on the principle of “better online access for
consumers and businesses in Europe.”
An initial bill (draft Regulation of December 9, 2015) on cross-border portability of online content aims at guaranteeing
that consumers who buy or subscribe to films, sports news, music, digital books and games can continue to access them
when they travel in another EU country. Other bills will follow in 2016, as explained in the Commission’s communication.
1.3.3.3 Processing of personal data and data privacy
The processing of personal data is governed by Law 78-17 of January 6, 1978 on technology, data and freedoms
(France’s Data Protection Act or the “1978 Act”). It was amended by Law 2004-801 of August 6, 2004, transposing two
EU Directives into French law, specifically:
 Directive 95/46/EC of October 24, 1995 on the protection of individuals with regard to the processing of personal data
and on the free movement of such data; and
 certain provisions of Directive 2002/58/EC on processing and protection of personal data in the electronic
communications sector (the “Directive on privacy and electronic communications”).
In 2011, the Law of 1978 was amended by Order 2011-1012 of August 24, 2011 on electronic communications
transposing Directive 2009/136/EC.
French regulation of data protection is governed by a European Directive, specifically Directive 95/46/EC on the
protection of individuals with regard to the processing of personal data and on the free movement of such data. This
Directive will be revised with the adoption of a new data protection regulation (General Data Protection Regulation
2011/011) which will come into force at the beginning of 2018. Other national legislation, for example the Digital Republic
Act, are currently being debated by France’s Parliament. On January 26, 2016, the National Assembly passed the bill
into law. It would have to be reviewed by the Senate in April 2016. It calls for:
 the creation of an open data policy for government data;
 the right to move data;
 SMS-based payment;
 a limited right to maintain an Internet connection. Households that have problems paying may receive financial
assistance from a universal solidarity fund and their connection would be maintained by their ISP while their
application for assistance was being reviewed.
As part of its normal course of business, the Group records and processes personal data in compliance with applicable
laws.
Article 34 bis of the 1978 act requires providers of public electronic communication services (operators) to immediately
notify the French Data Protection Authority (Commission Nationale de l’Informatique et des Libertés/CNIL) of any breach
of confidentiality involving personal data. Operators must maintain an up-to-date register of all breaches of data
confidentiality involving personal data (conditions, impacts and remedial measures taken) and must make the register
available to the Commission upon request.
The Group is required to archive certain data in accordance with applicable laws and regulations. It may also be required
to send information that it holds on the identity, location and connection of a user to duly authorized legal or
administrative authorities. The information that is subject to this obligation does not include the content that the user has
sent or consulted. They categories of data covered by this requirement are specified by decree. This obligation is fully
explained in Act 2015-912 of July 24, 2015 on disclosure, which, solely for terrorism prevention purposes, provides for
the possibility of collecting information and documents relating to a person previously identified as presenting a threat, in
real time from operators’ networks.
Under Articles L. 241-1 et seq. of the French Internal Security Code, the Group may also, at the request of duly
authorized judicial or administrative authorities, intercept electronic communications sent via its networks. When
authorized by the Prime Minister and in accordance with the principle of proportionality, Act 2015-912 also allows
authorities to use automated processing techniques on an operator’s network to detect connections that may reveal
terrorist threats (Act 2015-912 replaced Articles L. 246-1 and L. 241-1 with Article 852-1 of the Internal Security Code).
Operators are also required to implement specific measures to protect the security of their networks.
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1.3
1
Article L. 33-1 of the CPCE requires operators to report any problem involving the security and integrity of public
electronic communication networks or services to ARCEP.
Under Articles D. 98-3 to D. 98-7 of the CPCE, operators must:
 take all necessary measures to guarantee the security of communications sent on their networks;
 take all necessary measures to protect their facilities, networks and services against threats and risks of any kind;
 must be able to meet the government’s national defense requirements and remedy the most serious consequences
of the failure or destruction of their facilities; and
 must guarantee the confidentiality of all correspondence exchanged by telecommunication.
The Network and Information Security (“NIS”) Directive, which is to enter into force in 2018, will impose new network and
information security requirements on operators providing essential services and on providers of digital services. They will
have to take appropriate security measures to manage the risks incurred by networks and information systems. They will
be required to immediately report any incident with a significant impact on the continuity of the essential services that
they provide to the competent authorities.
1.3.3.4 Domain names
Act 2011-302 of March 22, 2011, as codified in Articles L. 45 et seq. of the CPCE, regulates the allocation and
management of top-level domain names in France. The Group has registered a certain number of domain names in
France, which are considered to be assets. The courts have recently reinforced protection for domain names by
establishing that a domain name can be protected by a registered trademark.
1.3.4 Tax regime applicable to distributors of audiovisual services
1.3.4.1 Tax on television services
Since January 1, 2008, television broadcasters and distributors of television services are also liable for tax on those
services, regardless of the electronic communication method used. Article 20 of the 2012 Supplementary Budget Act
extended the scope of the tax to electronic communications operators. Since January 14, 2014, this tax has been levied
on income generated by users of television services (with a 10% deduction) and on income generated by the provision of
public access to telephony services and online communication services, when those services also permit television
services to be received (with a 66% deduction). The tax rate is progressive (from 0.5% for the portion between €10
million and €250 million to 3.5% for the portion exceeding €750 million).
1.3.4.2 Tax on the revenues of electronic communications operators
Act 2009-258 of March 5, 2009 on audiovisual communication and the new public television service introduced a rate of
0.9% levied on the portion of revenues (excluding VAT) of telecommunications operators in relation to electronic
communications services exceeding €5,000,000. This tax came into force on March 7, 2009. It was increased to 1.3% for
2016 by Act 2015-1785 of December 29, 2015. The annual impact is estimated to be €20 million based on the budget for
2016.
1.3.4.3 VAT treatment applicable to television services
Since January 1, 2015, in conformity with Article 54 of the 2014 Supplementary Budget Act of December 29, 2014,
distributors of television services included in a “triple-play” plan for which the distribution rights have been acquired have
been able to apply a 10% surcharge to the per-user price of the services offered, to reflect the acquisition of the
distribution rights.
1.3.4.4 Flat taxation of network operators applied
to radio stations
Article 1635-0d of the General Tax Code (CGI) provides for a flat tax on network operators. In accordance with Article
1519 H of the CGI, this tax applies specifically to radio stations that require an opinion, an agreement or a declaration to
the National Frequencies Agency in application of Article L. 43 of the CPCE.
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1.3
1
1.3.4.5 Tax on the sale and rental of videos intended for private use
by consumers
Article 16090(B) of the CGI introduced a tax on the sale and rental of videos intended for private use by consumers in
France and in its Overseas departments and territories. It is levied on the pre-VAT price paid by the customer and its rate
is set at 2% for general content and 10% for “adult” content. This tax also applies to suppliers of videos-on-demand when
they receive an income for supplying a video to an end-user.
1.3.4.6 Fees and royalties laid down by the CPCE
 Royalties for the use of radio frequencies: Royalties payable by mobile network operators for the use of radio
frequencies are specified in Decree 2007-1532 of October 24, 2007, as most recently amended. These charges
consist of a fixed part and a variable part levied on revenues and determined in accordance with the provisions of
Decree 2007-1532 specified above;
 Tax on interference: Under Article L. 43-I Bis of the CPCE, operators are required to pay a tax aimed at fully covering
the costs incurred by the National Frequencies Agency to collate and process users’ complaints of interference
caused by radio stations in the 700 MHz and 800 MHz bands. The total tax collected is divided up between the
owners of the rights to use the frequencies in those bands, subject to a ceiling of €2 million euros per year per band;
 Dialing fees: in accordance with Article L. 44-II of the CPCE, SFR is required to pay a fee for the dialing resources
assigned to it by the ARCEP;
 Contribution to the spectrum development fund: Under Article L. 41-2 of the CPCE, mobile operators must contribute
to the spectrum development fund. This contribution is intended to fully cover the cost of development necessary to
provide and allocate frequencies as well as the frequency allocation costs incurred by the National Frequencies
Agency, in accordance with Articles R. 20-44-6 and R. 20-44-7 of the CPCE;
 The administrative taxes payable by operators to cover the administrative costs incurred in implementing the
provisions of the CPCE were repealed by Article 27 of the 2015-1785 Budget Act of December 29, 2015.
1.3.5 Consolidation of the French electronic communications market
Undertakings by Numericable-SFR to the Competition Authority regarding its activities,
market concentration, and monitoring of commitments made in 2015
On October 30, 2014, the Competition Authority authorized Altice, the Group’s parent company, to take exclusive control
of SFR subject to certain conditions, explained in Competition Authority Decision 14.DCC-160 of October 30, 2014. On
the terms and conditions determined by the Competition Authority, Numericable-SFR implemented the required
measures to satisfy the above-cited conditions.
On January 22, 2015, the Competition Authority decided, on its own initiative, to review the method whereby
Numericable-SFR implemented a price increase on its mobile services in Reunion and Mayotte prior to the sale of the
Outremer Telecom mobile business on those two French overseas islands. On April 19, 2016, having found that
Altice/Numericable Group had failed to execute a number of obligations connected with the sale of the Outremer
Telecom mobile telephony business (Only) in Reunion and Mayotte, undertaken when taking over SFR, the Competition
Authority imposed a €15 million fine on Altice/Numericable Group. However, as the risk had been carried by Altice
Group, no provision was recognized in the financial statements of Numericable-SFR Group.
In addition, on October 12, 2015, as the result of a complaint by Bouygues Telecom, the Competition Authority undertook
a review of the means whereby Numericable-SFR maintained its commitments under the co-investment agreement it had
signed with Bouygues Telecom for the deployment of fiber- optic networks in densely populated areas.
Neither of these two reviews suggest that the Competition Authority envisages taking further action, but in both cases
sanctions could have been applied against Altice and the Group. If sanctions had actually been applied, the companies
would have been entitled to appeal to the Council of State.
Undertakings by Numericable-SFR regarding jobs when acquiring SFR
As part of the acquisition of SFR, in a letter to Vivendi and SFR dated March 25, 2014, Altice and Numericable Group
made a unilateral commitment not to question SFR’s collective status and not to dismiss SFR employees for economic
reasons as part of a collective severance package, for three years counted from the end of the exclusivity period
between Vivendi’s Supervisory Board and Altice and Numericable Group, i.e., until April 4, 2017, unless economic
conditions unexpectedly change. These commitments were confirmed during the bargaining for a collective agreement
on jobs, which was signed by all SFR unions and extends the guarantees until June 20, 2017.
The same commitment was confirmed regarding Numericable Group in the collective agreement for NC Numericable,
Completel and LTI Telecom.
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1.4
Presentation of activities
1.4
1.4.1 Consumer Activities (B2C)
1.4.1.1 Presentation of consumer activities
1.4.1.1.1
General presentation and key figures
Numericable-SFR is the leading alternative telecommunications operator in the French consumer market. As of year-end
2015, all brands combined, the Group had 15.137 million mobile customers and 6.353 million high and very high speed
fixed-line customers. With more than 1.8 million customers, the Group is the leading very high speed fixed-line services
provider in France.
Key figures
As of and for the fiscal year
ended December 31
(in thousands)
2014
2015
Change
Mobile subscribers
16,238
15,137
-7%
Of which postpaid
13,004
12,604
-3%
Of which prepaid
3,234
2,533
-22%
Fixed-line subscribers
6,577
6,353
-3%
Of which ADSL
5,030
4,538
-10%
Of which FTTB and FTTH
1,547
1,814
17%
Note: SFR, Red, Numericable, Virgin and SRR customers; fixed-line non-telephony customers only (SFR).
1.4.1.1.2
Brand policy
In 2015, Numericable-SFR Group markets its consumer offerings under four brands: SFR, Numericable, Red and Virgin
Mobile. In the interests of efficiency and simplification, the Group decided to focus on two brands going forward: SFR for
premium “all inclusive” offers, and Red for digital “à la carte” offers. The Numericable and Virgin Mobile brands are set to
gradually disappear.
1.4.1.1.3
A strategy focused on very high speed services and on content
The Group’s goal is to offer to its customers the best consumer experience in terms of content, anytime, anywhere, on
any device. This goal is reflected, first, in its ambitious policy of investment in access networks. Numericable-SFR is now
in a position to bring very high speed services to 7.7 million homes in France, achieving the best coverage in the country.
The number of eligible homes is expected to grow to 12 million by 2017, 18 million by 2020, and 22 million by 2022.
This goal is also fueled by product innovation. On November 17, 2015, the Group launched the “SFR Zive box,” a new
“all-in-one“ box with innovative and advanced functionalities, right in the home. Fitted with a 1 Gbps Fiber modem, a
4K/UHD TV decoder, a 500 Gb hard disk for recording and direct control, as well as the best WiFi in the market
supported by the 802.11ac standard, it confirms its central place in the home. On the occasion of this launch, SFR also
unveiled a new simple and user-friendly interface to offer the best multi-screen TV experience. Designed for family needs
and rolled out with the latest version of the SFR TV app, this interface offers continuous use at home and on the road.
Lastly, the Group operates a deliberate policy to enhance the content offered to its customers. The “Zive” SVOD offer
launched on November 17, 2015, which when launched included more than 5,000 HD programs (15,000 by 2016) and
the most extensive 4K/UHD catalog currently available (some 600 content titles at launch), is set to enhance
entertainment content for the whole family. Thanks to Zive Extra (included in the Power range offers), all this content is
also multi-screen accessible (for example, on a smartphone or tablet).
Numericable-SFR has also developed its offers in premium sports content, having acquired numerous rights to broadcast
major events, including English “Premier League” and the French Pro A basketball championships.
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1.4
1.4.1.2 Fixed-line activity
1.4.1.2.1
Through its plans and packages, the Group offers various fixed-line telecommunications services. These services are
primarily accessible via a high or very high speed fixed-line Internet connection and its own equipment or “box” (modem
and/or decoder). These services include, in addition to high- or very high speed unlimited Internet access, fixed-line
telephony services, TV over IP, and access to video content. These services are primarily offered on a combined basis
(“double” or “triple-play”) via various access technologies (ADSL, VDSL, FTTB, FTTH), depending on the offer and
customer eligibility. The throughputs offered to customers vary depending on the access technology and may be up to 1
Gbps.
In 2015, some or all of these services are marketed under the Group’s four consumer brands: SFR, Numericable, Red
and Virgin. As of the end of 2015, the Group had 6.353 million high and very high speed fixed-line customers. The offers
mentioned above refer to offers available at the end of 2015.
1.4.1.2.2
Presentation of SFR branded offers
As of the end of 2015, SFR has close to 4.9 million high and very high speed customers, including 4.4 million
ADSL/VDSL customers.
a)
Fixed-line Internet offer (“one-play”)
SFR offers high speed Internet access (ADSL or VDSL depending on customer eligibility), that can be combined with a
preselected telephony service. The Internet access service (unbundled and including preselection) is offered at
€15.90/month (+€1/month for access to TV on smartphones, tablets and computers).
b)
Bundled Internet and telephony offers (“double-play”)
SFR offers high speed Internet access services (ADSL or VDSL) as bundled offers called “double-play,” which include
unlimited telephony service to fixed-line numbers in metropolitan France, its Overseas territories and more than 100
international destinations. Customers can also subscribe to unlimited telephony options (to mobiles or other international
destinations).
This “SFR Box” offer is available to:
Customers that have been unbundled by SFR: for €26.99/month (+€3/month box rental) plus “TV on smartphones,
tablets and computers” for €1/month.
For customers that have not been unbundled by SFR: for €31.99/month (+€3/month box rental) plus “TV on
smartphones, tablets and computers” for €1/month.
c)
Bundled Internet, telephony and TV over IP (“triple-play”) offers
ADSL AND VDSL TECHNOLOGIES
“Triple-play” offers include the “double-play” offers described above plus a TV over IP service.
Triple play offers to customers are split into 3 levels: Starter, Power and Power+.
These offers include access to high speed Internet (ADSL or VDSL), 10 Gb storage on “SFR Cloud,” unlimited calls to
fixed-line numbers in France and more than 100 destinations, unlimited calls to mobiles in France, North America and
China, as well as access to the “TV by SFR” package including 200 channels and services for Starter (Starter TV by SFR
package), 240 for Power (Power TV by SFR package) and 280 for Power+ (Family TV by SFR package), including more
than 130 channels accessible as multi-screen via the SFR TV app. The “Zive” SVOD service is also included in the
Power and Power+ offers (and as an option for €9.99/month on Starter).
These offers are available for €36.99/month with Starter, €46.99/month with Power, and €53.99/month with Power+, plus
€3/month for rental of the modem and Evolution TV decoder and its built-in 120 Gb hard disk (expandable to 250 Gb),
which notably allows program recording and direct control. The Evolution decoder also provides access to a number of
additional services (catch-up TV, program guides, VOD rental store, etc.).
Customers can also subscribe to pay-TV options: more than 200 optional channels available, optional TV Pass
(Discovery, Youth, Cinema, BeIn, Sports, OCS, etc.), ethnic packages, the Zive SVOD service (included in Power and
Power+).
FTTB FIBER TECHNOLOGY WITH COAXIAL TERMINATION
Customers eligible for FTTB only have access to “triple-play” offers including very high speed Internet access by SFR,
telephony services by SFR, and “TV by Numericable” television packages. These offers are available with the “SFR Fiber
Box” or “SFR Zive Fiber Box,” “all-in-one” boxes permitting access to very high speed Internet, telephony services, and
“by Numericable” television.
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1
1.4
These offers include access to very high speed Internet (up to 200 Mbps for Starter, up to 400 Mbps for Power and up to
800 Mbps for Power+), storage space on “SFR Cloud” (10 Gb for Starter and 100 Gb for Power and Power+), unlimited
calls to fixed-line numbers in France and more than 100 destinations, unlimited calls to mobiles in France, North America
and China, as well as access to “TV by Numericable” packages including 200 channels and services for Starter (Starter
TV by Numericable package), 240 for Power (Power TV by Numericable package) and 280 for Power+ (Family TV by
Numericable package), including more than 150 channels accessible as multi-screen via the SFR TV app (more than
190 for Power and more than 220 for Power+). The “Zive“ SVOD service is also included in the Power and Power+ offers
(and as an option for €9.99/month with Starter).
These offers are available for €36.99/month with Starter, €48.99/month with Power and €57.99/month with Power+, plus
€3/month for rental of the “SFR Fiber Box“ or “SFR Zive Fiber Box“ and its built-in 160 Gb hard disk (expandable to 500
Gb). The “SFR Fiber Box“ and “SFR Zive Fiber Box“ offer numerous advanced functionalities such as the ability to record
programs, direct control, “restart“ function, “picture in picture” function, web browsing. It also provides access to a
number of additional services (catch-up TV, program guides, VOD rental store, etc.).
Customers can also subscribe to pay-TV options: more than 200 optional channels available, TV Pass (Premium Sport,
Premium Youth, BeIn Sports, OCS, etc.), ethnic packages, the Zive SVOD service (included in Power and Power+).
FTTH FIBER OPTIC TECHNOLOGY
Customers eligible for FTTH only have access to “triple-play“ offers including very high speed Internet access by SFR,
telephony services, and TV over IP packages. These offers are available with the “SFR Box“ and the “Evolution“ TV
decoder.
These offers include access to very high speed Internet (up to 200 Mbps for Starter, up to 400 Mbps for Power and up to
1 Gbps for Power+), storage space on “SFR Cloud” (10 Gb for Starter and 100 Gb for Power and Power+), unlimited
calls to fixed-line numbers in France and more than 100 destinations, unlimited calls to mobiles in France, North America
and China, as well as access to “TV by SFR” packages including 200 channels and services for Starter (Starter TV by
SFR package), 240 for Power (Power TV by SFR package) and 280 for Power+ (Family TV by SFR package), including
more than 130 channels accessible as multi-screen via the SFR TV app. The “Zive” SVOD service is also included in
Power and Power+ offers (and as an option for €9.99 with Starter).
These offers are available for €36.99/month with Starter, €48.99/month with Power and €57.99/month with Power+, plus
€3/month for rental of the “SFR Box” and “Evolution” set-top box, and its built-in 120 Gb hard disk (expandable to 500
Gb). The “Evolution” decoder offers numerous advanced functionalities such as program recording and direct control. It
also provides access to a number of additional services (catch-up TV, program guides, VOD rental store, etc.).
Customers can also subscribe to pay-TV options: more than 200 optional channels available, optional TV Pass
(Discovery, Youth, Cinema, BeIn, Sports, OCS, etc.), ethnic packages, the Zive SVOD service (included in Power and
Power+).
d)
“Home by SFR” offer
“Home by SFR” is a home automation and monitoring service. Two service levels are offered: The “Video Alarm Pack”
for €9.99/month and the “Premium Video Alarm Pack” for €19.99/month. The “Video Alarm Pack” includes a center for
controlling connected equipment, a connected HD camera with an integrated motion detector, internal siren, smoke
detector, opening detector and remote control. The “Premium Video Alarm Pack“ includes all the above-cited equipment,
a command keyboard with 3G stick, two motion detectors, and Europe Assistance 24/7 support. Connected objects can
be controlled remotely via a computer or via the SFR Home app.
e)
Convergent fixed-line and mobile offers (“quadruple-play”)
To fully meet home needs, SFR allows fixed-line and mobile offers to be combined. These offers also benefit from
attractive rates via “Multi-Pack” discounts of up to €10/month per mobile line.
f)
Fixed-line telephony only
SFR offers fixed-line telephony only, which does not require an Internet connection. Two service levels are offered:
 preselection offers (call-by-call selection or automatic preselection), where the customer keeps his or her subscription
with the incumbent operator;
 offers which include telephone line subscription, where the customer subscribes for telephone service directly with
SFR Group and no longer with the incumbent operator.
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1.4
1.4.1.2.3
Presentation of Numericable branded offers
As of the end of 2015, Numericable has close to 1.3 million very high speed customers on FTTB technology. Since
November 2015, fixed-line offers are marketed mainly under the SFR brand.
a)
Digital television
The Numericable offers provide a wide choice of more than 400 TV channels and services. Three “TV by Numericable”
packages are offered: Starter, Power and Family. These packages include 200 TV channels and services for the “Starter
TV by Numericable package,” 240 for the “Power TV by Numericable package” and 280 for the “Family TV by
Numericable package.”
These packages are available for €25.99/month for “Starter TV by Numericable,” €30.99/month for “Power TV by
Numericable” and €36.99/month for “Family TV by Numericable,”, plus €5/month for set-top box rental.
Various theme passes can also be subscribed as an option (Premium Cinema, Premium Discovery, Premium Sport,
Premium Youth, Drama, OCS, BeIn Sports, etc.) as well as ethnic packages (Spanish, Portuguese, German, African, etc.
Customers also have access to a VOD catalog of 30,000 programs.
b)
Very high speed Internet and fixed-line telephony
Numericable’s Internet and fixed-line telephony range offers three service levels combining Internet access and fixed-line
telephony: Starter, Power and Power+. The Internet throughput varies depending on the offer: up to 100 Mbps for
“Starter Internet Fixed-Line Telephony,” up to 200 Mbps for “Power Internet Fixed-Line Telephony” and up to 400 Mbps
for “Power+ Internet Fixed-Line Telephony” (800 Mbps optional for €2/month). The three offers also include storage
space on SFR Cloud (10 GB for Starter and 100 GB for Power and Power+). They also include unlimited calls to 100
fixed-line numbers and to mobiles in France, as well as to mobiles in North America and Asia with the “Power+ Internet
Fixed-Line Telephony” offer. The latter also includes a second fixed-line.
These offers are available for €29.99/month for “Starter Internet Fixed-Line Telephony,” €33.99/month for “Power Internet
Fixed-Line Telephony” and €36.99/month for “Power+ Internet Fixed-Line Telephony.”
c)
Triple-play offers
In order to offer a comprehensive service to its customers, three bundled packages are available: “Starter Fiber Box,”
“Power Fiber Box” and “Power+ Fiber Box.” These three “all-inclusive” packages bundle TV channels, set-top box rental,
and Internet and fixed-line telephony services, along with a money-saving discount.
The “Starter Fiber Box” is available (excluding promotions) for €39.99/month, the “Power Fiber Box” for €48.99/month
and the “Power+ Fiber Box“ for €57.99/month (up to 800 Mbps as an option for €2/month).
These offers are available with the “Fiber Box” “all-in-one” box permitting access to very high-speed Internet, telephony
services, and “by Numericable” television. This box includes a 160 Gb hard disk (expandable to 500 Gb) and gives
access to advanced functionalities such as the ability to record programs, “restart” function, “picture in picture” function,
etc.
d)
Analog television services
Analog television services consist of broadcasting coded analog audio and video signals. As of December 31, 2015, the
analog television offer of the Numericable Group, which contains 30 analog channels, was provided to approximately
18,000 households primarily located in small and medium-sized cities in eastern France, which are connected to the
Group’s network but are not eligible to receive digital television. This service is also provided to the incumbent’s
customers on the remainder of the Group network who have chosen not to subscribe to one of the Group’s digital offers.
1.4.1.2.4
Presentation of Red branded offers
Since April 2015, Red by SFR has been marketing Internet access offers up to 100 Mbps for €29.99/month. It offers
access to SFR’s very high-speed fixed-line network and unlimited calls to fixed-line numbers in metropolitan France and
more than 100 destinations. A TV option for €2/month permits access via a TV decoder to 25 channels and a catalog of
pay-TV and VOD options. Customers with a Red mobile line and a Red Internet line can benefit from monthly reductions
on their mobile package.
1.4.1.2.5
Presentation of Virgin branded offers
The Group also offers its customers a fixed-line “Virgin box” package on a subscription basis which comes with all Virgin
Mobile’s distribution networks. This offer costs €29.99/month. Virgin box customers only have access to ADSL network
technology (no very high-speed services), but get the same services as SFR customers (particularly TV) excluding
premium services (TV app, multi-screen, etc.). Virgin box fixed-line customers are not eligible for “Multi-Pack” discounts
but have their own “quadruple play” plan connected to Virgin Mobile packages.
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As the company continues to streamline its portfolio of brands, Virgin offers will gradually be discontinued.
1.4.1.3 Mobile activity
1.4.1.3.1
Numericable-SFR Group addresses the entire mobile market, through its prepaid and postpaid offers, the latter
accounting for most of its business (more than 80% of its mobile customer base as of the end of 2015). In the postpaid
market the Group offers a comprehensive range of voice and data plans, under its various brands, covering all market
needs. These offers are available with or without contractual commitment, with or without a subsidized handset, and with
or without extras (“premium” or “no-frills”). The offers mentioned above refer to offers available at the end of 2015.
1.4.1.3.2
a)
Presentation of SFR branded offers
Premium postpaid offers - SFR 4G packages
SFR’s 4G packages are postpaid mobile telephony premium offers. There are six packages varying in price from
€9.99/month (price without a handset for Starter 2hrs+100 Mb with a 12-month commitment) to €89.99/month (Premium
15 Gb, with calls to and from international numbers, with a subsidized handset and a 24-month commitment). All these
offers include unlimited SMS and MMS, but come with a variable volume of voice and Internet data according to the
selected package. Subscribers to these packages all get access to SFR’s very high-speed mobile Internet (3G+ and/or
4G/4G+).
SFR’s 4G packages provide customers with a subsidized handset and are enhanced by a set of services: exclusive
“Extra” content by option on the 5 Gb and plus packages (iCoyote, Napster, Zive, SFR Jeux, Le Kiosk, L’Equipe), access
to SFR Cloud (storage capacity of 10 or 100 Gb depending on the package); some come with SFR TV options (access to
direct or on-demand television from a cell phone) or MultiSurf (additional SIM cards which allow data to be shared with
other devices). Some of these packages include use abroad, from 15 days a year from Europe and French Overseas
departments starting with the 5 Gb Power package. Some of these offers are also available in blocked packages. Lastly,
customers with SFR 4G packages can benefit from “Multi-Pack” discounts if they also subscribe to an SFR box offer.
These offers are available on all SFR distribution channels.
b)
Remote access offers - “connected everywhere”
Four “Pocket Box” or tablet packages are offered. These packages provide access to the mobile network (3G and/or 4G),
the SFR WiFi service, and SFR TV service. Two offers from €7.99/month for 1 Gb Internet are available for customers
who are already equipped. For customers who want a “Pocket Box” or tablet at reduced price, SFR offers two packages
with a 24-month commitment: they cost €19.99/month for the 10 Gb package and €39.99/month for the 15 Gb package,
and include up to 3 Gb Internet that can be used abroad.
For occasional use, “Pocket Box” and “surf-ready” prepaid kits are available for €9.90. These offers include 200 Mb
Internet valid for 2 weeks and can be topped using 3 SFR Connected Everywhere top-ups (from 200 Mb to 4 Gb).
c)
Prepaid offers - “SFR La Carte”
Attractively priced prepaid offers are available under the “SFR La Carte” brand. After a SIM card is purchased, at the
price of €9.99 including tax, it can then be recharged by phone, Internet, by purchasing coupons or tickets, recharging at
physical points of sale (tobacco stores/news agents, SFR spaces), or through ATMs of banks that are partners with the
SFR Group. Several ranges of prepaid recharges are accessible to customers: they offer voice, SMS, MMS, international
calls and data packages. They are sold at between €5 and €95 according to their type and the valid term of the credits
(from two days to five months).
In 2015, SFR had more than 2.2 million prepaid customers in metropolitan France.
1.4.1.3.3
Presentation of Red branded offers
Four postpaid packages with no commitment and no handset under the Red by SFR brand are available for between
€5.99 and €25.99/month. They are available mainly through subscription via the website redbysfr.fr, and these lines are
also managed online via the same site. Customers with Red packages have access to the same network technologies as
customers with SFR mobile packages. However, they do not benefit from services associated with the SFR packages,
and are not eligible for “Multi-Pack” discounts.
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1.4.1.3.4
Presentation of Virgin branded offers
Mobile plans marketed under the Virgin Mobile brand are offered to customers and distributed by the Virgin Mobile brand
distribution channels. They include commitment-free offers available from €4.99/month and offers with a subsidized
handset and 24-month commitment available from €13.99/month. Customers can adjust their offer to their needs by
subscribing to “Dooble data” or “Cockpit conso” options. They can also get a more attractive price if they also subscribe
to a fixed-line offer (Virgin Box). Virgin Mobile customers can access SFR mobile networks.
As the company continues to rationalize its portfolio of brands, Virgin offers will gradually be discontinued.
1.4.1.4 Marketing of offers
1.4.1.4.1
The Group has a powerful multi-channel distribution network that combines local channels (retail outlets, shelf space at
large food retailers, stands in shopping malls, home sales) and remote channels (websites and telesales), ensuring it
national market coverage. In 2015, each Group brand had its own distribution channels. Streamlining work is currently
under way, consistent with the streamlining of its brands.
1.4.1.4.2
a)
Retail outlets
SFR Spaces
As of December 31, 2015, SFR had a network of some 690 SFR spaces in France distributing all of SFR’s fixed-line and
mobile offers. This network is operated by two Group subsidiaries (SFD and Cinq-sur-Cinq), as well as a set of
independent partners. This mechanism is supplemented by some 20 “SFR Corners,” which are located in the largest
Fnac stores in France. The SFR Spaces network receives regular capital investment to modernize and maintain the
quality of the in-store experience.
In addition to subscriptions, SFR Spaces offer a set of services to customers and prospects, including demos and
product discovery (such as “La Box Workshops”) and support services.
SFR has developed a multi-channel approach. SFR’s “web to shop” service allows its customers to order a product
online, on the web or through telesales (for example a cell phone within the context of signing up for a new subscription
or renewing), and pick it up at the SFR space that is closest to home. Depending on availability, the customer can pick it
up in two to 48 hours. FR has also developed the “e-propale” service, which allows estimates to be issued by all
channels for a customer contact. These estimates can then be finalized via a sale by the customer him or herself, online
or at an SFR Space.
b)
Numericable stores
As of December 31, 2015, the Numericable stores network had 133 points of sale, operated by the Group and by a set of
independent partners. In the second half of the year, these stores were gradually converted into “Fiber Expert Spaces.”
This program consists of changing the merchandising of these stores from the Numericable brand (window stickers and
POS advertising combining the two brands Numericable and SFR), the gradual introduction of services for SFR
customers (Fiber Box ASV, SFR La Box Workshops, etc.) and marketing the SFR Fiber Box as of October 2015.
Choosing SFR as the Group’s Premium brand involves harmonizing the network of stores around this brand. Ultimately,
the only network outlets will be “SFR Spaces” offering the full range of premium consumer products and services.
c)
Virgin Mobile Stores
As of December 31, 2015, the Virgin Mobile stores network had 29 points of sale, operated almost exclusively by
independent partners. These stores are scheduled to close in 2016, given the gradual disappearance of the Virgin Mobile
brand.
1.4.1.4.3
Larger Retailers
SFR offers are distributed in a selection of large food retailers (Auchan and Carrefour), as well as in several networks of
specialized multi-brand distributors, telecom distributors, and large retailers (Vivre Mobile, Internity, Boulanger, Avelis
Telecom, Mobile Hut) or independents.
A “shop in shop” concept marketing SFR fixed-line offers is also deployed in a selection of shopping malls.
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1.4.1.4.4
Home sales
Home sales teams supplement the marketing approach for SFR Fiber offers. These teams, distributed around the
country, are partly Group staff and partly outsourced.
1.4.1.4.5
Websites
The Group has an Internet presence via its brands’ websites: sfr.fr, numericable.fr, red.sfr.fr and virginmobile.fr. The
purpose of these sites is to market the offers (online stores), forge customer relations (customer spaces, support,
communities, etc.), and to offer services (webmails).
As an indication of their scope, the SFR brand websites get more than 100 million visits a month, with more than 25
million unique visitors.
1.4.1.4.6
Telesales
The Group also markets its offers via telesales. As an indication of its scope, in 2015 SFR generated approximately
300,000 outgoing contacts and handled approximately 200,000 incoming calls per month.
1.4.1.4.7
a)
Customer Service
Increasingly digital customer relations
To give our customers the independence that they call for, SFR continues to develop and promote its digital customer
relationship tools, and in particular its Customer Space on the web and its MyAccount app on smartphone. These digital
services accessible 7 days a week and 24 hours a day allow all our customers to manage their packages and find
answers to their administrative, commercial or technical questions. With the launch of innovative self-diagnosing box
functions, SFR now allows its customers to monitor the state of their box and benefit from digital technical support.
With the introduction in 2015 of a Market Watch or “Observatory” of digital customer relations, SFR is constantly
improving the customer experience with self-care solutions.
b)
Multi-channel customer relations
In addition to our digital solutions, SFR has approximately 10,000 advisers who assist our customers by phone or via
contact methods such as chat, email, forums and social networks (Twitter, Facebook. etc.). The SFR Spaces also play a
key role in multi-channel customer relations, offering them local support. The ability of points of sale to better support our
customers and solve their problems is a priority for the Group.
To improve its handling of customer requests, SFR is focusing on the simplification and effectiveness of the tools used
by its advisers. To enhance customer satisfaction, SFR is strengthening its ability to detect faults as early as possible
and to take charge of them before the customer is even aware of them. Tested in 2015, these proactive actions will be
rolled out generally in 2016.
To support the development of very high speed fixed-line services, in 2015 SFR created units of advisers dedicated to
personalized customer support. These advisers specifically support customers who opt for Fiber from the point of
subscription and during the first 100 days of their experience of very high speed services.
1.4.2 Business Activities (B2B)
1.4.2.1 General Presentation
The change in usages reveals new trends in the B2B market, which accentuate the issues of performance, reliability and,
more generally, security. The development of mobility and remote work, as well as the proliferation of exchanges and
collaborative work, have resulted in the growth of data usage, specifically in terms of mobility, for all customer terminals,
and create new needs for the virtualization of applications and data.
Numericable-SFR is offering its B2B customers a full range of fixed-line and mobile services including voice services, be
it for traditional switched voice services or VoIP and data services, such as the provision of very high speed Internet
access, the provision of connection services for professional websites (IP VPN, LAN to LAN and SAN to SAN), and
cloud, hosting and ICT services.
The B2B customers of Numericable-SFR Group are small, medium and large businesses, as well as public
administrations, which often have several sites. Numericable-SFR currently meets its customers’ needs through a
catalog of standard solutions.
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The B2B segment of Numericable-SFR has a sales team that is organized into direct and indirect distribution networks.
The Group’s business engineers combine know-how, drive and experience, provide a strong regional and local
presence, and have close relationships with local authorities and administrations. The Group’s offers are adapted to the
needs of each of its small, medium and large businesses and public administrations. The sales teams are able to
determine customers’ needs and the best way of responding to them. Before signing a new contract, Numericable-SFR
considers its acquisition cost (i.e., the necessary investment expenses) in comparison to its value.
Numericable-SFR uses the following segmentation to meet the specific needs of its customers:
 A Large Accounts segment addressed by direct sales only. For large private and public accounts, the Group offers,
through internal sales forces, tailored, reliable and secure solutions which are based on a combination of
standardized products and more specific additional services. This segment is addressed by the Large and
International Accounts Sales Division.
 A Large Businesses and Public Contracts segment. This segment is addressed by the Business Sales Division.
 A Business segment, covering SMEs (20+ employees), focused on indirect sales by a network of independent
distributors (“SFR Business Space”). This segment is addressed by the Business Distribution Sales Division.
 A VSE segment (3-19 employees) assigned to the Very Small Businesses Sales Division by FUTUR, the network of
SFR Business brokers, via standardized, effective and reliable solutions with predictable costs. This network has
more than 500 active brokers.
 Spanning across them, a Sales Services Division marketing ICT services (Cloud solutions, IoT, customer relations,
security, network infrastructure, unified communications).
In the B2B segment, Numericable-SFR has set up a customer service structure, consisting of a Customer Relations
Division and a Business Deployment Division, specifically tailored to the needs of its B2B customers.
B2B customer services are tailored to the specifics of B2B customers (large private accounts, public contracts,
businesses, SMEs, VSEs) and to their service quality needs, particularly in technical and administrative problems.
Its computerized customer management interfaces (primarily via an efficient Customer Space) provide a centralized,
multi-channel customer relations approach tailored to B2B activities.
Numericable-SFR Group’s standard service contract for B2B customers includes commitments to reestablish service,
especially fixed-line voice or data service within four hours. In recent years, the full-year availability of the Group’s
network has been better than 99.98%.
Its highly secure network and customer service are available 24/7.
Numericable-SFR also offers added-value services tailored to the needs of B2B customers in terms of deployment or
operations (PM, ROC, TAM, dedicated Management/Operations, Managed Services, VIP, OSM, etc.).
1.4.2.2 Telecoms offers
1.4.2.2.1
Mobile voice and data offers
The mobile offers of Numericable-SFR Group are intended for all segments of the B2B market and include five mobile
telephony voice and data packages, which follow the same scheme as the B2C Offers, containing additional options that
integrate unlimited SMS/MMS as well as various levels of data usage, in addition to four data access packages for
tablets and computers, which offer Internet access from a few Gb to tens of Gb depending on the offers.
1.4.2.2.2
Management and control service offers
Financial management services are offered to businesses. They provide access to simple tools, including a dashboard of
telecommunications expenses and consumption, which allow them to effectively manage their fleet of handsets.
Handset management and security offers are available to all customers. The Mobile Device Management (MDM) offer
allows their fleet of smartphones and tablets to be remotely managed and secured, in particular by erasing the business’
information in the event of theft. The handsets are configured in a centralized manner through a Cloud platform.
1.4.2.2.3
Fixed-line voice offers
Fixed-line voice offers cover two fixed-line telephony packages, which are offered to all customers. They include calls to
fixed lines and cell phones of the business’ internal SFR fleet with privileged assistance: dedicated customer service,
guaranteed restoration in less than four hours with the dispatch of a technician if necessary, and the choice of single,
consolidated or separate billing.
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1.4.2.2.4
Fixed data offers
Numericable-SFR Group offers all of its customers two fixed data offers:
 The iPnet offer via VPN IP SFR DSL to interconnect the businesses’ various sites in a private network. Connections
can be made using DSL or Fiber technology. Additional services, remote access, centralized and secure Internet
access or assistance can be associated with this offer;
 the Connect offer, which provides access to dedicated fiber or single-site SDSL, with symmetrical guaranteed speed
of up to 1 Gbps in fiber or 16 Mbps in SDSL, and a main router.
1.4.2.2.5
Voice and data specific to SMEs/VSEs
For professionals and VSEs, the packages offered by the Group use the segmentation of the Consumer packages.
These also include additional specific advantages tailored to professionals and to VSE such as arranging priority
meetings in SFR Spaces, dedicated customer service, Femto technology, a second SIM card free.
The mobile offers to SMEs also provide professional telephony services (business directory services, fleet management,
customer area, consumer alert, financial management solutions, etc.) with selected handsets to meet professional
needs, benefiting from a 24/7 exchange service on site.
1.4.2.2.6
Fixed-line services specifically for SMEs/VSEs
Numericable-SFR Group offers a Pro version of its Internet box for small entities, which integrates services which have
been adapted for that segment. It also offers SMEs/VSEs high speed and very high speed solutions with security
services that have been adapted to business’ needs (connection security and filtering rules, availability of access with
backup access, etc.). Lastly, the Cloud Business Store allows these customers to access a list of applications which
correspond to their business sector.
1.4.2.2.7
Solutions which are specifically adapted to large corporate account segments
The SFR Ipnet offer, which is intended for major accounts and businesses, includes multi-site access in France and
internationally (virtual private network with guaranteed routing and prioritizing of data traffic). It allows information to be
securely transported between all of the business’ sites in France and internationally, thereby improving the performance
of its applications.
The SFR Ethernet offer, which is specifically designed for major accounts, includes access to a LAN network which
allows all of the business’ local networks to be connected through a very high speed support. It thus allows the network
resources of the customer business to be distributed and shared (LAN network, servers, etc.), and its main sites
(headquarters, data centers) to be connected through a flexible point-to-point architecture, with a broad range of speeds
and access (6 Mbps to 1 Gbps).
1.4.2.2.8
Business Enterprise Package
The Business Enterprise Package is an offer for various enterprises, from SMEs to major businesses that wish to depend
on a player that provides overall management of their business communications services (management of telephony
service and equipment, but also telecom uses). This offer provides a standard telephone service (transfer of calls, call
forwarding, conference calls, etc.), but also Fixed-Line and Mobile convergence services (single number, single
messaging, accessibility rules).
SFR provides a dedicated project manager during the period of on-site establishment and installation by certified
technicians.
1.4.2.2.9
Business Entrepreneurs Package
The Business Entrepreneurs Package, which is offered to micro-businesses, is focused on telecommunications and
Cloud solutions. It is dedicated to businesses with less than 20 employees and offered with a very economical minimum
package with, very simply, a sedentary line (fixed-line) and roaming line (mobile) added for each user. This all-in-one
offer is also provided in a shared optical fiber version.
1.4.2.3 ICT service offers
In addition to connectivity offers, the Group provides a set of services based on computer and telecom infrastructure in a
tailored or packaged mode, as an on-site or “as a service” basis, depending on needs and the business segment. To do
so, it partners with the largest technology companies in the world, in each of its fields of expertise.
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These offers are grouped into six business lines and can be supplemented by consulting services and support services.
1.4.2.3.1
“Business Network” Business Line
In addition to connectivity offers, the Group provides a set of services based on computer and telecoms infrastructure in
a tailored or packaged mode, as an on-site or “as a service” basis, depending on needs and the business segment. To
do so, it partners with the largest technology companies in the world, in each of its fields of expertise.
These offers are grouped into six business lines and can be supplemented by consulting services and support services.
1.4.2.3.2
“IT Infrastructure” Business Line
This business line groups all of the hosting offers in the Group’s data centers, platform management in public or private
cloud mode, business recovery plan, and content acceleration.
An on-demand Infrastructure offer on the IaaS (Infrastructure as a Service) model is offered to customers, in particular to
large accounts. The offer consists of a hosting service with virtual servers in a shared environment. It allows the business
to manage, optimize and evolve all or part of its set of information system infrastructures, on demand and according to its
needs. It is thus a solution that outsources IT resources in a secure environment.
1.4.2.3.3
“Unified Communications” Business Line
This business line groups videoconferencing, audioconferencing, messaging, collaboration and advanced business
telephony solutions. The portfolio includes the following offers in particular:
 SFR Sync, an automatic synchronization service for a business’ data, made available at all work stations and on all
work tools of associates. The files are backed up with secure access.
 Collaboration Office 365 package, which combines under a single user license the Microsoft Office tools (professional
messaging, conferencing and instant messaging, online document sharing site, and office applications, and makes
them accessible online at any time.
 Corporate Business Pack, offered specifically to large companies. This telephony and communications solution,
which is consolidated in Cloud mode, is adapted to each business and relies on four cornerstones: advanced
business telephony and consolidated communications functionalities, on-demand service with pay per use, the
guarantee of a single contact person for an end-to-end commitment, and a Customer Area that enables telephone
services to be managed on a daily basis, along with fully independent customer cooperation. This package is an allinclusive offer that contains a service platform at its backbone and centralized operator voice access, constructed on
the customer’s existing network or SFR Ipnet. It offers personalized end-to-end assistance in design, roll-out and
1
operations. In addition to the business’ telephony and cooperation functionalities, users will benefit from a Softphone
service and a single number. They can thus be reached at any time within or outside of the business, and on all types
of fixed-line or mobile handsets.
The portfolio also includes the ability to deploy tailored solutions at the customer’s site or in hosted mode.
1.4.2.3.4
“Customer Relations” Business Line
Numericable-SFR Group provides numerous offers to meet the Customer Relations needs of B2B clients, also known as
“Customer Relationship Management” (CRM) offers.
a)
Special Number offers
Numericable-SFR has been a special number collection operator for nearly 15 years. Approximately 6,000 businesses
are customers of the Group’s special numbers (No. 08AB, No. 09, No. 3BPQ, Proxinum). Overall, the more than 195,000
numbers that were activated on the SFR network totaled more than 1.7 billion minutes in 2015.
b)
Contact Center offers: “Genesys by SFR” and “Cross-Channel Contacts Center” solutions
The “Genesys by SFR” and “Cross-Channel Contacts Center” solutions cover, respectively, the call centers for the three
major accounts (more than 1,000 telephone representatives) and the mid-market (50 to 500 telephone
representatives). These hosted solutions allow businesses to manage their incoming contacts in a standardized manner,
regardless of the method used by the customer (i.e., phone, e-mail, mail, fax, chat, social networks or avatars). Allowing
360° customer vision, these solutions require strong integration with the customer information system.
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A softphone is an Internet telephony software program, which can be used, among other things, to place phone calls from a computer.
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c)
Marketing campaign management offers: Multi-channel Distribution and Pack Distribution
Numericable-SFR offers two outgoing multichannel marketing campaign management solutions: Multi-channel
Distribution, designed for big companies, and the Distribution Pack for SMEs. These offers allow messages to be sent
(individually or via direct marketing) using the method that is most appropriate for the target: SMS, MMS, e-mail, fax or
voice message. These campaigns are managed through an online extranet or Application Programming Interface.
1.4.2.3.5
“Internet of Things” Business Line
The Internet of Things (IoT) requires connectivity and service integration offers, which the Group provides in the form of
standard packages or tailored solutions.
These offers allow a group of fixed-line or mobile machines to exchange information with a central server, for example
global positioning (GPS) services or payment by bank card.
To meet the specific needs linked to critical, sensitive and/or high-volume projects, the Group is able to offer tailored
functionalities and prices.
1.4.2.3.6
“Security” Business Line
Numericable-SFR now offers integrated and managed Internet access protection and security services. It works in close
cooperation with security specialists to meet the security demands of its customers. The Group also offers secure
management solutions for remote access terminals with virtual private networks (VPN).
It also provides responses to so-called evolved threats, such as attempts to hack into systems or denial-of-service
attacks.
The range of ISS packages offers several levels of Internet access security, depending on the size of the firm and the
desired level of security. These offers are marketed as packages complete with Internet access links, or as tailored
security solutions for complex multi-operator environments.
1.4.3 Operator Activities
1.4.2.1 General Presentation
Numericable-SFR, through its Operator Services Division, is the second largest player in France selling wholesale
telecommunications services, next to the historical operator. In this market, the Group has certain advantages, such as
the wide extent of its catalog, proximity to its customers, and 16 years of acquired experience in this specific segment.
The Group is a key player in the operations market in France and internationally, specifically for three types of business:
 Operators targeting the consumer market
 Operators targeting the large business accounts market
 Operators targeting the VSE/SME market
By the end of 2014, the consumer market had been consolidated with the merger of SFR, Numericable Group and Virgin
Mobile. The consequence of the consolidation was a contraction in the market targetable by the Operator Services
Division and the revenue from it. Nonetheless, this market continues to have major potential for the Operator Services
Division, particularly through new growth vectors in very high speed fixed-line and mobile services.
In the large business accounts segment, the market remains dynamic with an explosion of throughputs and security
demands by large companies, allowing the Operator Services Division to grow its sales volumes in this segment. The
Group’s main customers are major international historic operators.
In the VSE/SME segment, many new players emerge every year. This market segment remains serviced mainly by the
historic operator. However, local telecoms operators or those specialized in this segment continue to grow. The biggest
operators in this market segment now offer their own telecommunications services and are positioning themselves for all
products: fixed-line and mobile voice and data. The Operations Services Division is aligning with these changes and
benefiting from this growth.
1.4.3.2 Proposed solutions
Through its Operations Services Division (OSD), Numericable-SFR offers national and international telecommunications
solutions that permit them to meet the needs of their own consumer or business customers.
The OSD currently markets:
 telecommunications infrastructure solutions
 fixed-line voice solutions
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



fixed-line data solutions
“white label” solutions
mobile solutions
roaming solutions for foreign operators
1.4.3.3 Infrastructure solutions
Numericable-SFR has IT and telecommunications equipment hosting capacities, which it markets among international
players as a supplement to its data transfer and connectivity services. Its infrastructure offer also includes the sale of
access to its ducts or fiber optics.
These infrastructures permit an operator wishing to develop its own telecommunications network in France to base itself
on solutions offered by Numericable-SFR.
1.4.3.3.1
Fixed-line voice solutions
Numericable-SFR meets the needs for national and international voice transfer through transit, collection and call
termination offers. Thanks to these solutions, third party operators in France or abroad can use the Group’s network to
connect to the networks of other operators.
Numericable-SFR also offers turnkey solutions for local or national players, such as preselection, Voice over IP on DSL
links and FTTB, the resale of Orange subscriptions, and the sale of added-value services (08xx numbers), allowing them
to be the one-stop shop for their end customers by handling all voice billing together.
Numericable-SFR supplements its services to third-party operators with VoIP offers (Voice over IP - phone calls over the
Internet) coupled with Internet access offers, permitting those operators to provide a comprehensive solution, that meets
all the telecommunications needs of their end (business) customers.
1.4.3.3.2
Fixed-line data solutions
To meet Internet connectivity needs, the Group offers end-to-end Internet access packages, with or without router, as
well as IP VPN solutions. These solutions allow the operator to benefit from Numericable-SFR’s network and support.
The Group also meets connectivity needs in data-gathering mode, to allow operators to capture Data traffic directly onto
their network. It also allows international operators to construct seamless offers which integrate France into their offer
(international IP VPN).
For these solutions, Numericable-SFR offers every type of access: ADSL, SDSL, LL, FTTB, FTTH and private network
Fiber. The Group also offers the ability to gather traffic coming from other operators in France. This allows NumericableSFR to be the one-stop shop for its operator customers.
1.4.3.3.3
White Label solutions
Numericable-SFR offers high and very high speed access links on a white label double play and triple play basis, to thirdparty operators. These solutions allow those operators to resell, under their own brands, turnkey solutions to their own
customers.
These solutions for white label triple play services are marketed under long-term contracts and are adapted to the needs
and requirements of each of the Group's customers. These contracts include the provision of television content, Internet
access services and fixed-line telephone services. Numericable-SFR also offers some other products and services such
as terminal equipment.
1.4.3.3.4
Mobile solutions
Numericable-SFR offers comprehensive packages in the mobile virtual network operators (MVNO) market. These offers
are intended for operators who do not have a network and who wish to market a mobile offer. The Group offers "Full
MVNO" packages (combining mobile voice, SMS and data), "light MVNOs" (end-to-end mobile services: national, calls
to international numbers, roaming, etc.), and via MVNO aggregators that provide turnkey solutions.
1.4.3.3.5
Roaming solutions for foreign operators
Numericable-SFR hosts roaming customers of foreign operators on its network, so as to offer them service continuity in
France (roaming in). The hundreds of agreements that the Group has entered into with most foreign mobile operators
allow it to cover close to 300 destinations, and thus offer an equivalent service to its customers when they are in a
foreign country.
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This roaming solution is now also available as part of the Full MVNO package, so its own customers can benefit from
those agreements.
1.4.4 Activities of Société réunionnaise du radiotéléphone (SRR)
Société réunionnaise du radiotéléphone, a subsidiary of SFR Group, operates on Reunion Island and Mayotte, in the
B2C and B2B markets. In mobile, this subsidiary holds a GSM license (second generation) and a UMTS license (third
generation) and covers more than 99% of the population for 2G and 96% for 3G, as a Dual Carrier, on Reunion Island.
1
In the B2C market, SRR provides fixed and mobile offers. Mobile offers under the SFR Réunion brand include four
Carrées packages, two blocked Carrés packages, and a prepaid card package. The NRJ Mobile brand, which is primarily
intended for young people, includes offers for a prepaid card and blocked package.
 The Formules Carrées packages are available with or without a commitment, and with or without a handset. Their
rates (with a commitment for 12 months or 24 months with a handset) vary from €19 to €89, including tax, per month,
according to the voice, SMS/MMS and data package.
 SRR also offers two blocked packages under the SFR brand: Carrés packages, which are also available with or
without a commitment and with or without a handset, for prices ranging from €19 to €29, including tax, per month
(with commitments of 12 months or 24 months with a handset). A CRAKE Mobile NRJ package is also available with
a commitment, and with a handset for €22.90.
 The La Carte and NRJ Mobile prepaid cards, with no commitment, are available for €15 via the kit.
 Lastly, SRR has remote access offers: the Carré tablet and key offers, for which the rate varies between €30 and €40
(with commitments of 12 or 24 months and handset) and SFR La Carte Web (€25 for up to 2 Gb).
 Fixed-line B2C packages include two triple play offers for €49.90/month (including taxes) (+130 TV channels
including 42 HD) and €39.99/month (including taxes) (+100 TV channels including 28 HD).
In the B2B market, SRR offers voice packages: the Formules Carrées, ranging from €19 to €89/month (including taxes)
with cell phone and commitment, and the Evidence meter for fleets of fifteen lines or more. SRR also provides data
offers, which include M2M solutions as well as Formules Carrées packages for tablets and Internet sticks. Three of its
stores (“SFR Spaces”) also have a reception desk especially for businesses.
SRR also offers, via the website redbysfr.re, no-frills packages for €6.99 (RED2H) and €19.99 (REDMAXI: unlimited
voice, unlimited SMS/MMS, 2 Gb data and 35 days’ voice roaming in metropolitan France, SMS and data to metropolitan
France and Reunion).
In Mayotte, SRR also covers the B2C and B2B markets. In mobile, it covers more than 99% of the territory (more than
99% of the population) in 2G, and more than 72% of the territory (more than 87% of the population) in 3G+. In the B2C
market, SRR offers, under the SFR Mayotte brand, mobile offers (Halo blocked or unblocked packaged, blocked 976
Mobile package, prepaid Yangou La Carte and 976 Mobile cards, Internet 3G+ key) and fixed-line offers (SFR box offers,
including a triple play offer). In the B2B market, SRR offers, under the same brand as that used on the B2C market, voice
solutions (Halo Pro) and data solutions (Internet mobile 3G+, Internet M2M).
1.4.5 SFR Collectivités operations
SFR Collectivités, a subsidiary dedicated to local authorities, was formed to the Group in its network and services roll-out
strategy, within the context of local authorities’ needs. Beyond the cooperative relationship with Numericable-SFR and
these authorities, SFR Collectivités also manages major long-term partnerships such as Public Initiative Networks
(“RIPs”). These physical networks, which were constructed by regional authorities with the participation of the private
sector. are in large part managed in the form of Public Service Concessions (“DSPs”). SFR Collectivités handles the rollout of fixed and mobile infrastructures in order to enhance the attractiveness and coverage of territories, and may assist
authorities with the design and even the operation of these telecommunications networks. SFR Collectivités is the leader
in the field of public network initiatives, with 28 public network initiatives in its portfolio.
1
List of offers valid as of December 31, 2015.
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1.4.6 Activities of equity associates
The main associates are:
1.4.6.1 La Poste Telecom
SFR Group holds 49% of La Poste Telecom, which markets offers for telephony, subscriptions and prepaid offers under
the La Poste Mobile brand, in the postal office network. La Poste Mobile is an MVNO (Mobile Virtual Network Operator)
on the SFR network.
1.4.6.2 Synérail
The SFR Group has a 30% stake in Synérail, alongside Vinci (Vinci Energies and Vinci Concessions) and AXA (AXA
Infrastructure Investissement SAS, AXA UK Infrastructure Investissement SAS, AXA Infrastructure Partners FCPR)
(each having 30%) and TDF (10%) and this company has signed a GSM-R public-private partnership contract with
Réseau Ferré de France. This contract, worth a total of one billion euros over a 15-year term starting on March 24, 2010,
is to finance, build, operate and maintain a digital telecommunications network that will provide voice and data
communication between trains and ground control teams in conference mode. It allows a European network to be built
with a unique communications system, which is compatible and harmonized between rail networks, to replace the
existing national radio systems. This network will be rolled out gradually on 14,000 km of traditional and high speed rail
lines in France. The Numericable Group also participates as a service provider in the GSM-R network building and
operation phase through Synérail Construction and Synérail Exploitation, which it holds jointly with Vinci Energies.
1.4.6.3 Numergy
Numericable Group has a 46.7% stake in Numergy, alongside Bull (20%) and Caisse des Dépôts (33.3%). The purpose
of the company is the development, operation and marketing of cloud computing services.
On January 22, 2016, the Group bought all the shares held by Caisse des Dépôts and Bull, thereby taking control of
Numergy.
1.4.7 Network and real estate
1.4.7.1 The Numericable-SFR Group network
With the first very high speed network in France, 7.7 million eligible jacks (wall sockets) in more than 1,000 communities
and a top-rank mobile network, Numericable-SFR Group has set itself the goal of becoming the national leader in very
high speed fixed-line/mobile convergence.
In terms of very high speed fixed-line services, the Group intends to maintain its lead and contribute to the success of the
French government’s Very High Speed France plan through massive investments that will allow it to service 12 million
jacks (wall sockets) by 2017, 18 million by 2020, and 22 million by 2022. Numericable-SFR will thus continue to drive the
market and support ADSL-to-fiber migration for homes as well as businesses.
The Group aims to roll out the high-quality experience of high and very high speed services to all its home, professional
and business customers in fixed-line as well as mobile services. To this end, Numericable-SFR is investing in its network
infrastructures in order to be able to develop innovative, convergent highquality services, while keeping costs under
control. These networks enable fixed-line and mobile voice and data traffic to be routed throughout France, but they are
also interconnected to the networks of the rest of the world by means of interconnection agreements or transitional
agreements.
The Group intends to continue to invest in advanced technology that enables it to get ahead of market trends and cover
future traffic needs.
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1.4.7.1.1
CUSTOMERS
General Presentation: Simplified general architecture
of a telecommunications network
ACCESS
NETWORKS
COLLECTION
NETWORKS
BACKBONE
INTER-CONNECTIONS
SERVICE
PLATFORMS
(Source: Numericable-SFR Group, diagram prepared internally)
The rate of major technological advances in the telecommunications sector is intense and is becoming increasingly
faster, specifically in order to be able to keep up with the very rapid development of Internet use, both in fixed-line and
mobile. Consequently, in recent years the Group has sought to streamline its networks.
Simplified diagram of the Group’s network
(Source: Numericable-SFR Group, diagram prepared internally)
Traffic is collected by means of access networks dedicated to customer connections and thereafter routed via the
collection networks to the backbone.
The laying of services is supplied by different platforms adapted to the services (voice or data) and each of the markets
covered by Numericable-SFR Group: B2C, B2B and Wholesale.
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1.4.7.1.2
The fixed-line network
Fiber coverage, end 2015
a)
Very high speed fixed-line
In terms of Very High Speed fixed-line services, Numericable-SFR is rolling out fiber in all existing technologies
(FTTB/FTTH), with a single objective: to give its customers the fastest and highest-quality throughputs that it can
realistically provide. The Group is actively engaged in ensuring the success of the Very High Speed France plan. Its fiber
optic network allows the Group to offer users throughputs from 100 Mbps to 1 Gbps.
The Group is also continuing to renovate its installed 30 Mbps jacks (wall sockets) to handle throughputs from 100 Mbps
to 1 Gbps.
The Group owns its network infrastructure, network heads, access nodes, and other network access components,
including the long-distance backbone. The civil engineering installations in which the cables are installed (like the
conduits and masts) are owned by the Group or Orange; in the latter case, the Group has access by means of long-term
1
IRUs . Several telecommunications operators can occupy or use the same civil engineering installation or even the same
telecommunications equipment without affecting the quality of the service provided. As of end-2015, the Group had the
largest optical fiber network in France with 7.7 million jacks (wall sockets) eligible for fiber. Numericable-SFR fiber is
already marketed in more than 1,000 communities in France. In 2015, more than one million new homes were eligible for
the Group’s fiber services.
FTTB TECHNOLOGY (FIBER TO THE BUILDING)
With performance comparable to other FTTx technologies, FTTB is the most widespread technology in the world (United
States, Germany, Belgium, Netherlands, etc.). This makes cable operators key players in very high speed services in
many markets.
FTTB, which is intended to bring optical fiber as close as possible to homes and use existing coaxial cable inside the
building to connect the end customer, offers two advantages: it allows subscribers to be connected easily and thus
encourages a faster spread of fiber use in France, it offers quality television viewing which is now recognized as better
than all other available technologies, and it is the main vehicle for access offers. (Source: IDATE study, 2015).
ARCEP, in its fourth Market Watch report on the quality of Internet access dated April 13, 2016, considers “fiber to the
subscriber” to be the most efficient technology.
FTTH TECHNOLOGY (FIBER TO THE HOME)
Since 2007, the Group has also been installing its own fiber optic connections to subscribers using Fiber to the Home
(FTTH) technology that allows speeds up to 1 Gbps. It followed this up in 2015 with a network of 320 Optical Distribution
Nodes (ODN) from which to run final fiber optic lines to home and business customers, to replace Orange copper lines.
FTTH technology offers significant development potential.
1
An IRU (Indefeasible Right of Use) is a contract granting an operator permanent, irrevocable and exclusive right of long-term use. Applied to the local
fiber optic loop, it enables an operator to have a right of use over a local loop deployed by another operator by making an initial payment. It is therefore
a form of joint investment. The right to sell remains with the owner of the local loop.
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Furthermore, unlike other technologies such as VDSL, where actual speed decreases as distance increases, FTTB and
FTTH are not technically limited by distances to connection nodes.
A REALISTIC APPROACH TO FAVOR DEPLOYMENT
In order to meet the growing needs of users even more quickly, the Group is taking a pragmatic approach to the
deployment of very high speed offers:
 In very densely populated areas, by rolling out its own infrastructure.
 In less densely populated areas that are privately serviced (called “AMII”), Numericable-SFR continues to deploy its
services in areas where the Group is the leading operator and continues to invest jointly with Orange in areas where
Orange has taken on the task of deployment.
Lastly, also in less densely populated areas, the Group is the natural partner for communities for extending fiber via
Public Initiative Networks.
b)
High speed fixed-line: DSL
For high speed fixed-line services, SFR relies on a DSL network of 7,100 unbundled Subscriber Access Nodes, as of
December 31, 2015.
Although the Group benefits from excellent historical DSL coverage, it has the largest fiber optic network in the market
and intends to support ADSL-to-fiber migration for homes and businesses in order to meet the gradual growth in usage.
1.4.7.1.3
The mobile network
The Group mobile access network has more than 18,500 radio sites, each comprising transmitting/receiving equipment
(base station), transmitting equipment and supporting infrastructure (e.g.: mast, technical room, power substation,
antenna, etc.). These radio sites are connected to the fiber optic backbone via its own fiber optic or radio relays or those
leased to Orange.
To operate on this mobile network, the Group has invested heavily in purchasing mobile frequencies from the different
auction-offs organized by the regulatory authorities. Therefore, today it has a diversified portfolio of frequencies
(2G/3G/4G) and an allocation of spectrum that suffices to cover its current and expected requirements.
The bidding organized by ARCEP in November 2015 for the allocation of frequencies in the 700 MHz band resulted in
Numericable-SFR boosting its portfolio with a new 5 MHz block of frequencies. The Group’s portfolio of low frequencies
now totals 25 MHz, of which 5 MHz is in the 700 MHz band, 10 MHz in the 800 MHz band, and 10 MHz in the 900 MHz
band. Combined with the 55 MHz that the Group has in high-frequency bands, Numericable-SFR’s total frequency
portfolio is now 80 MHz (after refarming 1800 MHz), which makes the portfolio the most significant in the market. This
allows the Group to tackle, for its customers, all the challenges of national coverage, especially in sparsely populated
areas, mobile Internet performance, and usage growth, for the years ahead (for more details, see Section 1.2.4.1.3 Specific regulatory framework for mobile operators).
a)
Mobile coverage
Through significant deployment on its radio sites of the different 2G, 3G and 4G technologies, the Group today aims to
cover all mobile connectivity needs in mainland France. Accordingly, as of December 31, 2015, the Group’s mobile
network covered 99.7% of the French population in GSM/GPRS (2G) and more than 99% of the population on the
UMTS/HSPA (3G/3G+) network. SFR 4G is accessible by 64% of the population of metropolitan France.
In order to support new mobile Internet uses, the Group also continues to expand the capacity of its 3G network.
The first operator to launch 4G in France, SFR continues to roll out its 4G/4G+ coverage. Thus, in the final quarter of
2015, the Group reported record production with the commissioning of more than 1,000 4G sites, the best performance
in the sector (Source: ANFER Observatory, 2G/3G/4G).
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4G Coverage, end-2015
With a view to increasing throughputs and improving browsing comfort and quality of service, the Group is also rolling out
4G+. Regarded as an advanced version of 4G, 4G+ can provide higher speeds than are available with 4G (theoretical
maximum 187.5 Mbps) by aggregating 800 MHz and 2600 MHz frequencies. 4G+ offers faster downloads/uploads and
HD content sharing when on the move.
b)
Deployment of 4G
GRADUAL, SYSTEMATIC DEPLOYMENT OF SINGLE-RAN TECHNOLOGY
Access to the Group’s mobile network consists of more than 18,500 radio sites, equipped with one or more items of
emission/reception equipment (base station), each dedicated to a single technology (2G or 3G) or latest-generation
“Single-RAN” equipment, which enables 2G, 3G and 4G technology to be managed by means of a single item of
equipment.
The Group makes the most of its deployment of 4G technology to systematically replace its older antennas by using
Single-RAN technology, thereby enabling its customers to benefit from a high-quality, very high-speed network, while
also making the most of the technical and financial benefits brought about by this technology.
Single-RAN technology has some technical advantages. First and foremost, it enjoys higher performance (quality of
mobile voice in 4G or 3G cover, increased 3G capacity) thanks to its ability to use optimal technology (3G/4G) and
frequencies (specifically 900 MHz). The effectiveness and reliability of connectivity are also optimized, thanks to the use
of unique transmission technology (comparable with the use of several technologies on alternative equipment, referred to
as “Overlay”). Finally, it facilitates technological evolution (introduction of 3G 900 or 4G 1800 for example), thanks to a
simple software evolution, with no intervention on the physical components. It also has prerequisites by which to evolve
towards LTE-Advanced (4G+) technologies.
The use of the Single-RAN technology also enables the generation of a certain number of economic benefits, particularly
due to the reduced amount of equipment necessary. Thus the reduction of maintenance works makes it possible to save
on operating costs, while the facilitation of technological evolution and the reduction of the number of sites required
reduces investments.
Finally, this technology also improves the customer experience in a parallel fashion, thanks to a greater fluidity of the
network (due to better cover and availability) and increased capacity over all frequencies concerned by this technology
(2G/3G/4G). This additional performance is also further reinforced by the desire of the SFR Group to develop fiberoptic
connections (“backhaul” links).
MOBILE NETWORK DEVELOPMENT PROGRAM
In 2014, SFR launched a massive network development program to upgrade 2G, 3G and 4G technologies. This is an
essential transitional stage to eventually having a very high-quality mobile network. This in-depth development program
constitutes an investment for the next 20 years.
This is also one of the Group’s key priorities: to do everything possible to offer customers optimal service quality that
makes a difference. Improving mobile network service quality is a priority for the Group.
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This network development requires replacing our 2G/3G equipment with the latest generation equipment, rolling out 4G,
and reallocating part of our 900 MHz frequencies to 3G, to provide better mobile Internet coverage inside buildings.
In practical terms, the program will:
 significantly boost our 2G/3G network capacity;
 improve coverage and quality of service;
 roll out 4G at 800 MHz and 2.6 MHz;
 reuse the 3G 900 MHz band for optimal coverage inside buildings.
The network development program began in 32 French urban centers with populations exceeding 200,000.
This program significantly improves overall customer satisfaction.
As of the end of 2015, many communities with populations exceeding 200,000 benefited from this development program,
including: Aix en Provence, Angers, Antibes, Avignon, Béthune, Bordeaux, Brest, Cannes, Clermont-Ferrand, Dijon,
Douai, Lens, Grenoble, Le Havre, Le Mans, Lille, Lyon, Marseille, Metz, Montpellier, Nantes, Nice, Orléans, Paris and
inner suburbs, Reims, Rennes, Rouen, Saint-Étienne, Toulon, Toulouse, Tours and Vitrolles.
MOBILE NETWORKS SHARING AGREEMENT
On January 31, 2014, SFR and Bouygues Telecom signed an agreement to share their mobile networks. The agreement
aimed to allow the two operators to offer their respective customers better geographic coverage and better quality of
service, while optimizing costs and investments made in this context.
The agreement sets forth the deployment over an area corresponding to 57% of the population (i.e., the entire territory
except for the 32 largest communities, with more than 200,000 inhabitants and the white zones) of a new shared
network.
The agreement is based on two principles:
 create a special purpose joint venture to manage the shared assets of the radio sites, i.e., the passive infrastructures
and geographical sites where the telecom infrastructures and equipment are deployed. SFR and Bouygues Telecom
each retain full ownership of their own telecom equipment assets and frequencies;
 set up a RAN-sharing service that 2G, 3G and 4G operators can use in the shared territory. Each operator is
responsible for the part of the shared territory in which it designs, deploys, operates and maintains the RAN-sharing
service.
SFR and Bouygues Telecom retain an independence capacity to innovate as well as complete rate and commercial
independence and continue to offer differentiated services thanks to the expert knowledge of their backbone and
frequencies.
The agreement to share part of the mobile networks of Bouygues Telecom and SFR is similar to numerous provisions
already implemented in other European countries.
2015 marked the first deployment of the network shared with Bouygues Telecom
Under the sharing agreement, a number of sites are deployed equally between SFR and Bouygues Telecom in less
populated areas.
Key
Heavily populated zone, not pooled
SFR leader zone (pooled network)
Bouygues leader zone (pooled network)
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1.4.7.1.4
The backbone
In order to offer all its customers a top quality user experience, the Group has developed its own unique transmission
network to carry all its mobile and fixed-line traffic. This network is based on a modern, high quality infrastructure, both in
its backbone and its mobile and fixed-line access networks.
The Group has one of the largest backbones in France. This backbone represents a transport infrastructure of national
scope with more than 50,000 km of optic fiber that connects more than 160 metropolitan loops in the country.
It is supported by a network of more than a hundred data centers, spread throughout the territory.
a)
Technical specifications
The backbone (which designates the main voice and data transmission routes between large, strategically
interconnected networks and the main routers) is used by the Group to route the digital signals of subscribers throughout
France. The data backbone currently functions in “All-IP” and carries all Group communications using specific
bandwidths for each of the Group’s digital services: digital television, high speed Internet, B2B data services and B2C
fixed-line telephone services. The Group believes that this backbone is entirely able to meet the needs of its subscribers.
b)
Transmission network and IP transport network
For its optical transmission network, the Group has chosen a “meshed” architecture, which is a network constructed in
the form of interlinked loops in order to secure the traffic flow as much as possible.
In the past, the SFR-Numericable Group built its optical transmission network on the basis of national agreements with
Réseau Ferré de France (RFF) and Voies Navigables de France (VNF). The Group has extended this vast transmission
network by also leasing fibers to third parties (Réseau de Transport d’Electricité (RTE), highway networks, metropolitan
networks) and also to Orange, specifically for the connection of MDFs.
To handle the growth in traffic, the Group has implemented the highest-performing optical technology available to date.
The Group has built a multi-service, very high capacity IP (Internet Protocol) transport network. It is located above the
optical transmission network. The backbone routers use Nx100G technology (i.e., they can support connections with a
unit capacity of 100 Gbps).
The network of the Numericable-SFR Group can manage Internet access services using addresses in the IPv4 or IPv6
format for its Consumer, Business and Operator customers. It can transport voice, data and video flows (television
services on multicast IP or Video On Demand - VOD).
c)
Data centers
In order to meet the needs of the B2B segment, the Group has more than a hundred data centers in France. These data
centers consist of one or more properties equipped with 24-hour security and surveillance services and include several
rooms with cabinets containing the servers, kept at an ideal temperature and with permanent electricity supplies. The
servers hold the data and applications to be used by B2B customers, who benefit from a secure connection to the data
center servers.
1.4.7.2 Properties and investments
1.4.7.2.1
Existing or planned property, plant and equipment
As of December 31, 2015, the Group owned property, plant and equipment with a gross value of approximately €8,591
million. The Group’s telecommunications network represented most of the total value of its property, plant and
equipment. For detailed information on the Group’s network, see Section 1.4.7 “The Group’s Network” in this Registration
Document.
The Group leases some of its property, plant and equipment, particularly certain buildings and telecommunications
network infrastructure.
Property, plant and equipment owned or leased by the Group consist primarily of the following.
a)
Tertiary and mixed-use sites
The SFR Group owns or leases, directly or indirectly, thirteen main tertiary sites throughout metropolitan France,
primarily major regional cities (Saint Herblain, Toulouse, Rennes, Lyon Saint Priest, Lyon Bron, Metz Territoire de Borny,
Aix le Sulky, Bordeaux lac, Marseille, Vénissieux, Vélizy). These sites are office buildings, sometimes with adjacent
technical facilities (in this case, the site is classified as “mixed-use”), ranging in size from 2,500 to 11,000 m² totaling
around 100,000 m² (excluding the technical facility at the Vénissieux site).
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The Group also leases 22 other large tertiary sites representing a total surface area of approximately 212,000 m², under
commercial leases entered into under normal market conditions. These sites include, in particular:
 the Group’s headquarters (“SFR Campus”) at Saint-Denis, divided into two sections representing a total usable area
of 123,720 m². This site is leased to SFR under the terms of four leases:
(i) two leases with a fixed term of 11 years and 9 months which took effect on December 4, 2013 for the first
segment, which represents an area of 69,177 m²;
(ii) two leases with a fixed term of 11 years and 9 months, that took effect in November 2015 for the second
segment, representing an area of 54,543 m². This site now houses the teams that previously worked at tertiary
sites leased in Meudon and Nanterre;
 mixed-used sites in Courbevoie and Strasbourg (around 55,145 m²) and office premises in Massy, Gentilly, Lille
République, Efixo Marseille and Grenoble (around 18,149 m²), representing a total surface area of approximately
73,294 m².
The Group also owns premises in Champs-sur-Marne (Paris-Ile de France) and leases the Béla Bartok site (where the
Company has its corporate headquarters). The Béla Bartok lease was signed on April 9, 2001 for a term of three, six or
nine years with effect from January 1, 2001.
b)
Technical sites
The technical sites of the SFR Group are classified in three categories:
 mobile switching centers (“MSC”);
 Radio sites: Transmission sites with transmitting/receiving antennas; and
 fiber-optic exchanges.
The Group owns around 50 MSC buildings; the principal sites are located in Trappes, Valenton, Mitry Mory, Toulouse,
Lyon Bron, Saint Herblain, Corbas, Palaiseau, Marseille and Nanterre.
The Radio sites consist of about 21,000 sites of various types (existing buildings, undeveloped land, water towers and
masts). The 3,000 principal sites are leased to major groups under leases signed within the scope of framework
agreements. The main framework agreements are with the TDF Group, Accord and the SNCF. 6,500 agreements were
transferred to INFRACOS, the joint company with Bouygues Telecom in the context of the network sharing.
Fiber-optic exchanges primarily include small local optical connection nodes, which are a priority acquisition for the
Group. The Group owns the optical fiber and coaxial cables of its network, as well as its equipment, headends, nodes,
switches, connection equipment and certain other parts of the access network, including the long-distance backbone
network.
The civil engineering infrastructures in which the cables are placed (such as the ducts and towers) are owned by the
Group or Orange, in which case Orange makes them available to the Group under long-term indefeasible rights of use
(IRU) signed with Orange (see Section 1.3.7.1 “The Group’s Network” in this Registration Document).
c)
Commercial sites and premises
The Group SFR holds more than 800 commercial leases for its stores located throughout France.
d)
Furniture and equipment
The Group’s assets also include movable assets, computer equipment and servers, particularly set-top boxes and other
digital terminals and equipment installed on the premises of the Group’s subscribers, of which the Group retains
ownership and which must be returned to the Group at the end of the subscription.
The Group believes that the usage rate of its various property, plant and equipment is consistent with its activity and
projected growth, as well as with its current and planned investments.
On the date of this Registration Document, the Group’s planned non-current assets reflect investments being finalized
and planned, which are discussed in Section 5.5 “Projected changes and outlook” in this Registration Document.
1.4.8 Seasonal nature of the activity
For B2C mobile activities, the year-end is an extremely sensitive sales period. A major failure of the information systems
or of any component of the chain of production and logistics during that period would have negative consequences on
revenues. To prevent this type of risk, the Group avoids working on the network and information systems during that
period of the year (starting in mid-November).
For fixed-line B2C activities, revenues from standard analog pay-TV services, basic and high-end Cable TV services,
and high-speed Internet services, are primarily based on a fixed monthly fee and are thus not subject to seasonal
variations. The number of customers generally increases from September to January as households tend to make more
purchases during back-to-school and end-of-year periods.
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1.4
Sales to B2B customers generally increase in June and December, which is the period in which the budgets of private
and public sector businesses are established, while revenues from B2B telephony services tend to follow the rhythm of
school vacations, with a slight decline during the summer and winter vacation period and the holidays in May, although
this decline is not significant.
1.4.9 Suppliers
Numericable-SFR has implemented a multi-sourcing purchasing policy for some technologies and permanently monitors
suppliers in the production chain.
The breakdown of the main suppliers for the major categories is as follows:
 eight main suppliers of mobile handsets;
 five main suppliers of telecommunications equipment;
 five primary suppliers for the deployment of this equipment and maintenance;
 fourteen principal suppliers for the IT systems;
 ten main suppliers for the call centers.
For mobile handsets, the Group works with the best known brands on the market, as well as with Original Design
Manufacturers (ODM) for which Numericable-SFR uses dedicated brands. It is very important for the Group to have
access to all the leading brands on the market. Moreover, Numericable-SFR may, for some very specific products or
services, find itself dependent on certain suppliers. SFR considers itself to be commercially dependent on a handset
supplier and on an access provider.
For telecommunications equipment, Numericable-SFR has a dual sourcing policy with leading companies in these
segments for the main equipment in the network, particularly the radio equipment. As a result, the Group believes that
there is no critical dependence. For the backbone, Numericable-SFR has more of a mono-sourcing policy, based on the
type of equipment, in order to simplify the process and because of smaller volumes of investments. The companies
concerned are also leaders in their fields.
For the information systems, the Group uses either solutions recognized in the market (Oracle, SAP), or more advanced
solutions for which specific provisions are stipulated in the contracts in order to protect access to the source code.
Numericable-SFR believes there is no critical dependence in this area.
Thus, the Group has developed and maintains relations with various suppliers who contributed to the development of
innovations, service quality and operational excellence for its customers to ensure economic efficiency.
The purchasing process consists of five stages that describe the entire life cycle of the relationship between the Group
and its suppliers.
The selection of suppliers is one of the critical steps. It is rigorous and applies objective criteria relating to product and
service quality, delivery terms and conditions and their costs as part of the total cost of ownership.
This assessment also considers commitments relating to:
 compliance with applicable laws and regulations;
 compliance with rules of confidentiality and loyalty;
 the existence and application of an Environmental and Social Responsibility (ESR) policy suited to the nature of the
products and services supplied.
These criteria are explicitly set forth in the contracts that govern the Group’s relations with its suppliers.
Governance is set up with the principal suppliers. This enables a long-term, balanced relationship to be established and
relates to both the monitoring of performance, the sharing and supervising of targets and the exchange of information
regarding market and technology trends.
The SFR entity has been implementing a purchasing policy that takes into consideration the principles of social and
environmental responsibility in its relations with its suppliers in order improve risk control.
The main principles are as follows:
 give priority to suppliers that meet these challenges;
 take these criteria into consideration in supplier evaluations;
 promote and ensure compliance with the code of ethics and commitments published by Numericable-SFR.
All purchase contracts signed in the last year include a clause on “compliance with laws and regulations - Social
responsibility.” The Group uses the specialized company Ecovadis to evaluate its main suppliers on a regular basis. The
evaluation is carried out on the basis of documents and is part of a process conducted in collaboration with the
Fédération Française des Télécommunications [French Telecommunications Federation]. On the date of this
Registration Document, 172 suppliers have been evaluated.
The use of protected sector businesses (recycling of equipment, telephone contacts, etc.) is an integral part of the
purchasing policy and is regularly monitored. In 2015, Numericable-SFR recorded 3 million euros before tax with
companies in the protected sector.
The Group regularly provides training to its buyers. An integration and training process is completed by all new hires in
the department. The process covers responsible buying.
65
1.5
1
Research and development, patents, licenses
DEPENDENCY
As described above, the Group uses several suppliers in the course of its business activities. The Group believes that it
is not dependent on any single supplier and that the loss of one of its suppliers would not have any material adverse
effect on the Group’s business, and that the Group could replace its main suppliers without any major disturbance to its
operations, with the exception of a very small number of suppliers (one terminal supplier and one access supplier). See
Section II “Risks relating to the Group’s business activities” in this Registration Document.
1.5
Research and development, patents, licenses
1.5.1 Research and development
The Group’s research and development department is located on three sites in Marseille, Grenoble, and Saint
Denis/Paris.
Mobiquity with the content/video elements is one of the top innovation programs for this department. To achieve this
goal, the Group has technological control (direct or indirect) of the various bricks (multi-equipment, Middleware, User
Interface, Firmware, Video platform, etc.) that allows it to offer this experience, end to end, with home automation
expanding this category.
Given the growing amount of data to be processed, Big Data, the Connected Home and the Internet of Things also
represent vectors for innovation.
1.5.2 Intellectual property
1.5.2.1 Intellectual property
The Group licenses its television programming content from third-party content providers. The Group signs contracts
directly with copyright management companies, including SACEM (Société des Auteurs, Compositeurs et Éditeurs de
Musique), SDRM (Société pour l’administration du droit de reproduction mécanique), SCAM (Société Civile des Auteurs
Multimedia), SACD (Société des Auteurs et Compositeurs Dramatiques), ADAGP (Société des Auteurs Dans les Arts
Graphiques et Plastiques) and ANGOA (Agence Nationale de Gestion des Œuvres Audiovisuelles), broadcasters and
distributors.
In general, the Group pays royalties to its content providers based on subscriber numbers. Under certain agreements,
the Group is sometimes required to pay content providers minimum guaranteed amounts or flat fees. The Group also
pays royalties based on its subscribers’ consumption of on-demand content. See Section 11.3.1, “Third-party copyright
and relations with collective management companies” below.
1.5.2.2 Trademarks and domain names
The Group uses several trade names, trademarks and domain names in its business. The brand names ”SFR,” “Red,”
and “SFR Business” are essential to the Group’s business. All of the Group’s trademarks - particularly on its devices are protected in France, and in some cases within the European Union. The Group has also registered various domain
names, including www.numericable-sfr.com, www.red-by-sfr.fr, and www.sfr.fr.
1.5.3 Licenses, usage rights and other intangible assets
1.5.3.1 Third-party copyrights and relations with collective management companies
As a broadcaster of music and audiovisual works, the Group must comply with the provisions of Articles L. 132-20-1 and
L. 217-2 of the Intellectual Property Code, which requires that the Group pay a royalty to broadcast these works to
companies that collect and distribute copyright and related rights, including: ANGOA (management of producers’
audiovisual rights), SDRM (copyright management for sound and visual reproductions), ADAGP (management of
copyrights for graphic and plastic arts), SACD (rights management for audiovisual works of fiction and the performing
arts), SCAM (multimedia rights management), and SACEM (music rights management). ANGOA, SDRM, ADAGP,
SCAM, SACD, and SACEM collect royalties and pass them on to producers, authors, composers and publishers whose
works are reproduced, broadcast, communicated or made available to the public.
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2
Risk factors
2
Risk factors
2.1
2.2
Risks relating to the Group’s business sector and markets........................................... 73
2.1.1 The Group operates in a competitive, innovative sector and the competition could have
an adverse material effect on its business
73
2.1.2 The deployment of fiber optic networks and/or VDSL2 by competitors of the Group
could reduce the gap between the performance of their networks and our own
74
2.1.3 Prolonged weakness or deterioration in macroeconomic conditions in France could
have a negative effect on the Group’s business, financial position, and operating
results
75
2.1.4 The reputation and financial position of the Group may be affected by problems in
quality
75
2.1.5 Cancellations or the threat of cancellations could have a negative impact on the
Group’s activities
76
2.1.6 Growth in the Group’s future revenues depends in part on market acceptance
of its new products and innovations
76
2.1.7 The Group may be unable to respond appropriately to technological advances
76
2.1.8 The Group may be unable to eliminate every risk or dispute in the event of failure of
software or a third-party claim of software ownership
77
2.1.9 The Group may be unable to eliminate every risk of a claim for violation of intellectual
property from “patent trolls” or patent hunters
77
Risks relating to the Group business activities............................................................... 77
2.2.1 The Group may be unable to implement or adapt its enterprise strategy effectively after
acquisitions
77
2.2.2 The Group faces risks relating to its strategy to pursue external growth opportunities 79
2.2.3 Revenues generated by some of the Group’s services are down and the Group could
be unable to offset this decline
79
2.2.4 The pressure exerted on customer service could have a significant adverse effect
on the respective businesses of the Group
79
2.2.5 The Group has no guaranteed access to content and is dependent on its relations and
cooperation with content providers and broadcasters
80
2.2.6 The Group’s reputation depends in part on its relations with its suppliers
80
2.2.7 The continuity of the Group’s services heavily depends on the correct functioning of its
IT infrastructure and network, and any failure of this infrastructure could have a
significant adverse effect on the business of the Group, its financial position and its
operating results.
81
2.2.8 Data loss, data theft, unauthorized access and piracy could have a material adverse
effect on the reputation and business of the Group, as well as on its liability, including
criminal liability.
81
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2
Risk factors
2.3
2.4
2.2.9 The Group may be held liable for content hosted on its infrastructures or transmitted via
its network
82
2.2.10 The Group’s business requires significant investment expenditures.
82
2.2.11 The risks connected with the environment and exposure to telecommunications
electromagnetic fields are subjects of public opinion concern.
83
2.2.12 Possible labor conflicts could disrupt the activities of the Group, affect its image, or
make the operation of its facilities more costly.
83
2.2.13 The possible inability of the Group to protect its image, reputation, and brand could
have a significant adverse effect on its business.
83
2.2.14 The loss of certain employees and key executives could be detrimental to the Group’s
business.
84
2.2.15 Group employees could commit a wrongful act or conduct other reprehensible
activities that could harm the Group’s business
84
2.2.16 The Group is exposed to the risk of consumer fraud
84
Risks relating to the financial structure and profile of the Group .................................. 84
2.3.1 The significant indebtedness of the Group could affect its ability to finance its
operations and its overall financial position.
85
2.3.2 As a holding company, the Company depends on the ability of its operating
subsidiaries to generate profits and ensure the servicing of its debts. Any decline in
their profits could have a significant adverse effect on the Group’s financial flexibility. 85
2.3.3 The Group might be unable to generate sufficient cash flows to meet its obligations to
service its debt.
85
2.3.4 Restrictive clauses and the pertinent covenants relating to the Group’s debt securities
could limit its ability to pursue its activities and any breach by the Group could
constitute default and have a significant adverse effect on the financial position,
operating results and the Group’s operating continuity.
86
2.3.5 Despite its high level of debt, the Group and its subsidiaries will be able to take on a
significant amount of additional debt, which could exacerbate the risks associated with
the Group’s substantial debt.
86
2.3.6 Negative changes in its rating could have a material adverse impact on the Group’s
financial position
87
Regulatory and legal risks ................................................................................................ 87
2.4.1 Future regulatory changes could have a significant adverse effect on its business. 87
2.4.2 The legal status of the Group network is complex and, in some cases, is subject
to renewals or challenges.
88
2.4.3 The Group faces risks arising from the outcome of various legal, administrative, or
regulatory proceedings.
88
2.4.4 Tax disputes and audits, adverse decisions by tax authorities,
or changes in tax treaties, laws, regulations, or the interpretations thereof could have a
significant adverse effect on the Group’s operating results and cash flows.
88
2.4.5 French tax rules could limit the ability of the Group to deduct interest for tax purposes,
which could reduce the net cash position of the Group.
89
2.4.6 The Group’s future results , French tax rules, tax audits or litigation, and possible intragroup reorganizations could limit the ability of the Group to use its tax losses and could
thus reduce its net cash position.
90
2.4.7 The introduction into French law of class action open to consumer protection
associations could increase the Group’s exposure to significant litigation
90
2.4.8 The Group is subject to requirements in terms of protection of confidentiality and
data security
90
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2
Risk factors
2.5
2.6
2.7
2.4.9 The Group is dependent on its intellectual property rights, which might not be
adequately protected.
91
2.4.10 The Group might be unable to obtain, retain, or renew
the licenses and authorizations necessary for performance of its activities.
92
2.4.11 The Group’s business activities and their development depend on the Group’s ability
to enter into and maintain joint arrangements with other players in the
telecommunications sector.
92
2.4.12 Risks specific to the national distribution network
93
Market risks ........................................................................................................................ 93
2.5.1 Currency risk
93
2.5.2 Interest rate risk
96
2.5.3 Liquidity risk
96
2.5.4 Credit and/or counterparty risk
98
Insurance............................................................................................................................ 98
Legal and arbitration proceedings ................................................................................... 98
2.7.1 Tax disputes
99
2.7.2 Civil and commercial disputes
99
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2
Risk factors
2.1
Risks relating to the Group’s business sector and markets
Investors are invited to take into consideration all of the information contained in this Registration Document, including
the risk factors described in this section. These risks are, as of the date of the filing of the Registration Document, those
that the Group believes, if they materialize, could have a significant adverse effect on its business, its results of
operations, its financial position, or its outlook. The attention of investors is drawn to the fact that other risks may exist
that are not identified as of the date of the filing of the Registration Document, or the materialization of which is not, as of
that same date, considered likely to have a material adverse effect on the Group’s business, results of operations,
financial position or outlook.
2.1
Risks relating to the Group’s business sector and
markets
2.1.1 The Group operates in a competitive, innovative sector,
and competition could have a material adverse effect on its
business
In general, the telecommunications industry is characterized by the frequent introduction of new products and services
on the market, or by the modernization of existing services and products in connection with new technologies, as well as
with changes in usage patterns and in the needs and priorities of consumers. The Group constantly assesses its
products and services in order to develop new offerings and improve the functionality of its current offerings.
The Group also faces significant competition. While the nature and level of competition to which the Group is subject
vary according to the products and services that it offers, such competition has a general effect on the prices, marketing,
products, network coverage, service features, and customer service. The main competitor of the Group on its markets
overall is Orange, the incumbent telecommunications operator in France, which has significant financial resources.
Bouygues Telecom and Iliad (Free) are also major competitors of the Group in the B2C market. On the premium pay-TV
market, Groupe Canal+ products are available throughout the French territory via satellite, cable, and DTT and DSL
technologies. On the B2B market, in addition to Orange and Bouygues Telecom, the Group also competes with
international telecommunications operators such as Colt, Verizon, AT&T, and BT, which offer multinationals access to
their international networks, while the Group’s network has a national scope along with competitors of local scope.
Furthermore, the development of new technologies and platforms and new telecommunications services has favored the
emergence in the telecommunications market of new players who are suppliers of services or content, such as search
engines, instant messenger services, VoIP (Voice over Internet Protocol), or suppliers of terminals and Operating
Systems (OS), whose services are already competing with and could compete even more against the products of
telecommunications operators. These new players deriving from sectors that are either unregulated or are subject to
other regulations (including Internet players such as Yahoo, Google, Microsoft, Amazon, Skype, Apple, YouTube, or
players in audiovisual) have emerged as competitors of the Group in terms of content offering. These new players could
inject themselves between telecommunications operators and the end customer, exposing the Group to a risk of
degradation or loss of the relationship with the end customer, in an environment where this relationship is generating
value. In addition, such providers of services or content could directly offer their services to end consumers, resorting to
telecommunications operators only for providing access. The Group and other telecommunications operators thus risk no
longer being the direct interface for customers, and risk becoming mere service providers.
In summary, the current and future competitors of the Group could offer more services to a large subscriber base or at
prices lower than those of the Group, which could lead the Group to lose subscribers (churn) and force it to lower its
prices, or could have a significant unfavorable impact on the margin generated by its services.
The information below provides an overview of the competitive landscape in France:
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2
Risk factors
2.1
B2C
In the French pay-TV market, the Group competes with suppliers of premium channel packages such as CanalSat, the
DSL triple and/or and quadruple play operators like Orange, Free and Bouygues Telecom, which supply IPTV services,
and with suppliers of pay-DTT, like Canal+, which operates via multiple formats, including IP-TV, pay-DTT, cable and
satellite). The growth in IPTV, which is the most popular pay-TV distribution platform, followed by satellite and DTT, has
changed the market by expanding the provision of pay-TV services beyond the traditional cable and satellite methods,
which are limited by the inability to install a parabolic antenna on building façades in certain locations, such as the center
of Paris. The Group is also in competition with the suppliers of satellite television services, which can offer a wider range
of channels to a larger audience, covering more extensive geographic areas (particularly rural areas) at prices lower than
those invoiced by the Group for its cable television services. Any increase in market share in the satellite segment may
have a negative impact on the success of the Group’s television services. While the share of DTT (which includes only
Groupe Canal+ at this time) in the pay-TV market is currently low, pay-DTT providers in the future may be able to offer a
broader range of channels to a wider audience at prices lower than those invoiced by the Group.
In the high speed market, the Group offers high speed Internet via its cable network and its xDSL network, and primarily
competes with xDSL and FTTH providers, given that FTTH is currently the most widespread technology to access highspeed Internet in France. Orange is the leading provider of DSL services in France, followed by Free and Bouygues
Telecom. The Group believes that its cable network offers performance and capacity that are superior to the xDSL
networks of its rivals, which gives it a competitive edge in exploiting the growing demand for high speed Internet in
France in zones covered by its cable network, but this competitive advantage could be reduced to the extent that the
xDSL operators are going to deploy FTTH or VDSL2 networks. For more information, see “Risk factor - The deployment
of fiber optic networks and/or VDSL2 by competitors of the Group could reduce and ultimately eliminate the gap between
the speed and the power of the fiber optic/cable network of the Group compared to the DSL networks of its main
competitors.” Moreover, the networks of the Group’s xDSL rivals cover more French households than the Group’s
networks, with very competitive pricing.
The Group also competes with service providers that use alternative technologies for Internet access, such as satellite
technologies or mobile standards like the Universal Mobile Telecommunications System (“UMTS”) and 3G/4G mobile
technologies. These mobile high speed broadband Internet access technologies may allow two broadband service
providers and new licensees to provide high speed voice and data connection services. In addition, additional access
technologies could be launched in the future, which will again increase competition or lead the Group to boost its
investment expenditures. Mobile high speed Internet service providers may be able to offer high speed Internet access
speed at a competitive cost, with the additional possibility of allowing remote Internet access for subscribers.
The French mobile telephony market is characterized by the competition between the well-established mobile network
operators, such as Orange, Bouygues Telecom, and Free and other operators that do not own their own mobile networks
(“MVNO”). Competition has intensified, particularly in pricing, since Free entered the market early in 2012 with a flat rate
for unlimited calls at a low price. The mobile telephone market in France is currently being transformed because of
competitive prices, simple offers without subsidized terminals, and the development of “low cost” brands.
B2B
In the B2B segment, the Group’s main rivals are Orange (Orange Business Services) and Colt. Bouygues Telecom
Entreprises is also a competitor in the small and medium business segment. The French B2B market for voice services
is extremely sensitive to pricing, with sophisticated customers and relatively short-term contracts (generally one year),
and vulnerable to reductions in mobile termination rates. The capacity to compete effectively depends in part on the
network capillarity, and some of the Group’s competitors have a more extensive and denser network than we do. In the
data market, customers are also looking for combined infrastructure and software solutions. As a result, the Group also
faces competition from software and other IT suppliers of data and network solutions, which may reduce the value that
customers assign to Group infrastructure solutions, bringing about a reduction in the Group’s prices and margins. The IT
suppliers may also collaborate with the Group’s telecommunications infrastructure rivals.
WHOLESALE
The French wholesale telecommunications market is dominated by Orange and the Group (through its subsidiaries,
including SFR), although the market shares of Orange and the Group vary depending on the segment. The Group is also
competing with consortia of telecommunications operators and construction companies, including Covage, Vinci, Eiffage
and Axiom (which can place fibers in construction projects, then lease them on the wholesale market). The wholesale
market for data services in France is less volatile than the voice market. In addition to pricing, competition is primarily
based on quality of service and technological advances. The wholesale market for black fiber infrastructures in France is
more open than for wholesale voice and data transport, given that it does not require a dense, national network and does
not include services that require technical expertise.
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2
Risk factors
2.1
2.1.2 The deployment of fiber optic networks and/or VDSL2 by the
Group’s competitors could reduce the gap between the
performance of their networks and our own
The Group believes that one of its major competitive advantages is the power and speed of its FTTH and FTTB network.
As of December 31, 2015, the Group’s network contained more than 7.7 million FTTH and FTTB outlets (100Mbit/s and
higher). However, the competitors of the Group could deploy fiber and/or VDSL2 networks enabling download speeds
and bandwidths that could rival those reached by the Group’s network, and thus more or less strongly reduce the
Group’s competitive advantage. The Group’s main DSL competitors (Orange, Free, and Bouygues Telecom) have begun
to introduce FTTH networks to increase and harmonize their network speed. On March 17, 2015, Orange launched its
strategic plan for 2020 and announced that it would invest more than 15 billion euro in its networks between 2015 and
2018. With regard to very high speed fixed broadband, Orange has the objective of tripling its investments in fiber
between now and 2020, and of going from 3.6 million connectable households at the end of 2014 to 12 million in 2018
and 20 million in 2022 (source: Orange press release).
In addition, other operators may obtain access to the infrastructure deployed by an operator through joint financing
projects. All the DSL operators have announced various agreements to share FTTH deployment in data zones. For
example, Orange and Free signed a contract in July 2013 that stipulates the deployment by Free of a fiber optic network
using the Orange infrastructure in around 20 French cities, which gives open access to all rival operators. Moreover, in
2013, the government announced a deployment plan for FTTH (for which cable technology is not admissible) for 20
billion euros (invested by private operators and local authorities) with the goal of providing very high speed Internet
access to 50% of the population by 2017 and to the entire country by 2022. The government will provide a package of
subsidies in the amount of 3.3 billion euros, a portion of which comes from the Program of future investisment managed
by the General Investment Commission and the 2015 Finance law.
In October 2015, the European Commission opened a proceeding against France concerning the subsidies allocated to
Orange in the context of the increased speed of the Orange copper network, on the grounds that this constituted “illegal
State assistance.” These proceedings may influence the Group’s results and operations. This could lead to an
accelerated FTTH deployment by the Group’s rivals, and the share of FTTH in the high speed Internet market could
increase significantly. While certain parts of the Group’s network may be eligible for the program, its effect on the Group
and the future of fiber deployment in France are not clear as of the date of this Registration Document.
The VDSL2 technology has also been implemented in certain locations by the Group’s rivals. Deployment of the VDSL2
technology requires only the addition of VDSL2 cards in DSLAM that have already been deployed, and does not involve
a physical operation in the subscriber’s premises. In addition, the deployment of this technology accelerated beginning in
October 2014, given the favorable opinion from the committee of copper experts, which allowed marketing of the VDSL2
as of that date in indirect distribution over all lines from an MDF on Orange’s local copper loop. In 2015, approximately
5.3 million households were eligible for VDSL2 (source: ARCEP, High and Very High Speed Observatory: Wholesale
market, March 2015).
If the competitors of the Group continue to deploy or significantly increase their fiber optic networks, they could be able to
compete with the Group in terms of the offering of high speed Internet and television services of a quality and speed
greater than or equal to those of the Group, thus potentially eliminating the Group’s current competitive advantage,
increasing the pressure weighing upon prices and margins, and leading the Group to make significant investments in
order to match the services they offer. Deployment of VDSL2 and/or fiber optic networks by competitors also represents
a risk for the B2B segment of the Group, particularly with regard to medium-sized, small-to-medium-sized, and very
small-sized businesses to which the Group’s network of FTTH, FTTB and DSL also represents an advantage at present.
Although the Group is preparing for this deployment by continuously investing in and improving its product range and
content, such a deployment could have a material adverse effect on the Group’s business, financial position and results
of operations.
2.1.3 Prolonged weakness or deterioration in macroeconomic
conditions in France could have a negative effect on the Group’s
business, financial position, and operating results
The Group has made all of its revenues in France. It is therefore highly dependent on the economic trends in France. On
November 8, 2013, the ratings department of Standard & Poor’s downgraded the sovereign debt of France by one notch
to AA. On December 13, 2014, Fitch downgraded France one notch to AA. On September 18, 2015, Moody’s
downgraded France one notch to Aa2. There can be no guarantee that there will be no deterioration in the rating for
France’s sovereign debt in the future.
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Risk factors
2.1
Poor performance by the French economy, particularly due to a possible resurgence of the eurozone debt crisis, could
have a direct negative impact on consumer spending habits and on businesses in relation to products and their usage
levels. Such poor performance could (i) make it more difficult for the Group to capture new subscribers and customers,
(ii) increase the likelihood that some subscribers or customers of the Group might reduce the level of subscribed services
or terminate their subscriptions, and (iii) make it more difficult for the Group to keep its ARPU or its B2B prices at current
levels.
2.1.4 The Group’s reputation and financial position could be affected
by problems in quality
Many products and services of the Group are manufactured and/or maintained using complex, precise technological
processes. Such complex products may contain defects or experience failures during their initial introduction onto the
market or when new versions or improved versions are marketed. Despite the testing procedures implemented, the
Group cannot guarantee that its new products will be faultless after their launch. Such a circumstance could result in lost
or delayed acceptance of the Group’s products by the market, increased costs of customer service, delayed revenue
generation or lost revenue, defective products eliminated from inventories, and replacement costs, or could undermine
the reputation of the Group with its customers and the industry.
Any customer loss of confidence in the Group may cause a significant decline in the sales of its products and services. In
addition, the Group may have difficulties in identifying customers who have defective products and services. As a result,
it could incur substantial costs in order to make modifications and correct defects. Each of these problems could have an
adverse impact on the Group’s operating results.
Moreover, demand for the Group’s products or the products it offers in the context of its services, including TV set-top
boxes, high speed routers, and cell phones among others, may increase quickly. The Group may be unable to accurately
estimate the demand for these products and services, which could result in a temporary supply shortage leading to a
drop in new subscriptions to the Group’s offers, and could have a strong adverse impact on the Group’s operating
results.
2.1.5 Cancellations or the threat of cancellations could have a negative
impact on the Group’s activities
The churn rate measures the number of customers who end their subscriptions for one or more of the Group’s products
or services. The reasons for cancellation are based on the term of the contracts (generally 12 months in the B2C
segment, and between one and three years in the B2B segment), the influences from competition, customers who move
outside the zone covered by the Group’s network (smaller than the zone covered by its rivals), death, and price
increases. The churn rate could also increase if the Group is not able to provide satisfactory services on its network or if
it modifies the types of services that it offers in a given region. Cancellation of services for customers in payment default
is another reason for cancellation. Any interruption in the Group’s services, including the elimination or unavailability of
programs, even outside the Group’s control, or any other problem in customer service, could raise the churn rate or
prevent the Group from achieving its goal of reducing this rate. In addition, the Group outsources a large number of its
customer service functions to third-party subcontractors, over whom it exerts less control than if it performed these
functions itself. The Group has recorded a significant churn rate in recent years because of intense competition in the
mobile segment. In addition, the churn rate for the Group’s White Label business could increase for reasons beyond the
Group’s control (as it is not involved in customer service or customer retention). In particular, the churn rate for the White
Label customers in DSL and THD of Bouygues Telecom has already driven down the number of White Label
subscribers, which is expected to continue over the long term (see “Group activities - Major contracts - White Label
Agreements”).
The B2B segment is also suffering from a “rate erosion” (when an existing customer negotiates a rate reduction). Major
corporate customers in particular are experts in this area and are often very experienced in renegotiating the price of
their contracts, which generates pressure on margins. Any increase in churn could have a negative impact on revenues
and an even more damaging effect on margins because of the fixed costs inherent in the Group’s businesses.
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2.1.6 Growth in the Group’s future revenues depends in part on market
acceptance of its new products and innovations
Generally, the telecommunications sector is characterized by the frequent roll-out of new products and services on the
market, or by the modernization of existing products and services in connection with the new technologies, and by
changes in usage habits and customers’ needs and priorities. In the long term, the Group’s operating results are largely
dependent on its ability to continue to create, design, procure, and market new products and services, and to maintain
acceptance by the market of its existing and new products and services. If the Group cannot launch new products and
services in the future, or delays in doing so, if these new products and services are not accepted by customers, or if
competitors launch more sophisticated or more successful products or services, its business and operating results could
be severely affected.
2.1.7 The Group may be unable to respond appropriately to
technological advances
To remain competitive, the Group must continue to increase and improve the functionality, availability, and
characteristics of its network, particularly by improving its bandwidth capacity and its 4G coverage to meet the growing
demand for the services that require very high speed.
In December 2015, the Group had 121,000 new outlets eligible for SFR Fiber; 1,332 additional communities opened with
4G, and 142 with 4G+, including Paris.
In general, the telecommunications industry is facing challenges that particularly relate to:
 rapid, significant technological evolution;
 frequent improvement to existing products and services as a result of the emergence of new technologies;
 the establishment of new industry practices and standards that make the current systems and technologies in the
business obsolete.
While the Group tries to keep a step ahead, closely pursuing technological change and investing in it in order to be able
to implement such change, it is difficult to forecast the effect that technical innovations will have on the Group’s business.
The Group may also be unable to adapt within an appropriate period to new or existing technologies in order to meet
customer needs, or a rival may do so before the Group does so, which could have a material adverse effect on the
Group’s business, financial positions and operating income. It may also be necessary for the Group to incur additional
marketing and customer service costs in order to attract and retain customers, and to respond to advertising pressure
from competitors or to potentially larger marketing campaigns, which may have an unfavorable impact on the Group’s
margins.
2.1.8 The Group cannot exclude every risk or dispute in the event of a
software failure or a third-party claim on ownership of software
In contrast to traditional software licenses (referred to as “proprietary”), open-source software (or “free software”) can be
defined as software distributed under an open licensing system (for example, of the GNU GPL (General Public License)
type), generally governed by the following principles: first, free of charge and open for use, study, modification, and
distribution of the software and the developments deriving from it and, second, a requirement that developments based
on the software be subject to the same license.
Open source software is generally considered to lead to two major risks. First, licenses for open source software
normally also cover subsequent distributions of derived work (based on the original open source software), with the result
that the proprietary software integrated in the open source software becomes “infected” and the entire integrated
software program (open source software and its related components) is covered by the open source license. One
notable result of this process is that the publisher or distributor of the derived work will have to make the source code for
all the work available, including the parts of proprietary software. The second risk generally considered is that the open
source software is generally authorized “as is” without any contractual guarantee.
As a result, the Group would bear the risks in the event of the failure of open source software without the benefit of
contractual remedy. Then, the Group’s use of such software could have an impact on the ownership of the software
developed on such a basis, notably in terms of exclusivity since the refusal to disclose changes made may be classified
as infringement. Moreover, the Group cannot eliminate any risk of a third-party demand for disclosure or demand for
access to modifications of the source code made on such software. Finally, the use or integration of such “open source”
software” could result in the application of the open source software rules, in whole or in part, to the proprietary software
that uses it. This situation could have a significant adverse effect on the business, financial position, results of operations
or outlook of the Group.
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Risks relating to the Group’s business activities
2.1.9 The Group cannot eliminate any risk of a claim of infringement of
intellectual property from “patent trolls” or patent chasers
The Group may also be the target of these patent trolls (also known as “non-practicing entities”), whose main activity is
the acquisition of patents and the concession of licenses without any activity to produce goods or provide services, who
often initiate legal action claiming that such patents or licenses have been violated. Therefore, the Group cannot exclude
the possibility of disputed claims from these patent trolls, which would have a significant negative impact on the Group’s
commercial activities, financial position and operating results.
2.2
2.2.1 The Group might be unable to effectively implement or adapt its
business strategy following acquisitions
The Groups has based its strategy on its vision of the market, particularly the importance of very high speed fixed-line
and mobile networks and the fixed/mobile convergence. However, the Group is evolving in a market affected by
economic, competitive, and regulatory instability and the Group must regularly adapt its business model to take into
account market changes such as the development of specific pricing policies, the adaptation of its structural costs, the
streamlining of its operational organization, and the adaptation of its sales strategy. If the measures taken by the Group
do not meet the demands, expectations, or habits of the consumer, it will have an adverse effect on the return on
investments made, on financial targets, on market share, and on revenues generated. Consequently, any development
of the Group’s business strategy that proves not to be sufficiently adapted to the actual trends and to the demands,
expectations, or habits of the consumer in the telecommunications market may have a significant adverse effect on its
business, financial position, and operating income.
Moreover, the transformation of the Group, because of the integration of SFR, Virgin Mobile, NextRadio and Altice Media
Group France, could create operational problems and unexpected expenditures and raise significant administrative,
financial and management challenges for the Group’s business. Such challenges include:
 profitable integration at the heart of the Group’s current business, including matters involving network infrastructure,
information and financial control systems, marketing, brand exploitation, customer service, and products and service
offerings;
 legal, regulatory, contractual, labor, or other difficulties resulting from the acquisition that have not been foreseen or
disclosed;
 integration of differing team management and corporate cultures;
 retention and/or renewal of significant contracts with business partners, suppliers, and certain B2B customers; and
 the retention, recruitment, and training of key personnel, including the management teams of the entities acquired.
The inability of the Group to effectively integrate SFR, Virgin Mobile, NextRadio and Altice Media Group France within
the Group could have a significant adverse effect on the financial position of the Group and its operating results.
2.2.2 The Group faces risks relating to its strategy to pursue external
growth opportunities
The Group considers that the television, high speed broadband, and fixed-line and mobile telephony industries in France
are likely to experience a phase of consolidation. The Group’s strategy included the pursuit of external growth
opportunities. In this regard, the Group has already initiated very significant acquisition projects that position it as one of
the players in the consolidation of these markets in France. In particular, on November 27, 2014 and December 4, 2014
the Group acquired SFR and Virgin Mobile, respectively. More recently, the Group completed the acquisitions of
NextRadio TV on May 12, 2016 and of Altice Media Group France on May 25, 2016. The acquisitions or combinations
pursued by the Group could give rise to significant changes. The success of this strategy of pursuing strategic
opportunities through selective acquisitions or other combinations depends on the ability of the Group to identify the
appropriate targets, audit the target appropriately, negotiate favorable terms, and lastly carry out these transactions and
integrate the new acquisitions. In addition, future consolidations in the sectors where the Group operates will reduce
opportunities for acquisitions or combinations. The Group believes that some of its competitors are implementing similar
acquisition strategies. These competitors may have greater financial resources to make investments, or they may be
able to accept less favorable terms than the Group, thus depriving it of opportunities and reducing the number of
potential targets. The implementation of this acquisition strategy could increase the level of indebtedness of the Group.
Furthermore, the possibility of the Group’s making acquisitions is limited by its financing agreements.
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In general, the process of integrating businesses may be detrimental to the activities of the Group and may have a
significant adverse effect on its results. More particularly, the integration of any new company acquired (such as SFR,
Virgin Mobile, Altice Media Group France, and any other future acquisition) could create operational difficulties and
unexpected expenses, and raise major administrative, legal, social, financial and management challenges for the
Group’s business. The inability of the Group to effectively integrate any new company acquired within the Group could
have a significant adverse impact on the Group’s financial position and operating results. If the Group is not able to
implement its acquisition strategy or successfully integrate the businesses acquired, its own business and growth could
be affected.
2.2.3 The revenues deriving from some of the Group’s services
are down and the Group may be unable to offset this decline
On a pro forma basis, revenues in the B2C (fixed-line and mobile) and B2B (fixed-line and mobile) segments were down
for the year ended December 31, 2015 from the year ended December 31, 2014. There is no guarantee that this trend
will not continue in the coming years.
The Group anticipates that its DSL and Very High Speed activity will continue to decline. In particular, the churn rate for
the DSL and Very High Speed White Label customers of Bouygues Telecom has already resulted in a decrease in the
number of White Label subscribers. If the loss of revenue and profitability from these activities is not offset by growth in
the revenue and profitability generated by other activities of the Group, there could be a significant adverse effect on its
operating results and its financial position.
In addition, the Group could suffer other customer losses on its DSL network in the future because of their migration to
FTTH networks that provide them with Internet access at speeds higher than those available on the DSL networks. If the
loss of revenue and profitability due to customers of the Group’s DSL network is not offset by growth in the revenue and
profitability generated by the Group’s FTTH and FTTB network, there could be a significant adverse effect on its
commercial activities, operating results and its financial position.
2.2.4 The pressure exerted on customer service could have a
significant unfavorable impact on the respective activities of the
Group
The volume of contacts managed by the Group’s customer service units may vary considerably over time. The launch of
new product offers may initially exert significant pressure on the Group’s customer service functions. Increased pressure
on these functions goes hand in hand with a decline in consumer satisfaction level.
Thus, in the B2B and Wholesale segments, customers require an extremely reliable service, with very rapid reestablishment in the event of an interruption. Penalties must often be paid when the quality of service expected does not
comply. In addition, installation of the products can prove to be complex and to require specialized knowledge and costly
equipment, and service problems and delays may lead to both penalties and to the potential loss of a customer. In these
segments, the Group counts on its key personnel, who are experienced in customer relations, to manage any problem or
customer request, and the loss of these employees could lead to a loss of customers.
Improvements in customer service may prove to be necessary to achieve the desired level of growth, and if the Group
fails to make these improvements and achieve such growth, difficulties could arise in the future involving customer
service, which could damage its reputation, contribute to an increase in the churn rate, and/or limit or slow down future
growth.
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2.2.5 The Group has no guaranteed access to content and depends on
its relations and cooperation with content providers and
broadcasters
In the B2C segment, the success of the Group depends, among other things, on the quality and variety of the content
that it offers to its subscribers. The Group does not produce its own content and is dependent on broadcasters for its
programming. In order to offer programs broadcast on the Group’s network, the Group has entered into distribution
agreements with public and private broadcasters for the transmission of analog and digital signals, both free and pay.
The Group depends on broadcasters for the supply of programs to attract subscribers. Program suppliers may have
considerable power to renegotiate the prices charged by the Group for the distribution of their products and the license
fees that are paid to them. The term of these distribution agreements varies between one and four years. For example,
certain Canal+ contracts expire in 2016 and 2017. The Group may not be in a position to renegotiate these distribution
contracts under conditions as favorable as those of the current contracts; this could result in a decline in the revenues
generated by the distribution contracts or an increase in the Group’s costs as a result of purchasing licenses from
broadcasters Furthermore, content providers and broadcasters may choose to broadcast their programming through
other dissemination platforms such as the CanalSat satellite platform or TNT broadcasting, or to enter into exclusive
distribution agreements with other distributors, which may limit the competitive advantage of the Group as the sole
provider of bundled offerings of content similar to what is offered by CanalSat without additional cost.
The Group intends to negotiate new contracts to expand its TV services beyond the cable channel packages that it
currently distributes, and thus improve its existing range of program offerings. The rights attached to a large selection of
premium and/or high-definition (HD) content are, however, already held by competing distributors and to the extent that
these competitors obtain exclusives for program broadcasting, the availability of new programs for the Group could prove
limited. In addition, as long as the Group continues to develop its video-on-demand (VOD) and other interactive services,
its ability to acquire programs for its free VOD offerings (replay), VOD by subscription, and one-time VOD will become
more and more crucial and will depend on the ability of the Group to maintain a relationship and cooperation with content
providers and broadcasters, for both standard-definition (SD) as well as HD content.
If the Group cannot obtain and keep competitive programs at attractive prices on its networks, demand for its television
services could decline, thus limiting its ability to maintain or increase the revenue deriving from these services. A loss of
programs or an inability to ensure the availability of premium content under favorable terms could have a significant
adverse effect on the business of the Group, its financial position, and its results.
2.2.6 The Group’s reputation depends in part on its relations with its
suppliers
The Group relies on third parties to provide services to its customers and to perform its activities. Any delay or failure by
such third parties in providing services or products, any increase in the prices charged to the Group, or any decision not
to renew their contracts with the Group could lead to delays or interruptions in the activities of the Group, which could
damage the reputation of the Group and result in the loss of revenue and/or of customers.
The Group uses equipment and software suppliers, including TV set-top boxes, high-speed routers and mobile terminals.
The Group also has work done by a certain number of subcontractors to maintain its network, manage its call centers,
and supply, install, and maintain the terminals set up at private homes and at the premises of B2B customers. Although
the Group works with a limited number of subcontractors, who are carefully selected and supervised, it cannot guarantee
the quality of the services or that these services will comply with the quality and safety standards imposed by the Group
or required by other contracting parties. If there are defects in the equipment or software, or the services involving these
products, or if the tasks of the subcontractors of the Group are not performed properly, it may be difficult or even
impossible to make claims against the suppliers or subcontractors, particularly if the warranties provided for in the
contracts entered into with suppliers or subcontractors are not as extensive as those contained in the contracts entered
into between the Group and its customers in certain specific cases, or if these suppliers or subcontractors are insolvent
or have suspended payments. These difficulties could undermine relations between the Group and its customers, as well
as the reputation of the brand.
Like many companies in the telecommunications industry, the Group is also dependent on some of its competitors.
Although the Group is committed to diversifying its commercial relations with its competitors, a risk of dependence exists
in this regard. In particular, the Group depends on Orange for a portion of its network infrastructure and on Canal+
Group, with which the Group has entered into a number of contracts for the supply of content. See Chapter 7.6 “Major
contracts” in this Registration Document. The Group might not be able to renew these contracts or to renew then under
favorable terms.
The Group cannot guarantee rapid acquisition of the equipment, software, and services necessary for its business under
competitive terms and in appropriate quantities. If any of these risks materializes, technical problems could arise, the
Group’s reputation could be impaired, customers could be lost, and there could be a significant adverse effect on the
business of the Group, its financial position and its results of operations.
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2.2.7 The continuity of the Group’s services depends heavily on the
correct functioning of its IT infrastructure, and any failure of this
infrastructure could have a significant adverse effect on the
Group’s business, financial position and its operating results
The reliability and quality (both in terms of service as well as availability) of its information systems and networks,
particularly for the mobile and fixed businesses, are key components of the Group’s activities, the continuity of its
services, and the confidence of its customers. More specifically, the information systems used by the store network, the
network deployment, the production of the electronic and television communications, the website, and the Group’s
customer service could, if they are unavailable, significantly disrupt the Group’s business.
A flood, fire, or other natural disaster, or an act of terrorism, a power failure, or other catastrophe affecting a portion of
the Group’s network could have a significant adverse impact on its business and its relations with customers. Measures
designed to correct such disasters, maintain safety or protect service continuity that have been or may be taken in the
future by the Group could be insufficient to avoid generating losses. The Group is insured for operating losses up to a
capped amount. Any disaster or other damages affecting the Group’s network could result in significant losses not
covered by its insurance policies. The Group’s network may be subjected to disruptions and significant technological
problems, and such difficulties could escalate over time. For example, although the Group’s cable networks are generally
constructed of resilient equipment to ensure the network continues to be available in the event of damage to its
underground fiber, if the cable is cut twice in different locations, the transmission signals will not be able to pass through
the fiber, which could cause significant damage to the Group’s operations. In the event of a power outage or other
problem, we do not have an alternative power source for all components of the Group’s network. The occurrence of such
an event could cause interruptions in service or reduce capacity for customers, which could reduce the Group’s revenues
or mean that the Group must incur additional expenses. Moreover, the occurrence of such an event may expose us to
penalties or other sanctions levied by the regulators. In addition, the Group may incur costs and suffer losses of
revenues related to the unauthorized use of its network, including the administrative and financial costs related to the
uncompensated use of the network, and with the detection, surveillance and reduction of the impact of the fraud. Fraud
also has an impact on interconnection costs, capacity costs, administrative costs, and payments to other operators for
fraudulent roaming charges that cannot be invoiced.
In addition, the Group’s business depends on certain crucial systems, particularly its network operation center and its
billing and customer service systems. In particular, the support for a large number of systems critical to the network of
the Group is located at a relatively limited number of sites. While the Group does have highly developed backup
systems, the risk that these systems may not be sufficient to handle a spike in activity cannot be ruled out, which could
lead to a slowdown or unavailability of IT systems for a period of time and, when involving the B2B customers of the
Group, to financial penalties.
Moreover, the Group’s technical projects in progress, on both the IT systems and on the networks and migration plans,
planned in the short or medium term for certain equipment in the mobile network, could generate an increased risk of
failure in the networks and information systems. In particular, the quality of the networks could be impacted by the
deployment of the fourth generation (4G) network as well as by the concurrent work of renovating the second (2G) and
third (3G) generation networks, requiring, among other things, frequent technical interventions. Such work could also
generate breakdowns or interruptions in services for the customers of the Group.
Furthermore, the development of the resources used by consumers (for example, videoconferencing, telepresence, and
cloud computing for B2B customers), of connected objects, and of new terminals (smartphones, tablets, etc.) may
generate risks of saturating the networks due to the large volumes of data that such resources generate or promote. The
end-of-year period is an extremely sensitive sales period. A major failure of the information systems or of any component
of the chain of production and logistics during that period would have negative consequences on revenues. To prevent
this type of risk, the Group avoids working on the network and information systems during that period of the year (starting
in mid-November).
Although the Group follows an IT policy designed to secure its infrastructures, no guarantee can be given that the
Group’s servers and network will not be damaged by mechanical or electronic breakdowns, computer viruses, cyber
attacks, or other similar disruptions. The occurrence of one or all of these risks could have a material adverse impact on
the Group’s business, financial position, and operating results.
2.2.8 Data loss, data theft, unauthorized access and piracy could have
a material adverse effect on the reputation and business of the
Group, as well as on its liability, including criminal liability
The Group’s activities depend on the secure and reliable operation of its information systems. The technologies used to
obtain unauthorized access, deactivate or damage a service or sabotage systems change frequently and are often not
recognized before they are activated against their target. As a result, the Group could be unable to anticipate these risks
or implement effective and efficient counter-measures at the right time.
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If third parties attempt to threaten or succeed in threatening any of the Group’s information technology systems, or in
breaching its information technology systems, they might be able to divert confidential information, cause interruptions in
the Group’s activities, access services of the Group without paying, damage its computers, or otherwise damage its
reputation or its activities. While the Group continues to invest in measures aimed at protecting its networks, any
unauthorized access to its cable television services could cause a decline in revenue, and any inability to respond to
security threats could have consequences within the framework of the Group’s agreements with content providers. Such
consequences could have a significant negative effect on the Group’s business, operating results and financial position.
Moreover, as a provider of electronic communications services, the Group may be held responsible for the loss,
dissemination, inappropriate modification or the storage conditions of the data of its customers or of a broader
population, which are carried on its networks or stored on its infrastructures. Under these circumstances, the Group may
be held liable or be the target of litigation, penalties, particularly the payment of damages, as well as negative publicity,
that generate a negative impact on its activities, financial position, and operating results.
2.2.9 The Group may be held liable for content hosted on its
infrastructures or transmitted via its network
As a provider of mobile, Internet and hosting services, the Group may be held liable for claims because of the content
hosted on its infrastructures or transmitted via its networks (particularly those relating to violations against the press,
privacy, and copyright), and must therefore incur substantial defense costs, even if its responsibility is ultimately not
proven. The existence of such claims could also damage the Group’s reputation.
2.2.10 The Group’s business requires significant investment
expenditures
The Group’s business demands significant investment expenditures. In particular, the Group makes significant
investment expenditures for the deployment of new technologies such as 4G (for the purchase of frequencies and the
deployment of network infrastructures) for its mobile operations and the FTTB and FTTH technologies (for the
deployment of the infrastructure) for its fixed operations. The Group plans to continue to modernize and extend its
network to 12 million FTTH and FTTB connections by the end of 2017, 18 million FTTB and FTTH connections by late
2020, and 22 million FTTB and FTTH connections by the end of 2022.
The Group also continues to invest in the improvement of the quality of its mobile network and the expansion of its 4G
network. On November 24, 2015, through Decision 2015-1454, ARCEP selected SFR for the acquisition of 2*5 MHz in
the 700 MHz band. The authorization to use the frequencies was issued by ARCEP on December 8, 2015, Decision
2015-1569. At that date, the license was capitalized for €466 million (excluding spectrum readjustment costs). Since
frequency auctions are rare, and the Group may need additional frequencies in the future, we will probably participate in
the next frequency auctions, even if the Group does not need additional frequency at the time of the auction.
Participation by the Group would require substantial expenditures for assets in the short term because the acquisition of
frequencies is expensive and the availability of frequencies is limited. The Group also plans to continue to modernize and
expand the scope of its FTTH and FTTB network to reach 22 million FTTB and FTTH connections at the end of 2022.
The Group also continues to invest in improvements to the quality of its mobile network, and to expand its 4G network,
which it plans to extend to cover 90% of the French population by 2017.
In addition, the Group is required to adhere to certain commitments to the coverage and deployment of the network
under its mobile licenses, which also requires it to make significant and constant large investments.
Moreover, new usages and the use of multiple applications increase the bandwidth requirements, which could lead to a
saturation of the networks and require telecommunications operators to make additional investments to increase the
capacity of their infrastructures. The structure of the French telecommunications market does not allow
telecommunications operators to pass along their investment costs to the end consumer in proportion to the volume of
data consumed. Accordingly, telecommunications operators may not benefit from the revenues drawn from the growing
demand for content even though they bear the costs of such demand through their investments in infrastructure.
The Group is also bound by certain obligations for access and/or coverage for its FTTB/FTTH and/or mobile network,
particularly under its mobile licenses, such as obligations to allow roaming or share networks in certain deployment
zones. The conditions for the implementation of these obligations may be regulated and some prices are regulated, such
as roaming rates, within the European Union. Given such constraints, the Group may not be able to operate its network
under economically favorable conditions, which could affect the profitability of its investments.
Moreover, the Group’s loan agreements limit its ability to make investments. It cannot be guaranteed that the Group will
continue to have sufficient resources to maintain the quality of its network and of its other products and services and to
expand its network coverage, key elements for the growth of the Group over the long term. Unforeseen investment
expenses, an inability to finance them at an acceptable cost, or an inability to make profitable investments could have a
significant adverse effect on the business of the Group, its outlook, financial position or results of operations.
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2.2.11 The risks connected with the environment and exposure to
telecommunications electromagnetic fields are issues of public
concern
The Group operates several facilities classified by the government as ICPE (installation classée pour la protection de
l’environnement) in metropolitan France, particularly as its data centers. The Group remains attentive to the
environmental risks that might arise or be discovered in the future and it has adopted programs aimed at ensuring
compliance with the regulations applicable on the subject.
The Group operates within a context of public opinion concern about the possible health effects of electromagnetic
waves (emissions of radio frequencies through relay antennas, emissions of radio frequencies through mobile terminals,
Wi-Fi, etc.). Such concerns are expressed in numerous countries and arise in the context of the deployment of a fourthgeneration network (4G) by mobile operators.
The fears generated by the potential health risks connected with electromagnetic waves could also lead third parties to
act against the Group by, for example, bringing actions demanding the withdrawal of antennas or towers, which could
affect the Group’s conducting of operations and the deployment of the network, and could have a significant adverse
effect on the activities, the financial position, and the results of the Group. In addition, if it were ever proven that the
health risks described above exist, or that there is a deviation from radiation standards that would result in a health risk
from sites or other mobile or terminal technologies, this would have a major unfavorable effect on the Group’s activities
and financial position, including because of the exposure to potential liability.
2.2.12 Possible labor conflicts could disrupt the activities of the Group,
affect its image, or make the operation of its facilities more costly
As of December 31, 2015, the Group had 15,816 employees, some of whom are union members. The Group may have
to negotiate at length with unions and works councils, and may suffer strikes, labor conflicts, work stoppages, and other
labor action, and may also encounter difficulties in attracting and keeping staff due to local or general strikes. Strikes and
other labor action, as well as the negotiating of new collective bargaining agreements or wage negotiations, could disrupt
the activities of the Group and have a significant adverse effect on the business, financial position, and operating income
of the Group.
In addition, the Group is active in very competitive markets that are constantly evolving, thus requiring its constant pursuit
of adaptation, anticipation, and the adoption of new measures to preserve its competitiveness and its efficiency. This
entails regular changes in organizations, which requires adaptation on the part of the human resources involved. In
particular, this process demands an ability to mobilize skills and motivate and orient teams toward the objectives of the
Group. As a result, in such instance the activities of the Group may sometimes be affected by a deterioration of the labor
relations with its employees, staff representative bodies, or labor unions.
In this context, certain Group structures are having to consult their staff representative bodies, or will have to do so, in
order to successfully execute its current and future projects, which is likely to slow down the performance of certain
operations.
The Group also faces the risk of strikes called by employees of its main suppliers of equipment or services, as well as its
facility providers, the latter generally organized in regional unions, which could lead to interruptions in the services of the
Group. Although the Group pays particular attention to its labor relations, the Group cannot guarantee that labor conflicts
or difficulties in keeping its staff will not have a significant adverse effect on its business and, potentially, its results of
operations and its financial position.
2.2.13 The possible inability of the Group to protect its image,
reputation, and brand could have a significant adverse effect on
its business
The brands under which the Group sells its products and services, including Numericable, Completel, SFR, RED by
SFR, and related brands are brands recognized in France. In an effort to increase efficiency and simplify, the Group has
decided to focus on two brands in the future: SFR for the “all-inclusive” premium offers and Red for the “à la carte” digital
offers.
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2.2
These brands have been developed through extensive marketing campaigns, Internet promotions and customer
contacts, and the use of dedicated distribution networks and sales force. The Group’s success depends on its ability to
maintain and improve the image and reputation of its existing products and services, and to develop a positive reputation
and image for its new products and services. Any issues regarding (i) the quality, reliability, and the quality/price ratio of
its products and services, (ii) the quality of its call centers, or (iii) its ability to provide the level of service announced could
have a significant adverse effect on the image and reputation of the products and services of the Group. An event or
series of events that significantly threatens the reputation of one or more of the Group’s brands or of one or more of the
Group’s products could have a significant adverse effect on the value of such brand or such product, and on the revenue
that it generates. Restoring the image and the reputation of the products and services of the Group could be expensive
and may not always be possible.
The Group relies on copyright, trademark, and patent laws to establish and protect its intellectual property rights, but no
guarantee can be given that the measures it has taken or measures it intends to take in the future will be sufficient to
avoid infringement of its intellectual property rights. Bad publicity, a lawsuit, or other factors could significantly diminish
the value of the Group’s brand, which could lead to a decline in consumer demand and have a significant adverse effect
on the business, operating income, and financial position of the Group.
2.2.14 The loss of certain employees and key executives could be
detrimental to the business of the Group
The Group benefits from the work of experienced employees, both administrative and operational, who have a thorough
knowledge of its business, particularly the members of its Executive Committee. who have led the Group for several
years, and in the B2B segment, which is characterized by complex facilities and the importance of customer relations.
There can be no guarantee that the Group will succeed in keeping such employees or that it will recruit and train
adequate replacements without excessive cost and delay. As a result, the loss of any of these key employees could lead
to significant disruptions in the Group’s commercial activities, which could have a significant adverse effect on its
operating results. In addition, the Group has begun to simplify its organization and has developed operating synergies.
This transformation plan is creating a number of in-house mobility situations. There can be no guarantee that the Group
will not face dissatisfaction from its employees or the loss of personnel in the future. In 2015, the Group launched a
program to place a large percentage of its employees at the Saint Denis Campus.
2.2.15 Group employees may commit a wrongful act or conduct other
reprehensible activities that could damage the Group’s business
The Group is exposed to the risk of employee fraud including, but not limited to, salary fraud, falsification of expense
vouchers, thefts of cash, assets or intellectual property and falsification of accounts. Individual employees may also act
against the instructions or internal policies of the Group and accidentally or deliberately break the applicable law,
including the laws and regulations on competition, by conducting prohibited activities, such as price fixing or collaboration
with competitors in certain markets or customers. In addition, given that a number of operational responsibilities are
delegated to Group subsidiaries, and that the Group’s local executives enjoy significant autonomy in managing the
Group’s business in their markets, the Group could face a higher probability that the risks described above become
reality.
2.2.16 The Group is exposed to consumer fraud
As a telecommunications operator, the Group is exposed to a risk of fraud in its various activities. In particular, these
risks are related to fraudulent orders and subscriptions for the purchase of telephone lines and subsidized terminals. In
addition, a change in the use of mobile telephone services and applications in order to market new offers, and the
development of new payment methods, could encourage fraud.
Such fraudulent activities could have a significant negative effect on the Group’s business, financial position and
operating results.
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2.3
2.3
Risks relating to the financial structure and profile of the Group
Risks relating to the financial structure and profile of the
Group
2.3.1 The significant indebtedness of the Group could affect its ability
to finance its operations and its overall financial position
The Group currently carries a substantial amount of debt. As of December 31, 2015, the total financial liabilities of the
Group were €17.5 billion, following various debt increases in 2015. The Group’s significant indebtedness results in
negative consequences, including:
 requiring the Group to devote a significant portion of its cash flow deriving from its operations to the repayment of its
debt, thus reducing the availability of the Group’s cash flows for financing internal growth using working capital and
investments and for other general business requirements;
 damaging the Group’s ability to compete with other suppliers of pay-TV, high speed Internet services, fixed-line
telephone services, mobiles services and B2B services in the regions in which it operates;
 preventing the Group from taking advantage of opportunities or making acquisitions or investments;
 increasing the vulnerability of the Group to a business slowdown or to economic or industrial circumstances;
 limiting the Group’s flexibility in planning for or reacting to changes in its business and its sector;
 damaging public perception of the Group and its brands;
 limiting the ability of the Group to make investments in its growth, especially those aimed at modernizing its network;
and
 in particular, limiting the Group’s ability to borrow additional funds in the future and to increase the costs of such
additional financing, especially due to restrictive clauses in our current debt agreements.
These risks could have a significant adverse effect on the ability of the Group to repay its debts, as well as on its
business, results of operations and financial position.
2.3.2 As a holding company, the Company depends on the ability of its
operating subsidiaries to generate profits and service its debts.
Any decline in their profits could have a significant adverse effect
on the Group’s financial flexibility
The Company is a holding company that does business indirectly through operating subsidiaries. The Group’s operating
subsidiaries hold its assets, and nearly all of the profits and cash flows of the Group are allocated to them. If the profits of
these operating subsidiaries happened to fall, the profits and cash flows of the Group would be affected and the
subsidiaries involved might not be able to meet their obligations, particularly their debts, or to pay dividends to the
Company. The cash flows of the Company mainly derive from the receipt of dividends and interest, and repayment by its
subsidiaries of intra-group loans. The ability of the operating subsidiaries of the Group to make these payments depends
on economic and commercial considerations, as well as on any legal constraints that may be applicable, as the case
may be. In particular, the distribution of dividends by the Group is subject to compliance with certain restrictions,
including a financial ratio. Any decline in profits or an impossibility or inability on the part of the Group’s subsidiaries to
make payments to the other subsidiaries of the Group could have a significant adverse effect on the Group’s ability to
ensure the servicing of their debts and to meet its other obligations, which could have a significant adverse effect on the
activities, operating income, and financial position of the Group.
2.3.3 The Group may be unable to generate sufficient cash flows to
meet its obligations for servicing its debt
The ability of the Group to ensure the servicing of its debt and to finance its operations in progress will depend on its
ability to generate cash flows. The ability of the Group to generate cash flows and finance its expenses of investment,
operations in progress, and obligations in terms of servicing its debt depends on numerous factors, including:
 its future operating performance;
 the demand and price levels for its current and projected products and services;
 its ability to maintain the level of technical capacity required on its networks and the subscriber equipment and other
pertinent equipment connected to the Group’s networks;
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2.3
Risks relating to the financial structure and profile of the Group
 its ability to successfully introduce new products and services;
 its ability to reduce the churn rate;
 the general economic conditions and other circumstances affecting consumer spending;
 competition;
 sufficient distributable reserves, in accordance with applicable law;
 the outcome of certain disputes in which it is involved; and
 legal, tax, and regulatory developments affecting the Group’s business.
Some of these factors are beyond the control of the Group. If the Group is not able to generate sufficient cash flows, it
might not be able to repay its debt, to increase its business, to respond to competitive challenges, or to finance its other
cash and capital requirements, including investment expenditures. If the Group is not able to meet its obligations in terms
of debt servicing, it might have to sell off assets, attempt to restructure or refinance its existing debt, or seek additional
financing in the form of debt or equity. The Group may not be able to do so, or to do so in a satisfactory manner.
2.3.4 Restrictive clauses and the covenants relating to the Group’s
debt securities could limit its ability to pursue its activities, and
any breach by the Group could constitute default and have a
significant adverse effect on the Group’s financial position,
operating results and ability to continue operations
Debt securities issued by the Group contain restrictive clauses and covenants which, among other requirements, limit the
ability of the Group to:
 contract or secure any additional debt, subject to a test of Consolidated Net Leverage Ratio (the ratio is 4.0:1.0 for
the total debt and 3.25:1.0 for the secure senior debt);
 make investments (including participation in joint ventures) or other payments subject to restrictions (including
dividends);
 dispose of assets other than through the normal course of its operations, and subsidiaries’ equity instruments;
 conclude certain transactions with its affiliates;
 carry out mergers or consolidations;
 carry out an early repurchase or redemption of equity securities or of subordinated debt, or issue shares in
subsidiaries;
 enter into agreements limiting the ability of its subsidiaries to pay it dividends or repay intragroup loans and
advances; and
 create additional pledges or security interests.
The restrictions referred to above could affect the ability of the Group to do its business and could limit its ability to react
according to market conditions, or even to take advantage of potential commercial opportunities that may arise. For
example, these restrictions could affect the ability of the Group to finance its business, to make strategic acquisitions,
investments, or alliances, and to restructure its organization or finance its capital requirements. Moreover, the ability of
the Group to comply with these restrictive clauses can be affected by events beyond its control, such as economic
conditions and the circumstances in finance and the industry. A breach by the Group of any one of its commitments or
restrictions could lead to default under the terms of one or more of its debt securities and, if not remedied or waived,
could result in making the loan immediately payable, and thus ancillary defaults under other debt agreements. This could
lead to liquidation of security interests held by creditors and/or the bankruptcy or liquidation of the Group.
2.3.5 Despite its high level of debt, the Group and its subsidiaries will
be able to take on a significant amount of additional debt, which
could exacerbate the risks associated with the Group’s
substantial debt
The terms of the contract on the existing bonds, the contract on the existing term loans, and the Contract on the existing
renewable credit facilities limit the Group’s ability to contract additional debt, but do not prevent it. The Group may
refinance its debt, and it may increase its consolidated debt for different reasons, particularly to finance acquisitions,
finance accelerated redemption premiums, if any, within the framework of refinancing existing debt, finance distributions
to its shareholders or finance the Group’s activity in general. If new debt is added to the Group’s consolidated debt
described above, the related risks which the Group would then face would increase.
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2.4
Regulatory and legal risks
2.3.6 Negative changes in the Group’s rating could have a significant
adverse impact on its financial position
A rating decline could have an adverse impact on the ability of the Group to obtain financing from financial institutions, to
retain the confidence of investors and banks, and could increase the cost of financing of the Group by increasing the
interest rates at which the Group could be refinanced in the future or the interest rates at which the Group is able to
refinance its existing debt or take on new debt. In October 2015, the Group’s rating was downgraded by Moody’s from
Ba3 to B1.
2.4
2.4.1 Future regulatory changes could have a significant adverse effect
on its business
The Group’s business is subject to significant regulation and to oversight by various regulatory bodies at national and
European levels. Such regulation and oversight have a strong influence on the manner in which the Group conducts its
activities. Adherence to the laws and regulations in force, and those to come, may increase the overhead and operating
expenses of the Group, limit its ability to implement price increases, affect its ability to launch new services, force it to
change its marketing approach and its sales practices, and/or more generally reduce or limit its revenue.
In particular, the Group is subject to the French Postal and Electronic Communications Code, which imposes general
obligations on all operators, and obligations specific to mobile operators.
The national regulatory framework governing the operators is also implemented through relevant market analyses
conducted by ARCEP, which is charged with (i) defining the relevant markets in France; (ii) analyzing these markets and
identifying the companies deemed to exert significant influence on these markets; and (iii) whether to impose regulatory
obligations on these companies in order to correct identified competition problems.
The Group is not considered by ARCEP to be an operator that exerts significant influence over a relevant market, except
in the voice call termination markets on its fixed line and mobile network, like all the other operators. Nevertheless, it
cannot be guaranteed that the Group, in the future, will not be identified by ARCEP as an operator deemed to exercise
significant power on one or more relevant markets, nor that ARCEP will not therefore impose additional regulatory
obligations in this regard. For example, the possibility cannot be excluded that, in the future, particularly in the context of
a boom in FTTH networks, the Group may be required to grant competitors access to its FTTH and FTTB network, under
conditions to be determined.
The Group is also subject to individual obligations resulting from its frequency utilization licenses.
Although the Group monitors and watches the regulations to which it is subject, the weight of the regulatory burden on
telecommunications operators, including the Group, may change and may lead to the application of different obligations
for them that may be more or less significant or restrictive for certain operators because of changes in the technology
used to provide services, the level of ownership of direct access networks, and the market power. If the Group became
subject to regulations that are relatively more restrictive than for its competitors, this could have a significant adverse
effect on its business, operating results, or financial position.
Furthermore, as an electronic telecommunications operator and a distributor of television services, the Group is subject
to specific taxes. The burden of such taxes could increase in the future due to changes in legislation. In addition, the
Group cannot guarantee that additional taxes will not be instituted in the telecommunications industry.
The Group may also face legal and regulatory restrictions with respect to its marketing strategies. In a Ministerial Decree
,
of March 1 2016, French authorities imposed restrictions on the use of the term “fiber” in all advertising messages and/or
communications relating to “non-pure” optical fiber FTTH connections, including the FTTB connections used by the
Group. The Group intends to challenge the legality of the ministerial decree in the appropriate court. As a result, these
advertising messages and/or communications must contain an explanation of the specific technical features of the
connection technology. Futures restrictions on the Group’s ability to market its products or services in the way it would
like could have a material adverse impact on its business, operating results or financial position.
On April 30, 2016, the European Union imposed new cuts in mobile roaming rates within the EEE.
EU Regulation 531/2012, which set a Eurotarif for roaming, was amended in 2015 (Regulation (EU) 2015/2120) in order
to set new rates and roaming caps in the retail markets invoiced by mobile operators as of April 30, 2016, as well as the
conditions and viability of the total elimination of retail roaming costs as of June 15, 2017, which includes the coming
revision of wholesale caps. In addition, the Regulation introduces measures related to Internet Neutrality in the
regulations. A new roaming regulation dealing with the regulation of the wholesale markets is planned in June 2016.
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Risk factors
2.4
2.4.2 The legal status of the Group network is complex and, in some
cases, is subject to renewals or challenges
The Group’s telecommunications network is essentially composed of the physical infrastructure (conduits, headends,
switches and radiofrequency stations) in which the telecommunications equipment (primarily the cables) is installed.
These components of the Group’s network are subject to different legal systems. The Group owns only some land
parcels that house these physical infrastructures; as the infrastructure is established on public or private property, it has
signed concessions, easements, leases or IRUs with land owners.
In order to establish a substantial part of its telecommunications network and its wireless network, the Group has signed
public property occupancy agreements with public entities or holds public property occupancy permits. Under these
agreements or permits, the Group may install its network equipment along roads, highways, railways, or canals, for
example. No transfer of ownership takes place within this framework.
Such agreements are entered into for terms that vary greatly, from 3 to 25 years, and the agreements with the shortest
terms generally provide for tacit renewal. As is the case for all occupants of public property, the Group’s occupancy of
public property is always temporary and is by nature on a personal basis. The public entities with which the Group has
signed these agreements or which have issued these permit can thus terminate these public property occupancy
agreements at any time for misconduct or for reasons of public interest, and some of the agreements even exclude
compensation in such a case.
The Group does not have a right to renewal of such agreements. If the Group fails to obtain such a renewal, the
company in question would be obliged, at the expiration of these agreements, (i) to return the site to its original condition
at the request of the manager or owner of the public property involved (ii) and to transfer to the owner, in certain cases in
consideration for the payment of compensation and in some cases free of charge, ownership of the facilities established
on the property in question.
If the Group were to lose all or some of the rights relating to its network, this could have a significant adverse effect on
the activities, financial position, operating results or outlook of the Group.
2.4.3 The Group faces risks arising from the outcome
of various legal, administrative, or regulatory proceedings
In the normal course of business, the Group becomes a party to litigation and other legal proceedings, including
administrative and regulatory proceedings, and thus could be the subject of investigations and audits. Some of the
proceedings against the Group may involve claims for considerable amounts and may require that the general
management of the Group devote time to addressing such issues, to the detriment of managing the Group. Such
proceedings may result in substantial damages and/or may impair the reputation of the Group, which may result in a
decline in the demand for the services of the Group, which could have a significant adverse effect on its business. The
outcome of these proceedings and claims could have a significant adverse effect on its financial position, its operating
income, or its cash flows during the years when such disputes are decided or the sums possibly involved in them are
paid. The Group may also be exposed to proceedings that could involve its independent distributor partners, as other
telecommunications operators are so exposed.
The group is currently involved in certain disputes and proceedings. Any increase in the frequency or size of such claims
could have a significant adverse effect on the profitability and cash flows of the Group and could have a significant
adverse effect on its business, results of operations and financial position. For more information, see Section 2.7 “Legal
Proceedings and arbitration” in this document.
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Risk factors
2.4
2.4.4 Tax disputes and audits, adverse decisions by tax authorities, or
changes in tax treaties, laws, regulations, or the interpretations
thereof could have a significant adverse effect on the Group’s
operating results and cash flows
The Group has structured its commercial and financial activities in compliance with various regulatory obligations to
which it is subject, as well as in line with its commercial and financial objectives. To the extent that the laws and
regulations of the various countries in which the Group or the Group’s companies are located or operate do not establish
clear or definitive positions, the tax treatment applied to its activities or its intra-group reorganizations is sometimes
based on interpretations of French or foreign tax regulations. The Group cannot guarantee that such interpretations will
not be called into question by the competent tax administrations, which could have a significant adverse effect on the
financial position or results of operations of the Group. More generally, any breach of the tax regulations and laws of the
countries in which the Group or the Group’s companies are located or operate could result in adjustments or the payment
of late fees, fines or penalties. In addition, tax laws and regulations could change and could be subjected to changes in
their interpretation and in the application thereof. In particular, in the current macroeconomic environment, governmental
authorities could decide to increase tax rates, to eliminate existing tax exemptions, to expand tax bases, or to introduce
new taxes. As a result, the Group could undergo an increase in its tax burden if tax rates rise or if legislation or the
interpretation thereof by the administration changes.
The Group is exposed to the risk of a further increase in the VAT and might not be able to pass along such an increase,
in whole or in part, through subscription rates, and this would then have a negative impact on ARPU. Furthermore, any
partial or total passing along of a possible increase would expose the Group to a risk of an increased churn rate on the
part of its subscribers and could limit the recruitment of new subscribers. Such a development would be likely to have a
significant adverse effect on the activities, financial position, results of operations or outlook of the Group.
The Group pays a number of sector taxes, including the tax on electronic communications operators stipulated in Article
302 bis KH of the General Tax Code. As of January 1, 2016, the rate of this tax rose from 0.9% to 1.3%. To date, the
Group believes that the impact of the rate hike represents an additional charge of around 20 million euros per year, on
the basis of the figures in the 2016 budget.
For more information, see Section 2.7 “Legal Proceedings and arbitration” in this document.
2.4.5 French tax rules could limit the Group’s ability to deduct interest
for tax purposes, which could reduce the net cash position of the
Group
Article 209 § IX of the General Tax Code imposed restrictions on the deductibility of interest expense incurred by a
French company if this company has acquired shares of another company classified as “equity securities” as defined by
Article 219 §I of the General Tax Code, and if this absorbing company cannot demonstrate, during the years following
the twelve-month period after the acquisition of the shares, that (i) the decisions about these acquired shares are
effectively made by the company that acquired them (or, if applicable, by a company controlling the acquisition of the
company, or by a company directly controlled by this controlling company, as defined by Article L. 233-3 §I of the
Commercial Code), and (ii) when the control or influence is exerted over the company acquired, such control or influence
is exerted by the absorbing company (or, if applicable, by a company that controls the absorbing company, or by a
company directly controlled by this controlling company, as defined by Article l 233-3 §I of the Commercial Code).
Pursuant to Article 212 I (b) of the General Tax Code, the deductibility of the interest paid on loans made by a relatedparty as defined by Article 39.12 of the General Tax Code is subject to one specific requirement: if the lender is a party
related to the French borrower, the borrower must demonstrate, at the request of the French tax authorities, that the
lender is, for the year in question and for the interest in question, subject to a tax that amounts to at least 25% of the
corporate income tax determined in accordance with the French tax rules in force. If the lending company is domiciled or
established abroad, the tax on profits determined under the ordinary legal conditions means the tax for which it would
have been liable in France on the interest received if it were domiciled or established in France. Specific rules are
applicable when the lender is a company or group governed by Article 8 of the General Tax Code, an undertaking for
collective investment described in Articles L. 214-1 to L. 214-191 of the French Monetary and Finance Code (which
includes UCITS and alternative funds as well as other collective investment undertakings such as SICAV and SPPICAV
with a single shareholder) or, subject to certain conditions, similar entities organized under foreign laws.
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Risk factors
2.4
In addition, under current French rules on under-capitalization stipulated by Article 212-II of the General Tax Code, the
deduction of interest paid on loans made by a related party as defined by Article 39.12 of the General Tax Code, or on
loans made by third parties but guaranteed by a related party (a third party classified as a related party) may be subject
to certain limitations. In particular, the deduction of the interest paid on these loans may be partially rejected for the year
in which it is recognized if this interest simultaneously exceeds each of the following: (i) the amount of the interest
multiplied by the ratio of (a) 1.5 times the equity of the company and (b) the average amount of the debt owed to related
parties (or third parties classified as related parties) during the year in question; (ii) 25% of the company profits before
taxes and extraordinary items (adjusted for the purpose of these limitations), and (iii) the amount of the interest received
by the indebted company from related parties. The deduction may be refused for the interest portion that exceeds, in the
year in question, the highest of the three limitations above if this interest portion exceeds €150,000, unless the company
is able to demonstrate for the year in question that the consolidated debt ratio of the group to which it belongs is equal to
or greater than its own debt ratio. Specific rules apply to companies that belong to French tax consolidation groups.
In addition, Article 212 bis of the General Tax Code generally limits the deductibility of the net financial expense, which is
defined as the portion of the financial charges that exceed the financial income, recorded by companies that are subject
to the French corporate tax. Pursuant to this article, and subject to certain exceptions, the adjusted net financial charges
recognized by French companies that are subject to the French corporate tax and are not members of a French tax
group are deductible from their taxable earnings only up to 75% of the amount, to the extent that the net financial
charges of these companies are at least equal to €3.0 million for a given year. Pursuant to Article 223 B bis of the
General Tax Code, special rules apply to companies that belong to French tax consolidation groups. The 75% limit
applies to the net financial charges paid by the companies that are member of a French tax consolidation group related
to the amounts made available by the lenders outside this group, insofar as the consolidated net financial expenses of
the companies is at least equal to €3.0 million for a given year.
This limit deprived the Group of a base deduction option of around €152 million in 2014, and deprived the Group of a
base deduction option of around €156 million in 2015 (on the basis of the rules in effect and the information available on
the date of this document).
The impact of these rules on the ability of the Group to effectively take a tax deduction for the interest paid on loans
could increase the tax burden upon the Group and thus have a significant adverse effect on its results and financial
position.
2.4.6 The future results of the Group, French tax rules, tax audits or
litigation, and possible intra-group reorganizations could limit the
ability of the Group to use its tax losses and could thus reduce its
net cash position
The Group has significant tax deficits. The ability to effectively make use of such losses will depend on a combination of
factors, including (i) the ability to earn tax profits and the degree of matching between the level of such profits realized
and the level of the losses, (ii) the general limitation under the terms of which the percentage of tax losses that can be
carried forward and used to offset the portion of taxable profit exceeding €1 million at 50% for fiscal years ending from
December 31, 2012 as well as certain more specific restrictions on the use of certain categories of losses, (iii) the
consequences of present or future tax disputes or audits, and (iv) possible changes in applicable laws and regulations.
The impact of these factors could increase the tax burden upon the Group and thus have a significant adverse effect on
its cash position, the effective tax rate, the financial position, and the results of operations of the Group.
2.4.7 The introduction into French law of a class action open to
consumer protection associations could increase the exposure of
the Group to significant litigation
As of October 1, 2014, French law allows consumers to join a group action initiated by a consumer defense association
in order to obtain reparation for physical damages suffered during an act of consumption. Given the B2C activities of the
Group, in the event of a consumer challenge relating to products or services offered by the Group, the Group, like all
operators in the sector, could face potential class actions joined by many customers who would like to obtain reparation
for potential damages. In such a case, if possible practices and injuries are proven or even merely alleged, the Group
could face significant amounts in claims. Moreover, such actions could undermine the reputation of the Group.
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Risk factors
2.4
2.4.8 The Group is subject to requirements in terms of protection of
confidentiality and data security
Within the context of its business activities, the Group must collect and process personal data. The French Data
Protection Law of January 6, 1978 imposes obligations on the party responsible for the processing of data (that is, the
entity that determines the purposes of the data processing and the procedures for processing the data) involving the
personal data and information of individuals, obtaining their consent (especially for the use of cookies), and the
formalities of disclosing and transferring data outside of the European Union. Any breach of these obligations may lead
to criminal and financial penalties against the Group and damage its reputation. The French Data Protection Law also
requires that providers of electronic communications accessible to the public, such as the Group, give notice of any
breach in security. Violation of these obligations could lead to legal action against the Group.
In addition, on December 15, 2015, the European Commission, Parliament and the Council of Ministers signed an
agreement, the General Data Protection Regulation (GDPR). The GPDR is scheduled for official approval by the
institutions of the EU with publication in the Official Gazette in the first half of 2016. The GDPR would enter into effect
two years and twenty days after the date of publication. This regulation will have a major impact on the procedures and
the processing of personal data by the Group, and will significantly increase the sanctions that may be imposed on the
Group if the new laws are violated. These changes made to the regulations for processing personal data could have an
adverse impact on the Group’s activities, financial position and operating results.
The Group conducts a data hosting activity concerning the health of persons subject to consent, which makes it liable for
specific obligations stipulated by the Public Health Code, such as obtaining and maintaining an authorization. If the
Group breaches its obligations or fails to adhere to the requirements applicable to personal data processing, it may be
subjected to criminal and financial penalties likely to have a significant adverse impact on the activities, financial position,
and operating income of the Group.
In its judgment rendered on October 6, 2015 (known as the “Schrems Judgment”), the European Court of Justice
overturned the decision of the European Commission ruling that the transfer of European personal data to the United
States in the context of “Safe Harbor” provides an adequate level of protection. The following “Privacy Shield” agreement
recently negotiated by the representatives of the European Union and the United States has not yet been ratified by both
parties and, even if it is ratified, it could be overturned by a judgment of the European Court of Justice if the Court finds
that such an agreement does not guarantee adequate protection of European personal data. The potential illegality of a
transfer of European personal data to the United States could have an impact on the companies and results of the
Group.
Despite the measures adopted by the Group to protect the confidentiality and security of the data, there is still a risk of
possible attacks or hacks into the data processing systems, which could result in sanctions and damage the Group’s
reputation. The Group could be forced to incur additional costs in order to protect against these risks or attenuate the
consequences of these acts which, in turn, could have a material unfavorable impact on its activity, financial position,
operating results or outlook. In addition, any loss of trust by the Group’s customers as a result of such events could result
in a significant decline in sales and have a substantial unfavorable impact on the Group’s activities, financial position and
operating results.
2.4.9 The Group is dependent on its intellectual property rights, which
might not be adequately protected
The Group holds a significant and diversified portfolio of trademarks, patents, designs and patterns, and domain names.
The Group’s activities are based to a large extent on its intellectual property rights and the Group pursues an active
policy of protecting and managing them.
The Group holds (in full ownership or under license) registered trademarks and patents as well as applications for
trademarks and patents in the European Union, particularly in France, as well as outside the European territory (including
in the United States, Japan, and China). Like any party filing intellectual property rights, the Group could experience
difficulties in obtaining intellectual property rights due to possible prior art or conditions relating to the registration of the
relevant documentation. In addition, the Group cannot guarantee that filings made for obtaining intellectual property
rights will result in the issuance thereof, particularly in the case of dispute by third parties in the context of opposition or
nullification of rights proceedings. The rights obtained could also prove insufficient to ensure adequate protection or a
competitive advantage, such as exclusivity of exploitation.
The Group may depend on its employees or third parties regarding the ownership of certain intellectual property rights.
Certain essential intellectual property rights exploited by the Group within the context of its activities are and/or could
nevertheless be held by third parties that have granted the Group a license, the terms of which limit the Group’s
exploitation rights, and a breach of which could lead to significant litigation, particularly with respect to software. In
particular, certain licensing agreements contain clauses that could put an end to the exploitation of the rights involved in
the event of a change in control affecting the Group.
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2.4
Despite the Group’s efforts to protect its intellectual property rights, third parties could attempt to infringe upon them. The
Group might have difficulty effectively protecting its rights and preventing unauthorized uses thereof, particularly in
foreign countries, which could generate significant costs.
The Group could also be sued for infringement of the intellectual property rights of third parties, which could result in it
being ordered to cease exploitation and, if there is a judgment against it, pay the resulting damages. Moreover, the
telecommunications industry is characterized by a high concentration of intellectual property rights, which increases the
risk of litigation resulting from the Group’s activities on the basis of third-party prior rights. As a result, just like its
competitors and other companies that do business in sectors that require technological expertise, the Group is
particularly exposed to the risk of a procedure initiated by “patent trolls.”
An inability on the part of the Group to succeed in effectively protecting certain important elements of its intellectual
property rights and of its technology could have a significant adverse effect on the activities, financial position, results of
operations or outlook of the Group.
2.4.10 The Group might be unable to obtain, retain, or renew the
licenses and authorizations necessary to conduct its activities
Some activities of the Group depend on obtaining or renewing licenses issued by regulatory authorities, particularly
ARCEP in the telecommunications field and CSA (Conseil supérieur de l’audiovisuel, the French broadcasting regulator)
in the audiovisual field.
The procedure for obtaining or renewing such licenses can be lengthy and complex. In addition, these licenses may not
be able to be obtained or renewed. If the Group fails in a timely manner to obtain or retain the licenses necessary for
performing, continuing, or developing its activities, its ability to achieve its strategic objectives could be altered.
The acquisition of licenses also represents a high cost, the timing of which varies depending on when the frequencies
involved are auctioned. Furthermore, this cost could rise due to strong competitive pressure in the telecommunications
field. In addition, the Group may fail to be awarded the desired use licenses, which could have an adverse effect on the
activities, financial position, results of operations or outlook of the Group.
Moreover, under the licenses allocated to the Group’s subsidiaries, they have committed themselves to complying with
certain obligations (population coverage, sharing in some areas, roaming allowance). The Group is required to deploy a
third (3G) and fourth (4G) generation radio network, adhering to certain rates of coverage for the metropolitan population
according to a given timetable. Within the framework of its fourth generation (4G) licenses, if certain conditions are met,
the Group will eventually have to allow Free Mobile roaming on a portion of its 4G network. The Group will also, in
conjunction with other 800 MHz band holders and under its 2G license, have to provide coverage for the city centers
identified under the “white zones” plan, and accede to reasonable requests for sharing in a priority deployment zone. The
Group will also have to accede to reasonable requests to allow MVNOs throughout its very high speed mobile network
open to the public in Metropolitan France. A failure to adhere to any one of these commitments could put the Group at
risk under its regulatory obligations and possibly expose it to penalties (fines, total or partial suspension, or withdrawal of
license). This could have a significant adverse effect on the activities, financial position, results of operations or outlook
of the Group.
2.4.11 The Group’s business activities and their development depend on
the ability of the Group to enter into and maintain joint
arrangements with other players in the telecommunications
sector
2.4.11.1
Sharing Agreement between Bouygues Telecom and SFR
On January 31, 2014, SFR and Bouygues Telecom signed an agreement to share a portion of their mobile networks. The
agreement aimed to allow the two operators to offer their respective customers better geographic coverage and better
quality of service, while optimizing costs and investments made in this context.
The first deliveries of cell plans were on April 30, 2014. At this time, each operator read the deployment plans and
technical specifications of its partner’s sites for the first time. The French Competition Authority had prohibited the
exchange of technical information prior to the signing of the agreement, and the engineering guidelines had been
established on the basis of assumptions that proved to be incorrect in some cases. The discussions that followed upon
the initial deliveries of cellular plans led on October 24, 2014 to the adaptation of the agreement and, more specifically, of
some engineering choices that had been made when the initial agreement was signed. The target date for completing
the network was moved forward a year, from the end of 2017 to the end of 2018, to account for the time needed to make
these adjustments in the target network engineering.
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Risk factors
2.4
The Group could be exposed to various risks related to the implementation of the sharing agreement. The agreement
organizes the deployment of the shared network between two operators. Any delay in its implementation may affect the
ability of the Group to achieve the aforementioned objectives of geographic coverage and quality of service. The
implementation of the joint arrangement will also require significant investment expenditures.
The Group will be dependent upon Bouygues Telecom for the part of its network that it is to be responsible for
operations. In particular, it will not have any direct operational control over the portion of the network managed by
Bouygues Telecom that is to be shared. Therefore, the Group will not be able to control the quality of the network
provided to the customers involved or to steer the implementation of the work or corrective measures necessary in the
event of defect. In addition, the Group will be exposed to the risk of failure on the part of Bouygues Telecom.
The joint arrangement implemented could also fail to generate the expected synergies, especially in terms of geographic
coverage or quality of service.
In the event of partial or total cessation and/or failure of the joint arrangement, the Group would have to redeploy a
network in the zones covered up to that time by the Sharing Agreement so as to maintain its geographic coverage and
the quality of its services. Such redeployment could represent a major expense for the Group. Moreover, the Group
cannot guarantee that it will be able, in such a scenario, to implement coverage equivalent to that enjoyed by customers
under the sharing agreement.
The competent authorities may, in the future, make decisions jeopardizing the overall economics and/or validity of the
sharing agreement.
Finally, third parties may also seek to have access to the shared network and take action against the Group and its
partner. On April 29, 2014, Orange raised an issue with the French Competition Authority regarding the Sharing
Agreement, alleging that it constituted an anticompetitive practice. Investigations on the merits are currently underway.
2.4.11.2
Contract related to the the GSM-R mobile telecommunications network
The Group holds a 30% minority stake in the company Synérail, which has entered into an agreement for a joint
agreement with Réseau Ferré de France for the design, construction, deployment, operation, maintenance, and financing
of the GSM-R mobile telecommunications network. The GSM-R project aims to set up a private telecommunications
network dedicated to the needs of professionals in rail transport. It allows a European network to be built with a unique
communications system, which is compatible and harmonized between rail networks, to replace the existing national
radio systems. This contract, with a term of 15 years starting March 24, 2010 and for a total amount of €1 billion,
provides for the gradual deployment of this network. The Group also operates as a service provider in the operating
phase of the GSM-R network. Delays in deployment caused by the Group or the impossibility of achieving the targets
stipulated in the contract could put the Group at risk with respect to its contractual obligations to its key partners.
The occurrence of any one of the eventualities described above could have a significant adverse effect on the activities,
financial position, results of operations or outlook of the Group.
2.4.12 Risks specific to the national distribution network
The Group distributes its products and services that are meant for the general public and businesses directly or indirectly
through its national distribution network. Within the framework of B2C activity, such distribution occurs mainly under the
brand “Espace SFR,” Numericable. In an effort to increase efficiency and simplify, the Group has decided to focus on two
brands in the future: SFR for the “all included” premium offers and Red for the “à la carte” digital offers. For indirect
distribution of the SFR services, the Group relies on independent partners, in which it directly or indirectly holds majority
stakes.
The telecommunications market is characterized by rapid change in the habits and needs of customers with impacts on
marketing methods and the distribution networks (particularly the digitalization of the customer relationship). Therefore,
the Group is committed to adapting its distribution network accordingly in order to respond to new market characteristics.
However, some of the Group’s distributors may not be able or may not wish to implement the necessary adaptations,
which could thus lead to disputes.
In addition, the Group is facing disputes for significant amounts deriving from former or current partners, particularly
demands to reclassify a partnership agreement as a sale agent agreement, for indemnification because of the
termination of the commercial relationship, the application of the status of management employee, as well as demands
from their own employees for recognition of the Group’s status as employer and application of the employment status
applicable within the SFR ESU. Although the Group has already implemented policies to adapt its contract tools to avoid
such risks and management-adapted protection policies, it cannot guarantee that these claims will not increase or that
the factual or legal arguments presented by the Group to refute these allegations will be viewed favorably by the courts.
In particular, the Group may be required to apply its employment status outside its current ESU agreement. Such events
could have a negative effect on the Group’s distribution network and force the Group to modify it. More generally, it could
have a significant negative impact on the organization, business, financial position, operating results or outlook of the
Group.
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Risk factors
2.5
2.5
Market risks
Market risks
2.5.1 Currency risk
The Group is exposed to fluctuations in currency exchange rates. Revenues are recognized in euros; however, since the
Refinancing Operations carried out in the first half of 2014, the second half of 2015 and April 2016, the Group is now
exposed to currency risks within the context of its financing activities.
Given that the financial statements of the Group are presented in euro, the Group has to convert its debts into euro using
the exchange rate that is applicable at that time. As a result, fluctuation in the value of the US dollar against the euro may
affect the value of debt denominated in US dollars in its financial statements. At December 31, 2015, and March 31,
2016 respectively, the outstanding debt in US dollars amounted to US$12,239 million and US$12,231 million, excluding
accrued interest and excluding the deduction of the initial origination costs, and the Group’s debt in euros amounted to
€5,381 million and 5,401 million, excluding accrued interest and excluding deduction of the initial costs, the impact of the
EIR, the TSDIs, the debts connected with operations, and overdrafts if any.
The Group is also exposed to currency risk involving interest due in US dollars on its debt denominated in US dollars.
The Group is seeking to cover this exposure using derivatives. There can be no guarantee that the Group’s hedging
strategies will fully protect its operating income from the effects of currency exchange fluctuations or that these hedges
will not limit any gain that the Group might otherwise obtain from favorable movements in exchange rates.
At the time of each financing in US Dollars, the company signs various swap agreements with different counterparties to
cover all or some of the financial obligations related to the debt denominated in US Dollars. In 2015, the Company signed
four new groups of swap agreements:
 In July 2015, in consideration for a cash balance of USD111 million received by the Company in January 2016, the
Company receives the USD Variable Rate and pays the USD Fixed Rate for the periods 2019 to 2022 on the notional
of the 2022 and 2024 Dollar Bonds. There is an early termination clause in 2019. This is a rate swap entirely in US
dollars.
 In July 2015, the Company hedged the principal and interest of the new B5 USD Term Loan for USD550 million
 In October 2015, the Company hedged the principal and interest of the new B6 Term Loan for USD1,340 million
The last two instruments meet the Group’s need to hedge its financial expense in US dollars with payments in euros. The
first has the synthetic effect of modifying the structure of financial interest over 2019-2022 on the 2022 and 2024 Bonds.
The two 2022 and 2024 Bond swaps (contracted in 2014) transform the USD fixed-rate interest on the 2022 and 2024
Bonds into a EUR fixed-rate. The new fixed-variable swap on these two Bonds transforms the fixed-rate leg into a
variable rate. The combined effect of these two instruments implies that the Group pays a fixed rate in euros and
receives a variable rate in US dollars, while the underlying USD (the 2022 and 2024 Bonds) are fixed-rate.
As of December 31, 2015, 7 categories of currency cross swaps were contracted with twenty counterparties:
B6
1,397/1,010
1,203/870
550/498
1,340/1,184
6.25%
L+3.75%/
L+3.75%/
5.143%
5.383%
E+4.210%
E+4.210%
Max(L; 0.75%)
+ 3.25%/
Max(E; 0.75 %)
+ 2.730 %
Max(L; 0.75%)
+ 4.00%/
E+ 4.130%
April 30, 2015
April 30, 2015
April 30, 2015
May 21, 2014
April 30, 2015
August 3, 2015
November 10,
2015
August 15/
February 15
August 15/
February 15
August 15/
February 15
July 31
October 31
January 31
April 30
July 31
October 31
January 31
April 30
July 31
October 31
January 31
April 30
July 31
October 31
January 31
April 30
May 15, 2019
May 15, 2022
May 15, 2022
May 15, 2019
May 15, 2019
July 31, 2022
January 31,
2023
At five years,
termination
clause in favor
of the banks
At five years,
termination
clause in favor
of the banks
2024 Dollar
Bond
2,400/1,736
4,000/2,893
1,375/994
Dollar Leg/
4.875%/
6.0%/
Euro leg
4.354%
Date of 1st swap
Coupon payment
date
Final swap date
Special clause
Term Loan
B5 Term Loan
2022 Dollar
Bond
USD M/EUR M
Notional
Refi Term
Loan
Non-Refi
Term Loan
2019 Dollar
Bond
At five years,
At five years,
termination
termination
clause in favor clause in favor of
the banks
of the banks
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2
Risk factors
2.5
Market risks
At December 31, 2015, 2 categories of fixed/variable swaps in US dollars were contracted with twenty counterparties:
Notional USD M
Variable/Fixed
Date of 1st swap
Coupon payment date
Final swap date
Special clauses
For the two instruments
2022 Bond
2024 Bond
4,000
1,375
L +2.03%/6.00%
L+2.28%/6.25%
May 15, 2019
May 15, 2019
August 15/November 15/
February 15/May 15
August 15/November 15/
February 15/May 15
May 15, 2022
May 15, 2022
(i) As of May 10, 2019, termination clause in favor of the banks
(ii) Payment of a total cash balance of USD 111 million on January 15, 2016
These contracts meet the following main objectives:
Hedge of interest and principal payments with 2019 maturity and 2022/2023 maturity
in US dollars
The purpose of the cross-currency swap agreements is to hedge the euro/US dollar exchange rate risk associated with
the interest payments and repayments of principal to be made in US dollars for the bonds and bank loans. Under the
terms of these swap agreements, the Group will swap amounts in euro for the amounts in US dollars to be paid on each
semi-annual or quarterly interest payment date, based on an exchange rate of €1.00 = $1.3827 for the debts set up in
2014 (the Bonds and Refi and Non-Refi Term Loans), on the basis of an exchange rate of €1.00 = $1.1041 for the USD
B5 Term Loan of July 2015 and on the basis of an exchange rate of €1.00 = $1.1318 for the USD B6 Term Loan of
October 2015.
The swap agreements for the bonds hedge the interest payments up to May 15, 2019 for the 2019 Dollar Bonds (final
payments), May 15, 2022 for the 2022 Dollar Bonds (final payments), and the 2024 Dollar Bonds. The swap agreements
for the draws in US Dollars for the Refi and Non-Refi Term Loans hedge the quarterly interest payments until May 21,
2019. The swap agreements for the draws in US dollars for the USD B5 and B6 Term Loans respectively hedge the
quarterly interest payments up to July 31, 2022 (at maturity of the underlying debt) and January 31, 2023 (at maturity of
the underlying debt).
The Group also used these swap agreements to hedge the principal of these bonds and bank borrowings in dollars:
 On May 15, 2019, Numericable-SFR will pay €1,736 million and receive US$2,400 million corresponding to the
principal on the 2019 bonds, and will pay €1,880 million and receive US$2,600 million corresponding to the principal
of the bank loan, even though this matures in 2020.
 On May 15, 2022, Numericable SFR will pay €2,893 million and receive US$4,000 million corresponding to the
principal of the 2022 bonds, and will pay €994 million and receive US$1,375 million corresponding to the principal of
the 2024 bonds, although the bond does not mature until May 2024.
 On July 31, 2022, Numericable-SFR will pay €498 million and receive US$550 million representing the principal on
the borrowings of the USD B5 Term Loan.
 On January 31, 2023, Numericable-SFR will pay €1,184 million and receive US$1,340 million representing the
principal of the borrowings of the USD B6 Term Loan.
It should be noted that the counterparties of Numericable-SFR in the hedge contract benefit from an early termination
clause at the end of five years for the eight-year hedge contracts, i.e. for the interest and principal of the 2022 and 2024
bonds in dollars, and for the seven-year hedge agreements, i.e. for the interest and principal of the term debt maturing in
2022 and 2023. The counterparties to these swaps may unilaterally terminate the hedge before maturity and have
Numericable-SFR pay or pay to Numericable-SFR (depending on the market conditions on that date) the cash balance of
the contract.
The establishment of the USD B6 Term Loan with conditions more favorable for the lenders than the conditions of the
USD B5 Term Loan resulted in an increase of 0.562% in the margin of the USD B5 Term Loan. This margin difference
generates interest in US dollars and was not hedged. The Group’s risk on the interest in US dollars is not entirely
hedged.
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2
Risk factors
2.5
Market risks
Hedging of LIBOR-based interest payments
In addition to the two objectives described above, the hedging instruments convert its LIBOR exposure for
the draws in US dollars under the Term Loans into EURIBOR.
The Group’s risk is not, however, entirely hedged, since the draws in US dollars under the Term Refi and Non-Refi Term
Loans originated in May 2014 bear interest at the LIBOR rate plus a margin, subject to a floor of 0.75% on the LIBOR,
while the swap agreements do not include this floor. However, the swaps on the last two Term Borrowings (July 2015
and October 2015) hedge the 0.75% floor on the LIBOR against the EURIBOR with or without a floor at 0.75% of the
paying leg.
Securities and guarantees
The swap contracts described above are secured and benefit from the same securities as those granted for the bonds
and bank loans.
Impact of these Swaps on the consolidated financial statements of the Group
There are two types of swap agreements entered into by the Group:
 The swaps on the Bonds have been classified as cash flow hedging because they correspond exactly to the flows
from the underlying bonds. The effective portion of the change in fair value of these derivatives is posted against
items of other comprehensive income. It is reflected in income when the item hedged affects income. These swaps
include exchange rate hedge and interest rate hedge items. On December 31, 2015 and March 31, 2016
respectively, these instruments had a fair value in the Group’s favor of €1,377 million, then €1,044 million excluding
accrued interest. This fair value breaks down into a foreign exchange element with a fair value in our favor of
€1,518 million, then €1,206 million at March 31, 2016, and a rate effect with a fair value against the Group of
€142 million, then €163 million at March 31, 2016. The portion in the Group’s favor is recognized as financial income
in order to offset the foreign exchange loss on the Bonds. On the other hand, at December 31, 2015 and then at
March 31, 2016, the fair value of these financial instruments related to the rate hedge components was recognized as
other items of comprehensive income in the amount of €129 million, then €154 million at March 31, 2016, i.e. it was
recognized in shareholders’ equity. The Group also recorded the deferred tax on these instruments in other items of
comprehensive income, i.e. recognized it in equity for €49 million at December 31, 2015, and for €53 million at March
31, 2016.
 The swaps on the Term Loans were posted as natural hedging (Fair Value category through profit and loss according
to IAS 39). The difference in recognition compared to the bonds is connected with the variable nature (variable rates)
of the underlying (Term Loans). These derivatives are accordingly posted at their fair value on the balance sheet, and
changes in value impact income. As at December 31, 2015, the fair value of these financial instruments (which also
include two items, that is, an exchange rate component and an interest rate component) was recognized as financial
income of €562 million excluding accrued interest, thus favorably impacting the Group’s net income.
The following table shows the face values and (negative) fair values of the swaps at December 31, 2015:
Fair value
Fair value
Notional
(including accrued
interest)
(excluding accrued
interest)
2019 Bonds
1,736
(430)
(418)
2022 Bonds
2,893
(740)
(714)
2024 Bonds
994
(253)
(244)
1,880
(260)
(259)
Amount
(in € millions)
2020 “refi” loan
2020 “non-refi” loan
872
(225)
(223)
2022 loan
498
1
2
2023 loan
1,184
(5)
(4)
TOTAL
9,186
(1,915)
(1,860)
A positive (negative) fair value indicates an amount in favor of the banks (of the Group).
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2
Risk factors
2.5
Market risks
2.5.2 Interest rate risk
The Group is exposed to the interest rate risk. Changes in these rates could have an adverse impact on the servicing of
its debt.
The Group is exposed to the risk of fluctuations in interest rates, mainly under the Term Loans, which are indexed to the
European interbank offered rate (“Euribor”) or, for loans denominated in dollars, to the London interbank rate (“LIBOR”),
plus an applicable margin. In 2015, the Group was exposed to the LIBOR over the period from 2019-2022 by making two
fixed-variable swaps in US dollars on the notional amount of the 2022 and 2024 Bonds in consideration for the payment
of a cash balance in January 2016. In effect, the income from these swaps is variable (LIBOR + a margin) while the 2022
and 2024 Bonds are fixed-rate. These swaps hedge only the period from 2019-2022.
In addition, any amount that the Group borrows under the Renewable Credit Facilities will bear interest at a floating rate.
An increase in interest rates applicable to the Group’s debt will reduce the funds available to repay its debt and to finance
its operations and investment expenditures. Although the Group can resort to various derivative instruments to manage
its exposure to interest rate movements, there is no assurance that it will be able to continue to do so at a reasonable
cost.
In order to cover its exposure to the risk of fluctuations in the LIBOR (which applies to the portion of the Term Loan
denominated in US dollars), the Group has entered into swap agreements (which cover its exposure to fluctuations in the
EUR/USD exchange rate and in the LIBOR), converting its exposure to LIBOR into exposure to EURIBOR. The Group
has adopted different strategies on its Term Loans. The loans established in 2014 have a LIBOR hedge (the Group
receives) vs. EURIBOR (the Group pays). The 2022 Term Loan has a LIBOR hedge (the Group receives), with a floor at
0.75%, vs. EURIBOR (the Group pays), with a floor at 0.75%. Finally, the 2023 Term Loan has a LIBOR hedge (the
Group receives), with a floor at 0.75%, vs. EURIBOR without a floor (the Group pays).
At December 31, 2015 and March 31, 2016, the Group had no contracts hedging its risk of exposure to fluctuations in the
EURIBOR rate. The EURIBOR could significantly increase in the future, resulting in an additional interest burden upon
the Group, reducing the cash flows available for investments, and limiting its ability to meet debt servicing for certain of
its debt securities.
A 50 basis point rise (fall) in the EURIBOR at the period-end date would result in an approximately €10 million increase
(decrease) in the cost of debt.
It should be noted that the Group’s counterparties to the hedging contracts benefit from an early termination clause at the
end of five years for the eight-year hedging contracts, i.e. those relating to the interest and principal on the 2022 Dollar
Bonds and 2024 Dollar Bonds. These counterparties may unilaterally terminate the hedge contract three years before
maturity and demand payment by Numericable-SFR (depending on the market conditions on that date) for the cash
balance of the contract (at the time of termination of the contracts) for the swaps. Likewise, the hedges established in
2015 on the two new Term Loans contain these early termination clauses. These clauses allow the Group’s
counterparties to be paid the cash balance of the contract by Numericable-SFR in 2020. The early payment possibilities
create a liquidity risk; the Group can probably contract new swaps under the market conditions at the time of such a
termination.
As of December 31, 2014, the Group’s exposure to variable-rate debt amounted to €4,047.0 million and the Group’s
exposure to fixed-rate debt amounted to €9,064.30 million. As of December 31, 2015, the Group’s exposure to variablerate debt amounted to €7,231.3 million and the Group’s exposure to fixed-rate debt amounted to €9,604.30 million. The
increase is due to (i) the appreciation of the US dollar against the euro and (ii) the financing from the new Term Loans in
July and October 2015.
The Group has entered into interest rate swap agreements and interest rate cap (caps) agreements in the past, and it
plans to continue to do so as needed. No guarantee can be given as to the ability of the Group to satisfactorily manage
its exposure to interest rate fluctuations in the future or to continue to do so at a reasonable cost.
2.5.3 Liquidity risk
The Group manages liquidity risk by using tailored reserves, bank lines of credit, and reserve borrowing facilities with
constant monitoring of cash flow projections and actual cash flows as well as by achieving a match with the best profiles
for the maturities of financial assets and liabilities.
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2
Risk factors
2.5
Market risks
The Group is also exposed to the risk that it will have to pay the amount corresponding to the mark-to-market value of its
eight-year hedge contracts, under which the counterparties of Numericable-SFR benefit from an early termination clause
at the end of five years, i.e. for the interest and principal of the 2022 Dollar Bonds and the 2024 Dollar Bonds. Those
counterparties may unilaterally terminate the hedging agreement three years before its maturity and have NumericableSFR pay (depending on the market conditions at such time) the mark-to-market value (at the time when the agreements
are terminated) for the swaps. Likewise, the hedges set up in 2015 on the two new Term Loans contain these early
termination clauses. These clauses allow the Group’s counterparties to be paid the cash balance of the contract by
Numericable-SFR in 2020. The early payment possibilities thus create a liquidity risk; the Group can probably contract
new swaps under the market conditions at the time of such a termination.
The Bonds and the Term Loans are “covenant light,” meaning that these debts do not have financial clauses that are
periodically tested, but only financial clauses tested at the time of specific events (asset disposal, financing new debt,
payment of dividends, etc.).
The Group also has revolving credit lines in the amount of €1,125 million. As of December 31, 2015, €450 million had
been drawn on this line. At March 31, 2016, €475 million were drawn on this line.
The availability of these revolving credit lines is governed by covenants and other normal commitments.
The following table shows the different maturities for the Group’s financial liabilities:
Maturity
(in € millions)
Less than one
year
Bonds
Bank loans
Between one and 5
years
More than 5
years
Total as of
December 31, 2015
173
2,131
7,174
9,478
80
4,199
2,402
6,680
Derivative Instruments
-
87
-
87
Revolving Credit Line
1
450
-
451
31
34
1
66
Finance lease debt
Perpetual subordinated notes (“TSDI”)
Other financial liabilities(1)
Deposits received from customers
-
-
43
43
418
16
-
434
14
121
-
135
7,037
9,620
17,500
Bank overdrafts
126
TOTAL FINANCIAL LIABILITIES
842
126
The following table presents the Group’s current financial rating:
Moody’s
S&P
B1 (stable)
B+ (stable)
2.5.4 Credit and/or counterparty risk
The credit and/or counterparty risk represents the risk that a party to a contract with the Group may breach its contractual
obligations, resulting in a financial loss to the Group.
Financial instruments that could expose the Group to concentrations of counterparty risk consist primarily of trade
receivables, cash and cash equivalents, investments, and derivative financial instruments. Overall, the carrying amount
of financial assets recognized in the consolidated financial statements, net of impairment, represents the Group’s
maximum exposure to credit risk.
The Group believes that it has very limited exposure to concentrations of credit risk relating to trade receivables by virtue
of its vast and diverse customer base (government entities and consumer market) operating in many industries
throughout France.
The Group’s policy is to invest its cash, cash equivalents, and investment securities with financial institutions and
industrial groups with a long-term rating of A-/A3 or above. The Group enters into interest rate contracts with leading
financial institutions and currently considers that the risk of a breach by its counterparties of their obligations is extremely
low, considering the fact that their credit ratings are monitored and that the financial exposure for each of these financial
institutions is limited.
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2.6
Insurance
Insurance
The Numericable-SFR Group carries general civil liability insurance and insurance covering property and operating
losses which contain coverage exclusions and deductibles. The Group is not insured against certain operational risks for
which no insurance exists or which can be insured only under terms that the Group considers unreasonable. Nor is there
any protection against the risks connected with the recovery of trade receivables. The Group also carries insurance
policies covering the risks related to vehicle fleets.
Through its parent company Altice, the Group is covered by insurance policies that cover the civil liabilities of its
corporate offices, which contain coverage exclusions and deductibles.
The Group considers that the existing insurance coverage, including the amounts covered and the conditions of
insurance, provides the Group adequate protection against the risks run by the Group in the zones where it operates,
considering the cost of such insurance and the potential risks to the pursuit of its activities. However, the Group cannot
guarantee that it will not suffer any loss or that no legal action will be brought against the Group that may not be covered
within the scope of the existing insurance.
2.7
Legal and arbitration proceedings
The Group is involved in legal, administrative, or regulatory proceedings that have arisen during the ordinary course of its
business.
A provision is recorded by the Group when there is a sufficient probability that such disputes will lead to costs that the
Group will bear and when the amount of these costs can be reasonably estimated. Certain Group companies are
involved in some disputes related to the ordinary activities of the Group. Only the most significant litigation and
proceedings in which the Group is involved are described below.
The Group is not aware of any governmental, legal, or arbitration proceedings (including any proceedings of which the
Group is aware that are pending or threatened) other than those described below in this section that may have or have
had significant effects on the financial position or profitability of the Group in the last twelve months.
2.7.1 Tax disputes
NC Numericable
The French tax authorities have conducted audits of various Group companies since 2005 with respect to the VAT rates
applicable to our multi-play offerings. Under the French General Tax Code, television services are subject to a reduced
VAT rate of 5.5%, which was increased to 7% as of January 1, 2012 and to 10% on January 1, 2014, while Internet and
telephony services are subject to the normal VAT rate of 19.6%, which increased to 20% on January 1, 2014. When
marketing multi-play offerings, the Group applies a price reduction on the price the Group would charge for these
services on a stand-alone basis. This discount is primarily applied to the portion of its multi-play offers corresponding to
its Internet and telephony services; the television service is the principal offer of the audited companies. As a result, the
VAT charged to the Group’s multi-play subscribers is lower than if the discount applied to the television portion of its
packages or if it were prorated on all services.
The French tax authorities assert that these discounts should have been calculated pro rata of the stand-alone prices of
each of the services (television, broadband Internet, fixed-line and/or mobile telephony) included in the multi-play
packages of the Group, and proposed adjustments for fiscal years 2006 to 2010.
The Group has also received proposed adjustments for fiscal years 2011 and 2012 for NC Numericable, Numericable
and Est Vidéocommunication primarily affecting the application of the VAT on the multi-play offers, despite the change in
rules on January 1, 2011 that supports the Group’s practice in this area. On February 1, 2016, the Department of
National and International Audits (DVNI) sent an audit notification to the Company concerning the years ended
December 31, 2013 and December 31, 2014 for the first mission set for February 22, 2016
The Group is disputing the entirety of the additional assessments proposed for the amounts provisioned below, and has
initiated appeals and challenges, which are at various stages depending on the years in question.
The proposed additional taxes are provisioned in the financial statements at December 31, 2015 and the period ended
March 31, 2016 for the amount of €40.5 million.
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SFR
In a proposed adjustment received on December 23, 2014, the tax authorities have contested the merger of Vivendi
Telecom International (VTI) and SFR dated December 12, 2011 and therefore intend to challenge SFR’s inclusion in the
Vivendi tax consolidation group for fiscal year 2011. The tax authorities thus intended to tax SFR separately from the
Vivendi tax consolidation group, leading to a corporate tax of €711 million (principal) plus late interest and surcharges
amounting to €663 million, for a total adjustment of €1,374 million. It should be noted that, under the agreement signed
on February 27, 2015 by Vivendi, Altice France and Numericable-SFR, Vivendi agreed to repay to SFR, if applicable, any
taxes and levies charged to SFR for fiscal year 2011, which SFR had already paid to Vivendi at the time, subject to a
maximum €711 million, if the 2011 merger of SFR and VTI is ruled invalid for tax purposes.
The Group believes it has strong legal grounds to defend the merger. The Group has petitioned the Legal Abuse
Committee on this question.
At the same time, an accounting audit of the years 2012 and 2013 led the tax authorities to make various adjustments in
the principal amount of the corporate tax.
The Group is disputing all of the proposed reassessments planned in the amounts provisioned below (with the exception
of a CICE assessment in the amount of €62,000) and has initiated appeals and dispute proceedings, which are at
different stages, depending on the fiscal year in question.
The assessments are provisioned in the financial statements at December 31, 2015 and March 31, 2016 in the amount
of €59.5 million.
2.7.2 Civil and commercial disputes
2.7.2.1 Wholesale disputes
Complaint by Bouygues Telecom against SFR and Orange regarding the wholesale market in
mobile call termination and the retail market in mobile telephony
The French Competition Council received a complaint from Bouygues Telecom against SFR and Orange claiming that
the latter were engaged in anticompetitive practices in the mobile call termination and mobile telephony markets. On May
15, 2009, the French Competition Authority decided to postpone its decision and remanded the case for further
investigation. On August 18, 2011, SFR received a complaint claiming unfair pricing. On December 13, 2012, the
Competition Authority fined SFR €66 million for abuse of dominant position, which SFR has paid.
SFR appealed the decision. The case was heard by the Paris Court of Appeals on February 20, 2014. The Paris Court of
Appeals rendered its judgment on June 19, 2014, dismissing SFR’s appeal (the judgment was appealed to the Court of
Cassation by SFR on July 9, 2014; on October 6, 2015, the Court of Cassation rejected SFR’s appeal) and asked the
European Commission to provide an Amicus Curiae to shed light on the economic and legal issues raised by the case.
The Court of Appeals postponed ruling on the merits of the case pending the Commission’s opinion. The Court issued its
opinion on December 1, 2014, which was not favorable to SFR. The hearing on the merits of the case was held on
December 10, 2015. The Court of Appeals rendered its judgment on May 19, 2016. The Court of Appeals confirmed the
judgment, but reduced the amount of the fine to €52 million.
As a result of the French Competition Authority decision of December 13, 2012, Bouygues Telecom, OMEA and EI
Telecom (NRJ Mobile) brought suit against SFR in the Commercial Court for damages. In accordance with the
transaction between SFR and Bouygues Telecom in June 2014, the closed hearing of the conciliation proceedings was
held on December 5, 2014. The motion for discontinuance granted on September 11, 2014 ended the legal action
between the two companies. With respect to the claim by OMEA (€67.9 million) and EI Telecom (€28.6 million), SFR
applied for stay on a ruling pending the decision of the Paris Court of Appeals, and obtained it. OMEA filed its pleadings
for withdrawal at a hearing of the Paris Commercial Court on May 24, 2016. The Court noted OMEA’s withdrawal
pending the withdrawal judgment expected at the end of June 2016.
Claim by Mundio Mobile against SFR
Mundio Mobile, an MVNO on the SFR network, brought claim in the form of a surprise filing against SFR on November 5,
2014 in the Paris Commercial Court. Mundio Mobile is claiming €63.6 million in damages from SFR. Mundio Mobile
accuses SFR of unfair practices under the MVNO contract (by launching the offer of its former subsidiary Buzz Mobile).
Mundio is also challenging certain aspects of the contract, including its pricing terms. Following the summons for adding
Numericable-SFR, the Court authorized the joining of the two cases on March 9, 2016.
Complaint against Orange filed with the French Competition Authority (NRA ZO)
On December 9, 2009, SFR and SFR Collectivités filed a complaint with the French Competition Authority against
,
Orange for unfair practices. SFR withdrew its action on October 1 2015.
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As part of this complaint, on June 18, 2013, SFR sued Orange in the Paris Commercial Court for damages. SFR is
seeking €50 million in damages subject to adjustment from Orange. On February 3, 2014, Orange requested a stay on a
ruling until the decision of the French Competition Authority; SFR did not oppose it.
SFR’s lawsuit and complaint against Orange in the Paris Commercial Court (call termination - call
origination)
On February 22, 2010, SFR filed suit against Orange seeking cancellation of the price for Orange call origination for the
period 2006-2007 and replacement with a lower rate of 2% for 2006 and 15% for 2007. On June 25, 2013, all of SFR’s
claims were dismissed. On July 25, 2013, SFR appealed the Commercial Court ruling. On December 4, 2015, the Court
of Appeals dismissed SFR’s claim. On March 14, 2016, SFR filed an appeal.
Complaint by Orange Réunion, Orange Mayotte and Outremer Telecom against SRR and SFR
DIFFERENTIAL ON-NET/OFF-NET PRICING IN THE MOBILE TELEPHONY MARKET IN MAYOTTE AND
REUNION
Orange Reunion, Orange Mayotte, and Outremer Telecom filed a complaint with the French Competition Authority in
June 2009, alleging unfair differential on-net/off-net pricing by SRR in the mobile telephony market on Mayotte and
Réunion, seeking conservatory measures from the Competition Authority.
On September 15, 2009, the French Competition Authority announced interim measures against SRR, pending its
decision on the merits. SRR had to discontinue any price spread exceeding its actual “off-net/on-net” costs in the network
concerned.
As the French Competition Authority found that SRR had not fully complied with its injunction, it fined SRR €2 million on
January 24, 2012.
In the proceedings on the merits, with regard to the “Consumers” component of the case, SRR requested and obtained a
“no contest” on the complaints on July 31, 2013. On June 13, 2014, the Authority rendered its decision for the
“Consumers” component of the case, fining SFR and its subsidiary SRR €45.9 million.
NON-RESIDENTIAL MOBILE TELEPHONY MARKET IN MAYOTTE AND REUNION
The SRR premises were raided and records seized on September 12, 2013. The operation focused on the nonresidential mobile telephony market in Réunion and Mayotte and was also in response to the complaint filed by Outremer
Télécom.
SRR appealed to the Senior Justice of the Saint-Denis Court of Appeals of Réunion against the decision authorizing the
operation and a second appeal against its procedure. On June 13, 2014, the Senior Justice of the Saint-Denis Court of
Appeals of Réunion handed down an order rescinding all the seizures at SRR in September 2013. The Competition
Authority appealed this order.
With respect to the proceedings on the merits, the Competition Authority on February 12, 2015 sent a notice of
complaints to SFR and SRR, who decided not to dispute the complaints. A notice of non-dispute was signed on April 1,
2015. A session in front of the Authority Board was held on September 15, 2015. On November 30, 2015, the French
Competition Authority fined SRR (and SFR as the parent company) €10.8 million.
COMPENSATION DISPUTES
Following the Competition Authority’s decision of September 15, 2009 (interim measures) and pending the Authority’s
decision on the merits, on June 17, 2013 Outremer Telecom filed suit against SRR and SFR in the Commercial Court
seeking remedy for the loss it believes it suffered as a result of SRR’s practices.
Outremer Telecom is claiming €23.5 million in damages subject to adjustment for unfair practices by SRR in the
consumer market in mobile telephony on Réunion and Mayotte, and €1 million as damages in full for unfair practices by
SRR in the business market in mobile telephony on Réunion and Mayotte.
In a ruling on November 13, 2013 the Court granted SRR and SFR a postponement until the Competition Authority‘s
decision, or until an order by the Senior Justice of the Court of Appeals of a stay of execution of the Competition
Authority’s decision.
On May 10, 2016, Outremer Telecom sent a notice of withdrawal from the proceeding, subject to the court’s approval.
On October 8, 2014, Orange Réunion sued SRR and SFR jointly and severally to pay €135.3 million for the loss suffered
because of the practices sanctioned by the Competition Authority. To date, the merits of the case have not yet been
heard and various procedural incidents have been raised, on which a judgment is awaited. On May 27, 2016, estoppel
pleadings were held before a full court (withdrawal of SFR, future injury, and time limit). The Court will render its
judgment on these points by the end of June 2016.
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Complaint against Orange to the Competition Authority regarding the market in mobile telephony
services for businesses
On August 9, 2010, SFR filed a complaint against Orange with the Competition Authority for anticompetitive practices in
the business mobile telephony services market.
On March 5, 2015, the Competition Authority sent a notice of complaints to Orange. Four complaints were filed against
Orange. On December 17, 2015, the Authority ordered Orange to pay a fine of €350 million.
At the same time, SFR filed suit against Orange in the Commercial Court and is seeking €512 million euros in damages
subject to adjustment as remedy for the loss suffered as a result of the practices in question in the proceedings with the
,
Competition Authority. On May 1, 2016 an update hearing was held after the case was refiled. On April 12, 2016, SFR
filed its summary pleadings. Orange’s pleadings are expected on June 21, 2016.
Orange suit against SFR in the Paris Commercial Court (overflows case)
Orange filed a claim on August 10, 2011 with the Paris Commercial Court, asking the Court to order SFR to immediately
cease its unfair “overflow” practices and to order SFR to pay €309.5 million in contractual penalties. It accused SFR of
deliberately organizing overflows onto the Orange network for the purpose of economically optimizing its own network
(underdesigning the Primary Digital Block (PBN)). In a ruling of December 10, 2013, the Court ordered SFR to pay
Orange €22.1 million. SFR and Orange both appealed the ruling. On January 16, 2015 the Paris Court of Appeals upheld
the Commercial Court’s ruling and SFR paid the €22.1 million. SFR also petitioned the District Court enforcement judge
on August 11, 2014, who issued his decision on May 18, 2015, ordering SFR to pay €600,000 (payment of the fine
corresponding to 118 abusive overflows).
SFR suit against Orange: abuse of dominant position in the second homes market
On April 24, 2012, SFR filed a complaint against Orange with the Paris Commercial Court for practices abusing its
dominant position in the retail market for mobile telephony services for non-residential customers.
On February 12, 2014, the Paris Commercial Court ordered Orange to pay to SFR €51 million for abuse of dominant
position in the second homes market.
On April 2, 2014, Orange filed an emergency motion against SFR with the Senior Justice of the Paris Court of Appeals to
suspend the provisional enforcement. This motion was denied by the Chief Justice on July 4, 2014.
On April 2, 2014, Orange appealed the decision of the Commercial Court on the merits. On October 8, 2014, the Paris
Court of Appeals overturned the Paris Commercial Court’s ruling of February 12, 2014 and dismissed SFR’s requests.
The Court of Appeals ruled that it had not been proven that a pertinent market limited to second homes actually exists. In
the absence of such a market, there was no exclusion claim to answer, due to the small number of homes concerned.
On October 13, 2013, SFR received notification of the judgment of the Paris Court of Appeals of October 8, 2014 and
repaid the €51 million to Orange in November 2014. On November 19, 2014, SFR appealed the ruling. A hearing was
held before the Court of Cassation on March 8, 2016. On April 12, 2016, the Court of Cassation overturned and canceled
the judgment rendered by the Paris Court of Appeals on October 8, 2014. Orange must return €52.7 million to SFR.
SFR suit against Orange (non-unbundled areas)
On November 26, 2012, SFR filed a complaint with the French Competition Authority for abuse of dominant position in
the retail market for high speed Internet access in non-unbundled areas. On October 1,2015, SFR withdrew its petition.
Orange suit against SFR and Bouygues Telecom (Sharing Agreement)
On April 29, 2014, Orange applied to the French Competition Authority to disallow the agreement signed on January 31,
2014 by SFR and Bouygues Telecom to share their mobile access networks, based on Article L. 420-1 of the French
Commercial Code and Article 101 of the Treaty on the Functioning of the European Union (TFEU). In addition to this
referral, Orange asked the Competition Authority for a certain number of interim measures against the companies
involved.
In a decision dated September 25, 2014, the Competition Authority dismissed all of Orange’s requested interim
measures to stop SFR and Bouygues Telecom from implementing the agreement that they had signed to share part of
their mobile networks.
The Competition Authority ruled that “no serious and immediate harm to the general economy, the sector, consumers or
the plaintiff can be described based on the section of the agreement relating to network sharing or from the 4G roaming
capability associated with it.”
Orange appealed the Competition Authority’s decision to dismiss its request for interim measures.
The Court of Appeals upheld this decision on January 29, 2015. Orange is now appealing the matter to the Supreme
Court.
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Claim by Bouygues Telecom against Numericable, Completel, and NC Numericable
In late October 2013, Numericable, Completel and NC Numericable received a claim from Bouygues Telecom regarding
the “white label” contract signed on May 14, 2009, initially for five years and extended once for an additional five years
for the supply to Bouygues Telecom of double and triple play very high speed offers. In its letter, Bouygues Telecom
claimed damages totaling €53 million because of this contract. Bouygues Telecom alleges a loss that, according to
Bouygues Telecom, justifies damages including (i) €17.3 million for alleged pre-contractual fraud (providing erroneous
information prior to signing the contract), (ii) €33.3 million for alleged non-performance by the Group companies of their
contractual obligations and (iii) €2.4 million for alleged damage to Bouygues Telecom’s image. The Group considers
these claims unfounded both in fact and in contractual terms and rejects both the allegations of Bouygues Telecom and
the amount of damages claimed.
On July 24, 2015, Bouygues Telecom filed suit against NC Numericable and Completel concerning the performance of
the contract to supply very high speed links. Bouygues Telecom is accusing NC Numericable and Completel of abusive
practices and contractual faults, and is seeking nullification of certain provisions of the contract and indemnification of
€79 million. The next procedural hearing will be held on June 21, 2016 for the filing of opposing arguments or designation
of the reporting judge
2.7.2.2 Consumer Disputes
CLCV complaint against SFR
On January 7, 2013, the consumer association CLCV filed a complaint against SFR in the Paris Commercial Court.
CLCV claimed that some of the clauses in SFR’s general terms of subscription, and those of some other telephone
operators, were unfair. It also asked for compensation for the collective harm inflicted. The Paris Regional Court ruled
that the clauses were unfair. On April 15, 2015, SFR appealed the judgment, declaring that some of the clauses
submitted were abusive.
Free suit against SFR: unfair practices for non-compliance with consumer credit provisions in a
subsidized offer
On May 21, 2012, Free filed a complaint against SFR in the Paris Commercial Court. Free challenged the subsidy used
in SFR’s “Carrés” offers sold over the web between June 2011 and December 2012, claiming that it constituted a form of
consumer credit and, as such, SFR was guilty of unfair practices by not complying with the consumer credit provisions, in
particular in terms of prior information to customers. Free asked the Paris Commercial Court to require SFR to inform its
customers and to order it to pay €29 million in damages. On January 15, 2013, the Commercial Court dismissed all of
Free’s requests and granted SFR €0.3 million in damages. On January 31, 2013, Free appealed the decision. On March
9, 2016, the Paris Court of Appeals upheld the lower court ruling and allocated the sum of €0.5 million in damages to
SFR.
SFR suit against Iliad, Free and Free mobile: unfair practices by disparagement
In June 2014, SFR filed a complaint against Iliad, Free and Free Mobile in the Paris Commercial Court for unfair
competition, claiming that when Free Mobile was launched, as well as afterwards, Iliad, Free, and Free Mobile were
guilty of disparaging SFR services. On September 11, 2015, Free filed its arguments.
Disputes regarding the transfer of customer call centers from Toulouse, Lyon and Poitiers
Following the transfer of customer call centers from Toulouse and Lyon to the company Infomobile and the Poitiers call
centers to a subsidiary of the Bertelsmann Group, the former employees at those sites filed legal actions at Human
Rights Tribunals in each city to penalize what they claim were unfair employment contracts constituting fraud under
Article L. 1224-1 of the French Labor Code, as well as under the legal provisions regarding dismissal for economic
reasons. The 2013 rulings were mixed as the Toulouse Court of Appeals penalized SFR and Téléperformance in half of
the cases, while the Lyon and Poitiers courts ruled in favor of SFR. The cases are now at different procedural stages:
Labor Tribunal, Court of Appeals and Court of Cassation. On June 18, 2014, the Court of Cassation upheld the decision
of the Toulouse Court of Appeals (which went against SFR) and dismissed the appeal against the decision of the Poitiers
Court of Appeals.
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Litigation over distribution in the independent network (Consumer market and SFR Business
Team)
The Group, as is the case for other companies operating an indirect distribution model, faces complaints from a certain
number of its distributors, and almost routinely from former distributors. Such recurring complaints revolve around claims
of sudden breach of contractual relations, unfair economic dependency, and/or demands for requalification as a sales
agent as well as, more recently, demands for requalification as a contractual branch manager and requalification as SFR
contracted point of sale staff. SFR, after receiving four adverse judgments by the Court of Cassation regarding the status
of branch manager, was recently successful in various Courts of Appeals. Regarding the requalification of employment
contracts and sales contracts in these disputes, despite rare exceptions, SFR received favorable judgments.
Free suit against SFR
In July 2015, Free filed suit against SFR in order to stop it from using the word “Fiber,” claiming that the solution
marketed by SFR is not a fiber to the home (FTTH) solution; Free considers SFR’s communication to be deceptive about
material qualities and, on that basis, is asking the court to find there is parasitism and unfair competition. The case is in
the trial preparation phase.
Familles Rurales suit against SFR
In May 2015, Familles Rurales filed suit against SFR in the Paris Regional Court in the context of a class action seeking
remedy for the loss allegedly suffered by consumers, claiming deceptive sales practices used by SFR in its
communications about 4G. The case is in the trial preparation phase.
2.7.2.3 Other disputes
In-depth inquiry of the European Commission into the assignment of cable infrastructures by
certain local authorities
On July 17, 2013, the European Commission signaled that it had decided to open an in-depth investigation to determine
whether the transfer of public cable infrastructures between 2003 and 2006 by several French municipalities to
Numericable was consistent with European Union government aid rules. In announcing the opening of this in-depth
investigation, the European Commission indicated that it believes that the sale of public assets to a private company
without proper compensation gives the private company an economic advantage not enjoyed by its competitors, and that
it therefore constitutes state aid under the rules of the European Union and that the free-of-charge transfer of the cable
networks and ducts by 33 French municipalities to Numericable, according to its estimates, confers a benefit of this type
and, as such, is government aid. The European Commission has expressed doubts about the compatibility of the alleged
aid with the rules of the European Union. The Group firmly denies the existence of any state aid. In addition, the decision
to open an investigation concerns a relatively small number of network connections (approximately 200,000), the majority
of which have not been migrated to EuroDocsis 3.0 and allow access only to a limited number of the Group’s television
services. The European Commission’s decision of July 17, 2013 was published in the Official Journal of the European
Union on September 17, 2013. Since then, discussions have continued within the framework of this process both in
terms of comments from third parties as well as those from the parties to the proceedings as to the allegation of the
existence and extent of aid, with the Group firmly challenging the existence of any government aid.
Dispute with Orange concerning certain IRUs
The Group signed four non-exclusive IRUs with Orange on May 6, 1999, May 18, 2001, July 2, 2004 and December 21,
2004 in connection with the Group’s acquisition of certain companies operating cable networks built by Orange. These
cable networks, accessible only through the civil engineering installations of Orange (mainly its ducts), are made
available to the Group by Orange through these non-exclusive IRUs. Each of these IRUs covers a different geographic
area and was signed for a term of 20 years.
Following ARCEP’s decision 2008-0835 of July 24, 2008, Orange published, on September 15, 2008, a technical and
commercial offer made to telecommunications operators allowing them access to the civil engineering infrastructures of
the local wire-based network, pursuant to which the operators can roll out their own fiber networks in Orange’s ducts.
The terms of this mandatory technical and commercial offer are more restrictive than the terms that the Group enjoys
under the Orange IRUs.
As a result, in December 2011, Numericable and Orange signed amendments to the IRUs in order to comply with the
November 4, 2010 ARCEP decision and to align the operating procedures set out in the IRUs with the procedures set out
in the Orange general technical and commercial offer.
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Lastly, Numericable initiated parallel proceedings against Orange before the Commercial Court of Paris on October 7,
2010 claiming damages of €2.7 billion for breach and modification of the IRUs by Orange. On April 23, 2012, the
Commercial Court of Paris ruled in favor of Orange and dismissed the Group’s claims for damages, ruling that there were
no material differences between the original operational procedures and the new operational procedures imposed on
Numericable by Orange under the terms of its general technical and commercial offer, published on September 15, 2008.
Numericable appealed this decision before the Paris Court of Appeals. Numericable claimed the same amount of
damages as it had in the Paris Commercial Court. Orange, in turn, claims that this proceeding materially impaired its
brand and image, and is seeking an order to make Numericable pay damages of €50 million. In a ruling dated June 20,
2014, the Paris Court of Appeals dismissed Numericable’s appeal, which was referred to the Court of Cassation on
August 14, 2014. On February 2, 2015, the Court of Cassation overturned the ruling of the Paris Court of Appeals,
except in that it recognized NC Numericable’s interest in acting, and referred the case back to the Paris Court of
Appeals.
Action by Colt, Free and Orange in the General Court of the European Union concerning the DSP
92 project
Colt, Free and Orange, in three separate motions, filed suit against the European Commission before the General Court
of the European Union seeking to annul the European Commission’s final decision of September 30, 2009 (Decision No.
C (2009) 7426), which held that the compensation of €59 million granted for the establishment and operation of a high
speed electronic communications network in the department of Hauts-de-Seine does not constitute government aid
within the meaning of the rules of the European Union. The Group is not party to this proceeding. Its subsidiary
Sequalum is acting as the civil party, as well as the French government and the department of Hauts-de-Seine. In three
rulings dated September 16, 2013, the General Court of the European Union rejected the requests of the three
applicants and confirmed the aforementioned decision of the European Commission. Free and Orange have appealed to
the Court of Justice of the European Union.
Litigation between Sequalum and CG 92 regarding DSP 92
A dispute arose between the Hauts-de-Seine General Council (“CG92”) and Sequalum regarding the terms of
performance of a utilities public service concession contract (“THD Seine”) signed on March 13, 2006 between
Sequalum, a subsidiary of the Group, and CG92; the purpose of this delegation was to create a very high speed fiber
optic network in the Hauts-de-Seine region. The CG92 meeting of October 17, 2014 decided to terminate the public
service delegation agreement signed with Sequalum “for misconduct by the delegatee for which it is solely responsible.”
The CG92l demanded the payment of penalties totaling approximately €45 million for delays, advanced by the sole
delegator and disputed by Sequalum, in the deployment of fiber optics and connections to buildings.
The order for payment was contested in a motion in the Administrative Court of Cergy Pontoise on September 3, 2014.
Its enforcement and the payment of the sums requested have been suspended pending a ruling on the merits.
On May 7, 2015, the CG92 sent a second demand for an order for payment in the amount of €51.6 million, orders
disputed by Sequalum on July 11, 2015.
Sequalum claims that the termination was unlawful and is continuing to perform the contract, subject to any demands
that the delegator may impose. Should the competent courts confirm this interpretation, Sequalum may have to repay the
public subsidies received for the DSP 92 project, normally the outstanding component of the subsidies (the company
received €25 million in subsidies from the CG92). In turn, the department of Hauts-de-Seine received the returnable
assets of the DSP on July 1, 2015. Furthermore, the CG92 will also have to pay compensation to Sequalum in an
amount essentially equal to the net value of the assets.
On October 16, 2014, Sequalum filed a motion in the Administrative Court of Cergy Pontoise to have the public service
delegation rescinded on the grounds of force majeure in the form of irreversible disruption of the contract economics.
At December 31, 2015, the assets were removed from Sequalum’s accounts in the amount of €116 million. Income
receivable in the amount of €139 million related to the expected indemnification was also recognized, an amount fully
provisioned given the situation.
The Group states that it also has its own fiber optics in the department of Hauts-de-Seine to service its customers.
Furthermore, the revenues generated by DSP 92 account for a relatively immaterial percentage of Group revenues.
Operations, inspections and seizures
By Order of March 25, 2015, the Nanterre District Court authorized the rapporteur-general of the Competition Authority to
conduct inspections and seizures in order to find proof of actions prohibited by Article L 430-8-II of the Commercial Code
and any evidence of such actions before the authorization of the concentration of Numericable-SFR, Omea Telecom and
SFR. On April 9, 2015, the Group appealed the authorization of the Regional Court of Nanterre and filed an appeal
against the inspection and seizure operations with the Senior Justice of the Court of Appeals of Versailles. The Court
deferred the case to November 24, 2016. It is understood that the opening of such an inquiry by the Competition
Authority does not in any way prejudice the results that may be issued by the Authority.
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Social, environmental, and societal information
Scope
3
Social, environmental, and
societal information
Scope ......................................................................................................................................... 107
Methodology of the non-financial information process ........................................................ 111
Organization of internal control ............................................................................................... 113
3.1 Informations sociales ...................................................................................................... 113
3.1.1 Trends and highlights
113
3.1.2 Social indicators
113
3.2 Environmental information ............................................................................................. 128
128
3.2.2 Environmental indicators
128
3.3 Societal information ........................................................................................................ 136
136
3.3.2 Societal indicators
136
3.4 Cross-reference table(s) .................................................................................................. 147
Report by one of the Statutory Auditors, appointed as independent third party, on the
consolidated human resources, environmental and social information included in the
management report ......................................................................................................... 156
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Scope
In November 2014, the merger between SFR SA and Numericable Group resulted in the Numericable-SFR Group, which
is striving to become the French leader in very-high-speed and content, and to adopt a sustainable development process
for its activities.
This last portion of the report presents the initiatives and results of our sustainable development process, which concerns
the following main issues:
 Consumer protection;
 Controlling environmental impacts;
 Employee development and satisfaction;
 Societal commitment.
This information addresses topics of the decree implementing Article 225 of the so-called Grenelle II Law.
Scope
Under Article 225 of the Grenelle 2 Law, the Numericable-SFR Group is required to publish non-financial information in
its management report, and to have that information verified by an independent third party entity that has been
accredited by COFRAC.
The scope of reporting aims to represent the Group's significant activities. It is determined each year with the Legal
Division. The subsidiaries included under the scope of the non-financial reporting are companies subject to Global
Integration (GI), in the sense of financial consolidation, that have an operating activity and dedicated personnel.
For the fiscal year ended 12/31/2015, the target scope is as follows:
 Numericable-SFR SA,
 SFR SA,
 SFR Service Client SA,
 SFD SA,
 Cinq sur Cinq SA,
 SRR SCS,
 SFR Collectivités SA,
 Futur Telecom SAS,
 2SIP SAS,
 NC Numericable SAS,
 Completel SAS,
 SFR Business Solutions SAS,
 Omea Telecom SAS,
 SMR SAS,
 LTI Telecom SAS.
Due to non-representative figures in terms of workforce and/or revenues, certain companies were excluded:
For the social segment: Numericable-SFR SA and SMR SAS
For the environmental segment: Numericable-SFR SA, LTI Telecom SAS and SMR SAS
For the societal segment: Numericable-SFR SA
Some information is included within the scope of the SFR ESU (Economic and Social Unit), which is comprised of: SFR
SA, SFR Service Client SA, SFR Collectivités SA and SRR SCS.
For this first year of consolidated reporting at the Group level, some indicators do not cover 100% of this scope. In order
to determine the breakdown by indicator, please refer to the cross-reference table at the end of Appendix 1.
Due to the recent merger, the information published for the new Group is calculated for 2015 only, and thus cannot be
compared to previous years with regard to this new scope.
Indicators were prepared according to their pertinence vis-a-vis the Group's activities, in conformity with the Grenelle II
Law and with the goal of objectively quantifying and/or qualifying its social, environmental and societal impacts.
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Scope
The diagrams below represent the coverage rates of the indicators, with regard to the revenues of each of the
subsidiaries concerned:
Summary of social scope
Coverage rate
Total workforce and distribution of employees by
sex and age
100%
Anti-discrimination policy implemented and
New hires and terminations
measures taken
90%
Policy implemented and measures taken to
promote the employment and integration of
people with disabilities
80%
70%
Compensation and compensation development
60%
50%
Policy implemented and measures taken to
promote gender equality
40%
Organization of work time
30%
20%
10%
Total number of hours of training
Training policies implemented
Work accidents, in particular their frequency and
severity, as well as occupational illnesses
Overview of agreements signed with union
organizations or staff representatives regarding
occupational health and safety
Absenteeism
Structure of the social dialogue, in particular
employee information and consulting procedures,
and negotiations with employees
Overview of collective bargaining agreements
Occupational health and safety conditions
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3
Scope
Summary of environmental scope
Provisions for environmental risks
CO2
100%
Hazardous waste
Emissions from Corporate Fleet
90%
CO2
80%
Non-hazardous waste
Emissions from business travel
70%
60%
CO2
Energy Emissions
50%
Business WEEE produced
40%
30%
20%
Fuel consumption
Household WEEE collected
10%
Corporate fleet
Integration of landscape
Other energies
Water
Fossil fuels
Electrical energy
Paper
Consumption of logistical
raw materials
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3
Summary of societal scope
For regional jobs and development
100%
Actions taken to promote human
rights
90%
80%
Local or resident populations
70%
60%
50%
40%
Measures taken to promote
consumer health and safety
30%
20%
Conditions of the dialogue with
these persons or organizations
10%
Actions taken to prevent
corruption
The importance of subcontracting
and consideration in relations with
suppliers and subcontractors of
their social and environmental
responsibility
Partnership or sponsorship
programs
Consideration of the social and
environmental issues in relation to
the purchasing policy
A detailed scope by subsidiary is presented at the end of Appendix 1.
The non-financial reporting process of the Group was carried out with regard to the requirements of Article R225-105-1 of
the Commercial Code. The reporting period is based on a calendar year (from January 1 to December 31) in accordance
with the company's fiscal year.
Organization of internal control
Reporting is monitored by the CSR Coordination Unit within the Human Resources Division, in cooperation with the
Secretarial Office and the Financial Affairs Division.
A common, dedicated tool for reporting social, environmental and societal data allows data to be collected at all of the
consolidated subsidiaries of the Numericable-SFR Group and at certain subcontractors. The IT tool also facilitates
internal control procedures and consistency controls and makes them more reliable.
This tool is used by Coordinators, Operators and Correspondents to collect, control and consolidate data. If necessary,
users receive specific training in its use.
This tool contributes to the precision of the reporting, accuracy and traceability of consolidated data. It facilitates the
internal control procedures and allows data reported by a site or subsidiary to be compared with the source data that is
archived and available at the level of these sites or subsidiaries. The flexibility of this tool also allows monitored
indicators to be developed and regulatory and organizational changes to be taken into account.
The consolidation of information is organized around a map of the Divisions and contacts in charge of the information to
be collected within all of the Group's subsidiaries.
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3
It relies on a clear definition of each contributor's responsibilities, which are divided as follows:
 the Controller, who guarantees the exhaustive nature and truthfulness of the data;
 the Coordinator, who ensures that the Operators' roles and responsibilities are well understood for each social,
environmental and societal topic;
 the Operator, who ensures that the data disclosed is complete, consistent and accurate;
 the Correspondent, who collects the supporting data and documents.
Protocol
A reporting protocol was defined in order to cover all of the Group's subsidiaries for social, environmental and societal
matters. It references and defines all of the non-financial indicators and specifies their methods of collection and control.
The goal of the protocol is to ensure the reliability and uniformity of the data collected. It is made available during the
external data check.
The protocol serves as a reference for the various coordinators and contributors of the subsidiaries and must be applied
by all contributors involved in monitoring the indicators and associated data. It should allow each person to understand
how the data is obtained (scope, calculation methodology, estimate, source, etc.).
The principles used in this protocol, as well as the list of indicators, are consistent with:
 the guidelines of the Global Reporting Initiative (GRI4 and the “Telecommunications” sector supplement),
 the Bilan Carbone® method defined by Association Bilan Carbone, in collaboration with France's Environment and
Energy Management (ADEME) to measure greenhouse gas emissions.
The Reporting Protocol will be revised in the event of a substantive change in the structure, indicators and/or regulations.
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3.1
Social information
The establishment of the Numericable-SFR Group in late 2014 resulted in several projects throughout 2015 relating to
organizational changes, which greatly mobilized employees and social partners. As of 2015, the signing of three “group”
agreements with social partners, which attests to the dynamic nature of social dialogue at the Group level.
3.1.2 Social indicators
3.1.2.1 Jobs
The indicators of the social chapter concern the following companies: SFR SA, SFR Service Client SA, SFD SA, Cinq
Sur Cinq SA, and, grouped within the line for Other subsidiaries, SFR Collectivités SA, SFR Business Solutions SAS,
2SIP SAS, SRR SCS, NC Numericable SAS, Completel SAS, LTI Telecom SAS, Futur Telecom SAS, OMEA Telecom
SAS. SMR and Numericable-SFR, which represent 0.49% of the total workforce, are not included in the social indicators,
as they fall outside of the scope of application of the agreements. The Group workforce is entirely based in France, 2.6%
of which is outside mainland France.
3.1.2.1.1
Total workforce and distribution of employees by sex and age
Total employees registered as of 12/31/2015 - Distribution by sex
Subsidiaries
Total
Men
Women
16,168
9,770
6,398
SFR SA
6,764
4,321
2,443
SFR SC SA
1,703
825
878
SFD SA
2,655
1,437
1,218
Cinq sur Cinq SA
1,557
857
700
Other subsidiaries
3,489
2,330
1,159
TOTAL NC-S FR GROUP
The workforce includes employees who are contractually connected to the company as of 12/31 of Year N, under a permanent or fixed-term, apprenticeship
or professional training contract, who are counted as individuals. Interns and temporary employees representing 1.1% of the total workforce as of
12/31/2015 are not taken into account in this indicator.
The group workforce is comprised of 60.4% men and 39.6% women.
Total workforce as of 12/31/2015 - Distribution by age group
Subsidiaries
Total
under 30
30-49 years
50 and older
16,168
3,331
11,006
1,831
SFR SA
6,764
725
4,864
1,175
SFR SC SA
1,703
280
1,293
130
SFD SA
2,655
1,152
1,428
75
Cinq sur Cinq SA
1,557
570
942
45
Other subsidiaries
3,489
604
2,479
406
TOTAL NC-S FR GROUP
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3.1.2.1.2
New hires and terminations
Number of new hires
Subsidiaries
New hires
TOTAL NC-S FR GROUP
2,808
SFR SA
428
SFR SC SA
95
SFD SA
1,395
Cinq sur Cinq SA
547
Other subsidiaries
343
New hires concern permanent, fixed-term, apprenticeship and professional training contracts. Changes from fixed-term to permanent contracts
are also taken into account. Uninterrupted extensions of fixed-term contracts are not taken into account in this indicator.
Number of terminations
Subsidiaries
Terminations
TOTAL NC-S FR GROUP
367
SFR SA
68
SFR SC SA
14
SFD SA
114
Cinq sur Cinq SA
100
Other subsidiaries
71
Posted dismissals concern permanent, fixed-term, apprenticeship and professional training contracts. The majority of dismissals correspond to
permanent contracts.
Differences in terms of hires between companies with various numbers of staff are explained by the desire within SFR
ESU companies to only use internal transfers to fill positions.
3.1.2.1.3
Compensation and compensation development
Payroll in € million
Subsidiaries
2015
2014
TOTAL NC-S FR GROUP
760.15
800.72
SFR SA
400.49
423.60
SFR SC SA
58.39
60.70
SFD SA
72.55
79.67
Cinq sur Cinq SA
47.45
50.80
Other subsidiaries
181.27
185.96
Payroll corresponds to the gross amount subject to social security contributions that is declared in the Annual Declaration of Social Data (Déclaration
Annuelle de Données Sociales or DADS) for a Year N, for employees with a contractual relationship to the company during Year N, under a permanent,
fixed-term, apprenticeship or professional training contract.
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Number of agreements signed during the year regarding compensation and employee savings
Subsidiaries
Number of agreements
Comments
2
AP P LICABLE TO THE S COP E OF THE NCS FR GROUP
14
agreements concerning the SFR ESU
NC-S FR GROUP
SFR SA
SFR SC SA
SFD SA
2
Cinq sur Cinq SA
1
Other subsidiaries
7
This data includes records of agreements and disputes.
The difference in the number of agreements signed is mainly related to each company's history. For example, within the
SFR ESU, negotiations about a given subject, employee savings, have resulted in several agreements.
Generally speaking, there is a real social dialogue among the Group's subsidiaries. As a result, there are more
agreements than just the single mandatory annual negotiation agreement.
3.1.2.2 Work organization
3.1.2.2.1
Organization of work time
A full-time employment contract is the norm within the Group. Nevertheless, through our labor agreements, we offer the
possibility of part-time parental leave.
Within distribution companies, the number of part-time employees is structurally higher, but the situation is fairly similar at
other companies in the distribution sector.
Organization of full-time/part-time work as of 12/31/2015
Full-time
Part-time
Subsidiaries
Total
Men
Women
Total
Men
Women
15,024
9,514
5,510
1,144
256
888
SFR SA
6,450
4,285
2,165
314
36
278
SFR SC SA
1,446
764
682
257
61
196
SFD SA
2,361
1,326
1,035
294
111
183
Cinq sur Cinq SA
1,396
829
567
161
28
133
Other subsidiaries
3,371
2,310
1,061
118
20
98
TOTAL NC-S FR GROUP
3.1.2.2.2
Absenteeism
Number of days absent and absenteeism rate
Subsidiaries
TOTAL NC-S FR GROUP
Number of days absent
Absenteeism rate
379,551
6.94%
SFR SA
90,155
3.92%
SFR SC SA
68,033
11.10%
111,367
14.61%
Cinq sur Cinq SA
SFD SA
45,453
8.79%
Other subsidiaries
64,544
5.07%
The annual average absenteeism rate corresponds to the average of the monthly rates. It is calculated using calendar days absent for permanent contracts,
during the period from 12/2014 to 11/2015, taking into account absences due to disability, unpaid absences, unauthorized absences, commuting accidents,
occupational accidents, parental, maternity, paternity, sick, illness, and occupational illness leaves, and part-time work arrangements due to health
reasons.
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3.1.2.3 Industrial relations
3.1.2.3.1
Structure of the social dialogue - in particular employee information and
consulting procedures and negotiations with employees
SFR ESU scope
PROMOTING SOCIAL DIALOGUE AND COLLECTIVE BARGAINING
For SFR SA, promoting a quality social dialogue between social partners and the company's executive management has
always been extremely important.
The dynamic nature of this social dialogue is even more essential since the company underwent major strategic and
organizational changes in 2015, which needed to be promoted and added to the social plan.
At SFR SA, promoting an innovative and responsible social dialogue necessarily entails recognizing union issues at both
local and central levels.
For matters that involve the entirety of the SFR ESU, Management was able to develop internal social relationships with
secretaries from national bodies (Works Councils, Central Works Councils,) and with the Representative Union
Organizations via the Central Union Delegates and the Deputy Central Union Delegates.
This commitment involves respecting the exercise of civil liberties and prohibiting all forms of discrimination that are
linked to the exercise of a mandate by a staff representative.
The ordinary and extraordinary meetings organized with staff representative bodies (Central Works Councils, Works
Councils, Occupational Health and Safety Committees, or Staff Delegates,) as well as collective bargaining meetings
with the representative union organizations, at the time of ad hoc social committee meetings, allowed strong strategic
and structural challenges to be managed for the company in 2015, and in particular:
 a four-year agreement in favor of hiring employees with disabilities, confirming the commitment of SFR SA,
with this 4th consecutive agreement on diversity issues due to major societal causes
 an agreement relating to measures for assisting employees concerned by changes related to strategic projects
presented at various groups and corporate partners (Central Works Committee, Works Committee,
Occupational Health and Safety Committee).
 an agreement relating to healthcare expenses, guaranteeing employees a very good level of medical
coverage, with significant employer contributions to the plan.
 Several agreements concerning Employee Savings, which allow staff to share in the company's profits and
benefit from the dynamic devices of the newly established Group Savings Plan.
 A series of five agreements relating to our variable compensation policy for business activities.
LISTENING TO EMPLOYEES AND APPROACHABILITY
SFR SA stays in tune with the company, through its use of measurement tools and indicators. An annual internal
barometer, “The voice of employees,” allows each employee to provide their overall perception of SFR SA with regard to
various topics such as its environment, work climate, professional satisfaction, image of SFR SA, etc. The results of this
barometer are used in establishing action plans.
Moreover, employees are continuously informed about changes in the company and the strategic guidelines defined. The
internal communications devices (Intranet, meetings with managers, Q&A sessions) allow there to be a regular dialogue
between management and employees.
SFD scope
For SFD, maintaining a constructive and dynamic social dialogue at all levels of the company has always been extremely
important.
Promoting a quality social dialogue necessarily entails recognizing union issues at both local and central levels.
This commitment involves respecting the exercise of union freedoms and prohibiting all forms of discrimination linked to
the exercise of a staff representative's mandate.
The ordinary and extraordinary meetings organized with staff representative bodies (Central Works Councils, Works
Councils, Occupational Health and Safety Committees, and Staff Delegates) as well as the representative union
organizations during ad hoc social committee meetings, allowed strong structural challenges to be identified for the
company for 2015, and allowed two agreements relating to our compensation policy (profit-sharing and pay due to
temporary work disabilities) to be signed.
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5 Sur 5 scope
Management was able to develop a privileged social communications network with members of the Works Council and
the Representative Union Organizations through the Union Delegates.
This commitment involves respecting the exercise of union freedoms and prohibiting all forms of discrimination linked to
the exercise of a staff representative's mandate.
The ordinary and extraordinary meetings organized with staff representative bodies (Works Councils, Occupational
Health and Safety Committees, or Staff Delegates) as well as collective bargaining meetings with the representative
union organizations, allowed strong structural challenges to be managed for the company during the year.
the signing of an agreement relating to work time of executives and an agreement relating to telecommuting allowed
monitoring to be implemented, and for there to be flexibility in their work-life balance, along with a lesser disparity
between their professional and personal lives.
an agreement relating to workforce planning (Gestion Prévisionnelle de l’Emploi et des Compétences or GPEC) allowed
the bases for geographic and professional mobility to be established within the ESU 5 sur 5.
a series of agreements relating to our compensation policy, both to encourage salary development and to keep
employee savings at very competitive levels.
3.1.2.3.2
Overview of collective bargaining agreements
Number of agreements signed in 2015 with union organizations
Subsidiaries
Comments
3
AP P LICABLE TO THE S COP E OF THE
NC-S FR GROUP
28
agreements concerning the SFR ESU
NC-S FR GROUP
SFR SA
SFR SC SA
SFD SA
7
Cinq sur Cinq SA
2
Other subsidiaries
18
The breakdown of agreements incorporates six dispute records (for the SFR ESU), ruled upon at the end of negotiations,
which did not lead to an agreement being signed.
The 2015 agreements primarily concern the topics of compensation, elections, employee savings, integration and
continued employment of Workers with Disabilities, health and retirement expenses and mobility.
3.1.2.4 Health and safety
3.1.2.4.1
Occupational health and safety conditions
SFR ESU scope
Control of joint activities at sites (tertiary, technical or third-party) and during deployment and maintenance operations
remains a major issue for SFR.
To that end, an Occupational Health and Safety Committee (CSST) comprised of fifteen Safety Supervisors and
Coordinators was created within the Networks Division in order to centralize expertise and standardize practices.
At the tertiary sites, a Common Inspection Visits office (Visites d’Inspections Communes or VIC) was established at the
Saint-Denis Campus when the second tranche of the building was delivered, in order to evaluate the risks linked to the
intervention of outside companies in charge of technical and/or intellectual services.
Furthermore, due to the fact that personnel from various entities of the Numericable-SFR Group are cohabitating,
preventive actions were implemented at the sites concerned: risk analyses and submission of safety regulations
In terms of professional risk prevention, 2015 was also marked by:
 the deployment of asbestos-related risk training sessions,
 the consolidation of safety rules relating to electrical installations,
 the establishment of safety booklets for all tertiary SFR sites,
 the definition of maintenance and monitoring principles for the defibrillators installed at SFR sites,
 and the standardization of the work at height authorization model.
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SFD scope
The Unique Risk Assessment Document (Document Unique d’Évaluation des Risques or DUER) which was reviewed in
1
2014 with members of the Occupational Health and Safety Committee and our SMARTE correspondents, was not
modified in 2015. It allowed a unique version of the document to be produced, with risks listed according to frequency
and severity. The prevention plans related to our risks were thus determined and deployed at all SFD sites, which
thereby allowed them to be disseminated.
5 Sur 5 scope
The prevention of risks related to verbal and physical aggression, as well as theft with aggression, was a leading issue in
2014.
A note on the conduct to be maintained, along with actions to raise the awareness of the employees concerned, was
implemented in 2014.
3.1.2.4.2
Overview of agreements signed with union organizations or staff
representatives regarding occupational health and safety
Number of agreements signed in 2015 regarding safety, health and work conditions
Subsidiaries
Comments
0
AP P LICABLE TO THE S COP E OF THE NCS FR GROUP
1
Agreements concerning the SFR ESU
NC-S FR GROUP
SFR SA
SFR SC SA
SFD SA
2
Cinq sur Cinq SA
0
Other subsidiaries
0
This data includes the records of agreements and disputes.
3.1.2.4.3
Occupational accidents, in particular their frequency and severity
Frequency and severity rates for occupational accidents
Subsidiaries
Number of fatal accidents
Frequency rate
Severity rate
141
5.55
0.38
SFR SA
14
1.33
0.03
SFR SC SA
14
5.40
0.28
SFD SA
38
9.52
1.21
Cinq sur Cinq SA
24
9.87
0.52
Other subsidiaries
51
8.68
0.43
TOTAL NC-S FR GROUP
Occupational illnesses are monitored annually and given special consideration. For our activity, occupational illnesses
are very rare and essentially concern musculoskeletal disturbances, which are related to posture when using a computer.
1
SMARTE: Security and Management Applied to the Network and Business (Sécurité et Management Appliqué au Réseau et à l’Entreprise).
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Frequency rate
Definition
The frequency rate measures the number of recorded accidents in the workplace with work stoppage during the year per
million hours worked annually. Workplace accidents are measured for employees working under permanent, temporary,
apprenticeship or professional training contracts.
Calculation method
Frequency rate of accidents in the workplace = (number of recorded workplace accidents with work stoppage *
1,000,000) / (average annual number of full-time equivalent employees * annual hours worked per employee)
Severity rate
Definition
The severity rate measures the number of business days with work stoppage associated with recorded workplace
accidents per thousand hours worked annually. Workplace accidents are measured for employees working under
permanent, temporary, apprenticeship or professional training contracts.
Calculation method
Severity rate of workplace accidents = (number of business days lost from recorded workplace accidents with work
stoppage * 1,000) / average annual number of full-time equivalent employees * annual hours worked per employee).
3.1.2.5 Training
3.1.2.5.1
Training policies implemented
SFR ESU scope

A training plan which is adjusted as closely as possible to priority needs that are essential for activity and
primarily based on assisting in transformational issues.
 Training sessions on the management of Psychosocial Risks (PSR) and transitional and transformational
management.
 Strengthening the training effort according to needs by developing internal training.
Three main lots structure the training plan:
 Prioritizing of training needs which are essential for the activity and exercise of the profession
 Assistance in projects to gradually transform the new Numericable-SFR SA entity in light of information
produced by the Works Committee
 Strengthened assistance in internal mobility to favor professional changes throughout the year
SFD scope
Business and Group priorities, as well as organizational development, guide the priority actions to assist employees and
develop expertise at SFD.
Therefore, the training offerings reflect the priorities of business projects, varying by Business Unit. Recurring topics
concern:
 The integration of new employees
 Managerial assistance of teams
 Management of discourteous behavior at Point of Sale
 Organization of managers' time and priorities
 Psychosocial Risks
 Establishment of Professional Maintenance
A specific offer is proposed and defined between the training services and the Directors of support departments. This
allows each employee to be assisted, addressing their individual professional needs.
Teaching formats adapted to organizational constraints:
 Areas for improvement defined by managers and/or by evaluation in the form of knowledge tests, allowing the most
suitable actions to be selected,
 A management path which combines theoretical training with assistance by a tutor allows the skills acquired to be put
into practice. Validation in a B2C manager position is subject to an evaluation in the form of a defense before an
internal jury.
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5 Sur 5 scope
5 sur 5 decided to structure its training policy around four aspects:
1/Providing support to build loyalty
- Encouraging the use of skill assessment, recognition of prior experience, and personal training accounts
- Provide skill improvement opportunities to high-potential employees through targeted training programs
2/ Strengthening managers' skills with a training base:
-
Management HR
- Performance review
- Conducting difficult interviews, etc.
3/ Moving towards professional expertise
-
Training in business fundamentals
Training programs in SFR products and offers (fiber focus to boost very-high-speed sales)
- Technical training programs
- Training programs in tools
4/ Ensure employee employability and facilitate flexibility
-
Integration and training for each employee with a new position after an internal transfer.
3.1.2.5.2
Subsidiaries
Number of hours
TOTAL NC-S FR GROUP
257,233
SFR SA
113,758
SFR SC SA
55,853
SFD SA
16,431
Cinq sur Cinq SA
13,955
Other subsidiaries
57,236
Training data concern employees with a permanent or fixed-term contract. Apprenticeship and professional training
contracts, in which employees alternate between attending school and working, are not taken into account for training
indicators.
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3.1.2.6 Equal treatment
3.1.2.6.1
Measures taken to promote gender equality
The workforce corresponds to the number of employees who are contractually connected to the company as of 12/31 of
year N, by a permanent, fixed-term, apprenticeship or professional training contract, regardless of the duration of their
service.
Distribution of total workforce by sex and status as of 12/31/2015
Managers
Non-managers
Subsidiaries
Total
Men
Women
Total
Men
Women
TOTAL NC-S FR GROUP
8,495
5,980
2,515
7,673
3,790
3,883
SFR SA
5,323
3,778
1,545
1,441
543
898
SFR SC SA
594
309
285
1,109
516
593
SFD SA
385
236
149
2,270
1,201
1,069
Cinq sur Cinq SA
145
111
34
1,412
746
666
2,048
1,546
502
1,441
784
657
Other subsidiaries
Male/Female distribution of promotions
Subsidiaries
Men
Women
TOTAL NC-S FR GROUP
56%
44%
SFR SA
52%
48%
SFR SC SA
49%
51%
SFD SA
57%
43%
Cinq sur Cinq SA
57%
43%
Other subsidiaries
67%
33%
3.1.2.6.2
Measures taken to promote employment and the integration of people with
disabilities
Employees with disabilities
Subsidiaries
Employees concerned
TOTAL NC-S FR GROUP
365
SFR SA
169
SFR SC SA
109
SFD SA
24
Cinq sur Cinq SA
22
Other subsidiaries
41
Data for NC Numericable SAS, Completel SAS and LTI Telecom SAS companies are not available at the time of
publication of this report.
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3.1.2.6.3
Anti-discrimination policy
Number of managers trained in non-discrimination and diversity
Subsidiaries
Employees concerned
TOTAL NC-S FR GROUP
204
SFR SA
76
SFR SC SA
18
SFD SA
62
Cinq sur Cinq SA
36
Other subsidiaries
12
3.1.2.7 Promotion and compliance with the fundamental conventions of the
International Labour Organization
3.1.2.7.1
Respect of freedom of association and collective bargaining rights
These elements are covered by the policy on social dialogue.
3.1.2.7.2
For elimination of employment and professional discrimination
The Numericable-SFR group as a whole now seeks to imbue equal opportunity and non-discrimination into its human
resources policy. Discussions are already underway in this sense with the Union Organizations.
Equal opportunity and diversity are at the heart of SFR SA's commitment. They have formed the structure of its Human
Resources policy and civic actions for some fifteen years.
A strong commitment, involving a proactive Human Resources policy, based on two imperatives:
 Non-discrimination,
 Evaluation of individual skills.
Promoting professional gender equality
The signatory of a company Diversity Charter, which condemns all forms of discrimination, SFR SA is convinced that
professional diversity is a strategic issue for both individual and group development. The company ensures, among
other things, that any differences in treatment based on gender are prohibited, so that women and men are represented
in a balance manner in all positions and at all levels of the company, and so that each person benefits from equal
treatment at all stages of their professional life.
After having adopted two agreements regarding M/F professional equality, SFR SA implemented an annual 2015-2016
action plan which contains, among other things, three measures concerning educational actions, reconciling
private/personal life, and salary equality.
Work-life balance
SFR continues to apply all measures to achieve a work-life balance (paternity leave, parenting leave, leave due to family
events, days off to care for sick children, birth benefit, parental childcare leave, etc.), renewing telecommuting measures,
launching the training program “Managing your career as a woman” for women returning from maternity, parenting or
adoption leave, and strengthening these measures, in particular by providing cribs at inter-company daycares for parent
employees. In 2015, 88% of parent employees who were provided with a crib considered that the daycare availability
allowed them to achieve a better work-life balance.
Equal pay
While studies have shown that there was no discrepancy in the structural compensation between men's and women's
salaries at SFR, certain individual situations could make readjustment measures necessary. In an effort to monitor
equitable compensation for both sexes, the M/F professional equality action plan provides that any discrepancy in salary
that is not objectively justified for a given job/profession be identified and corrected.
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From this perspective, in 2015 SFR renewed specific funding aimed at reducing any discrepancies not explained by
objective elements, when there is more than a 5% discrepancy between the median salary of men and that of women
within a given job/profession.
A concrete, ambitious and innovative disabilities policy
For more than 12 years, SFR has conducted a proactive policy in matters related to disabilities, and it actively contributes
to changing society's views on the subject. Information, raising awareness, employability, assistance, manager training,
site accessibility, work tools, cooperation with the protected sector: this is a global approach which implements the
various three-year business agreements signed with corporate partners' complete cooperation since 2003.
In 2015, SFR SA signed, with the four representative union organizations, its fifth business agreement in favor of
employment, integration and continued employment of employees with disabilities (2015-2018,) which, among other
things, sought to help reduce the deficit in the initial qualification of people with disabilities seeking employment, and to
develop the skills of employees with disabilities in order to guarantee equal opportunity throughout their professional
lives, along with their sustainable integration.
SFR'S ACTIONS IN FAVOR OF THE EMPLOYMENT OF WORKERS WITH DISABILITIES SEEK TO:
Favor the hiring of people with disabilities, in cooperation with the protected and adapted sector
New hires: number of new hires between 12/31 of Year N-1 and 12/31 of Year N, for employees with a contractual
connection to the company via a permanent, fixed-term, apprenticeship or professional training contract, regardless of
the duration of their service.
An employee who has had several types of contracts during the year is recorded as many times as such employee has
contracts. Uninterrupted contract extensions are not calculated in new hires.
Transfers among companies within the NC-SFR Group, with no change in contract type, are not calculated as new
hires.”
Terminations: number of terminations of individuals between 12/31 of Year N-1 and 12/31 of Year N, relating to
employees with a contractual connection to the company via a permanent, fixed term, apprenticeship or professional
training contract.
Individual terminations are terminations due to a reason pertaining to the specific person: disciplinary cause (serious or
gross fault of the employee) and a non-disciplinary cause (professional incompetence, refusal of a substantive change in
the employment contract, etc.). Financial terminations are excluded from the indicator.
Within the context of this agreement, SFR has committed to:
 achieve a global employment rate of 5% as of December 31, 2018 and 3.9% as of December 31, 2015 (including a
maximum of 2.5% in indirect jobs via the services granted to the protected sector);
 hire at least 25 employees with disabilities for the term of the agreement;
 integrate employees with disabilities under work-study contracts, with 4% of work-study staff members welcomed
each year.
To do so, SFR SA will create a qualifying training session that is recognized by the professional branch of the SFR ESU:
the Professional Qualification Certificate (PQC). This specific certification allows know-how that is specific to recognized
professions to be validated and actual specific jobs to be accessed. SFR SA is planning this action to reduce the deficit
in qualification and the shortage of candidates in certain professions, particularly for the “digital professions” which are a
cornerstone of SFR SA's positioning.
Implementing a maintenance plan in the hiring of employees with disabilities and preventing
professional exclusion.
When a disability occurs during an employee's professional career, or if it changes, the employees concerned may, at
the recommendation of the occupational physician, have access to various devices in order to pursue their professional
activity under the best conditions.
Situation assessments used to prevent professional exclusion:
In the event of an absence due to a long-term illness or work stoppage of more than three months, each employee with
disabilities will be offered an individual interview with the employee's Human Resources Supervisor, in cooperation with
the Disabilities Task Force. The purpose of this interview is to allow the individual employee's situation to be assessed, in
order to foresee and prevent a risk of professional exclusion.
This assessment shall be performed by specialized external partners who can use various areas of expertise, such as
ergonomics, psychology, etc.
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Modified workstations
This might concern, for example, access to IT equipment and software (including for blind persons), an ergonomic chair
or adjustable desk, or interpretation services in French sign language. For more complex arrangements, the Disabilities
Task Force may request the services of an ergonomist who works in close cooperation with occupational physicians in
order to recommend the most suitable equipment.
Planning of tasks, hours or objectives
In certain cases, and specifically if there is a change in the disability, the occupational physician may have to recommend
a change in schedule (telecommuting, etc.), objectives and assignments, which allow the employee to stay employed.
Career management for employees with disabilities
Because a disability should not halt career development, the fifth agreement provides for actions to assist and promote
developments of employees with disabilities. The skill assessment helps employees analyze their professional and
personal skill sets, as well as their abilities and motivations, in order to define a professional plan. The employee may
also benefit from a recognition of prior experience corresponding to their work time. Employees with disabilities older
than 45 are eligible, at their request, for a dedicated retirement overview and training session (impact of disability
pension, early retirement, etc.)
Transportation aids
Mobility is a major issue in employing persons with disabilities. To make their daily commute to and from work easier,
SFR SA relies on three mechanisms to keep people with reduced mobility employed:
 accessible transportation solutions based on the recommendations of an occupational physician for employees who
cannot take mass transit, nor a personal vehicle;
 financial assistance to retrofit or acquire an adapted vehicle: in 2015, three employees with disabilities received
assistance to purchase or retrofit a vehicle;
 financial assistance for the additional cost of the driver's license.
Psychological issues support
SFR SA has committed to deploy special support for employees with psychological disabilities, in cooperation with
dedicated and specialized associations, to assist medical teams and Human Resources teams to help and treat
psychological disabilities at work.
Provide special support to employees impacted by a disability
SFR SA is a disability-concerned business and has implemented dedicated measures for employees with a relative with
disabilities, by authorizing additional allowed days off:
 three days off allowed per year for employees who have a child with disabilities (who is their dependent for tax
purposes);
 two days of days off allowed per year for employees who have a father, mother, brother, sister or spouse that is
officially registered as a worker with a disability (Reconnaissance de Qualité de Travailleur Handicapé or RQTH)
(who is their dependent for tax purposes);
 one day off allowed per year for employees who are confronted with a disability situation, in order to facilitate
procedures to officially register as a worker with disabilities;
 three days off per year for employees who are already officially registered as workers with disabilities;
 one day off per year for employees with disabilities, for medical care;
 Full-time or part-time parental leave of three to eight years from when the child's disability is first officially registered,
which is offered to employees with a child with disabilities.
Strengthen internal and external awareness and training actions
SFR SA implemented an ambitious training plan for all parties concerned by a disability at the company and an
information and awareness plan for all employees. In 2015, a workshop entitled “Career development” was offered to all
employees with disabilities, along with a disabilities awareness program for managers. The Social Innovation division
went to the main SFR SA sites to present employees with the new features of the disabilities agreement. A practical
guide for “Employees with disabilities” was created and distributed at the various sites, along with a disabilities
awareness quiz which was offered to all employees.
As one of the founding companies of the association supporting students with disabilities in the completion of their
studies, Accompagner la Réalisation des Projets d’Études de Jeunes Élèves et Étudiants Handicapés (ARPEJEH), SFR
SA has also committed to contribute, improve and promote the training, qualification and employment of students with
disabilities, by accepting interns from the junior high school level until they join the workforce. SFR SA has committed to
create or develop partnerships to favor the employment of employees with disabilities, such as CAP Emploi (a network of
agencies helping people with disabilities find work), the Employment Centers, universities, the Region of Seine Saint
Denis, etc.
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The Disabilities Task Force also works together with the professional reclassification centers (centres de reclassement
professionnels or CRP) and pays close attention to job opportunities that could help strengthen the professional
integration of employees with disabilities.
Taking action to employ young and older people
Continuing with its proactive policy on equal opportunity and diversity, SFR SA has signed a business agreement with
the corporate partners which relates to the hiring of various age groups, which addresses the threefold objective of:
 Promoting the sustainable integration of young people (under 26 or 30, including for workers with disabilities) in
employment under a permanent contract,
 Promoting the continued employment of older employees,
 Ensuring transfer of knowledge and skills.
Indeed, SFR SA has already chosen, for several years, to carry out a work-study program, which is a true lever that
favors diversity and allows young people to acquire the experience and skills to develop their employability. Thus, in
order to favor young peoples' access to a job, SFR SA has committed through this agreement that 30% of permanent
contract hires will consist of young people.
Moreover, the issue of placement and professional development of older employees has led SFR SA to propose various
specific career-related measures. These mechanisms seek to favor professional recruitment and mobility as early as at
age 45, continued employment of employees age 55 or older, as well to acknowledge and utilize their experience and
expertise, in particular by offering them the opportunity to mentor younger employees.
In a company where age representation is increasingly expansive, with, on the one hand, the integration of young
students through work-study arrangements, and on the other, longer careers in terms of the development of retirement
plans, it seems essential to establish mechanisms that address intergenerational issues and ensure the transmission of
reliable expertise and knowledge.
THE PRINCIPAL MEASURES OF THIS AGREEMENT ARE
Promoting the integration of young people in employment
Promoting the use of work-study (5.5% of staff), respecting the ratio of one work-study person to one mentor, established
by a Human Resources Committee, in order to promote recruitment through permanent contracts of work-study
candidates who have been identified in the “pool of work-study candidates,” the establishment of an adviser for each
young hire, implementation of measures that allow the material obstacles that prevent access to employment to be lifted
(assumption of 90% of public transit costs, CESU for which a portion of financing is assumed by SFR, daycare spots,
housing assistance). At end-2015, SFR SA had 5.6% of work-study participants on its staff.
To promote the transmission of knowledge and skills
SFR SA has committed to promote the development of the community of internal trainers, in order to create a community
of older experts that allows knowledge and skills to be shared. On this last point, the Social Innovation Division
organized, on December 15, 2015, the conference entitled “Transferring knowledge in a multi-generational context.”
Reserved to employees age 55 and over, this meeting was targeted at encouraging the recognition of “SFR Older
Experts” and the development of initiatives aimed at sharing and transferring professional knowledge from one
generation to the next.
More than a hundred employees affirmed their interest in the topic by registering for the conference. Led by Philippe
Pierre, a diversity expert, this moment of exchange was aimed at assisting the employees concerned in identifying their
expertise, but also and above all encouraging them to share it, specifically by providing them with the desire to create a
community of older experts.
Likewise, because there can be no progress without a desire that is clearly expressed at the top of the company and by
empowering managers in the field, a specific training program is offered to the new managers, whose team is multigenerationally diverse. In 2015, managers benefited from this training.
Promoting the employment of older people
Employees who are 45 years and older may benefit from a late-career interview and may make use of the adult
professional training contract in partnership with an Employment Center to help with their return to work.
For employees aged 55 and older, SFR SA has committed to preserve their employment (at least 5% of workforce) to
promote professional mobility, to maintain a professional Development Committee that is dedicated to the professional
projects of older employees, to ensure that older employees have access to professional training under the same
conditions as all of the company's employees, and to give them two half-days off for meetings with the CNAV (France's
old-age insurance fund for employed people).
For employees who are within three years of retirement, SFR has committed to provide access to part-time employment
and cover 100% of mandatory retirement plan contributions, to promote skills sponsorship, to provide access to
telecommuting independently of quotas, and to conduct an end-of-career interview within the three years preceding an
employee's retirement, if the employee so requests.
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The diversity label
The award of the Diversity Label in October 2010, the confirmation that it was maintained in July 2012, and its renewal in
2014 all validate the commitment of any company in combating discrimination and working for equal opportunity.
Through the HR process, training and awareness, SFR SA reaffirms its intention of imbuing its management and human
resources administration with a dynamic of continued progress.
Supplementary actions within subsidiaries as part of the promotion of diversity in 2015


SFR SA





SFR SC SA




SFD SA





Cinq sur
Cinq SA




Training of social partners in non-discrimination and diversity: in 2015, 120 staff representatives received such
training.
Establishment of a “discrimination alert” monitoring device on social networks.
Expansion of the internal Discrimination alert: in an effort to guarantee equitable treatment to all, and as part of the
Diversity Label and its group Psychosocial Risk Prevention agreement, SFR SA opened the SFR SA internal
Discrimination alert to employees and applicants of the NC/SFR group, thereby allowing them to report any
discrimination of which they are victim, and enabling them to be subsequently assisted. A single discrimination alert
was issued in 2015.
The Non-Discrimination Charter was established in 2014.
Consistently informing and raising the awareness of all managers about non-discrimination.
Implementation of an HR process which has as its only rules non-discrimination and evaluation of skills (recruitment,
access to training, internal mobility, compensation)
Communication with employees about recruiting more diverse profiles (recruiting workers with disabilities, taking into
account the employment of older employees, populations that are the most removed from employment and
professional gender equality requirements).
Establishment of Telecommuting to allow certain management-level employees to achieve a better work-life
balance.
Facilitating the hiring and continued employment of people with disabilities (work scheduling, etc.)
Signature of a second agreement on March 26, 2015 in favor of professional gender equality for 2015-2017.
A Diversity Charter was signed at SFD SA as of 2010; it is a testament to the commitment, in France, to promoting
cultural, ethnic and social diversity. It seeks to reflect the diversity of French society, and to communicate to all
employees the company's commitment to promote non-discrimination.
Review of the Single Risk Assessment Document (Révision du Document Unique d’Evaluation des Risques or
DUER) in 2014 with members of the Occupational Health and Safety Committee and our SMARTE (Security and
Management Applied to the Network and Business) correspondents, which has not been modified in 2015.
The production of a single-document version allowed risk to be listed according to frequency and severity,
Prevention plans related to the risks of SFD SA were thus defined and used for all SFD SA sites.
The Non-Discrimination Charter was established in 2014.
Consistently informing and raising the awareness of all managers about non-discrimination.
Implementation of an HR process which has as its only rules non-discrimination and evaluation of skills (recruitment,
access to training, internal mobility, compensation)
Communication with employees about recruiting more diverse profiles (recruiting workers with disabilities, taking into
account the employment of older employees, populations that are the most removed from employment and
Establishment of Telecommuting to allow certain management-level employees to achieve a better work-life
balance.
Facilitating the hiring and continued employment of people with disabilities (work scheduling, etc.)
Signature of a second agreement on March 26, 2015 in favor of professional gender equality for 2015-2017.
Other subsidiaries*, including:
Futur
Telecom
SAS


Compliance with current regulations (agreement for gender equality, salary committee.)
Contribution in the fight against all forms of discrimination and showing that the company can play a positive social
role
2SIP SAS
2SIP is implemented to favor diversity and equal opportunity. In 2015, this commitment was illustrated by the
preparation of the following action plan:
 Consistently informing and raising the awareness of all managers about non-discrimination.
 The HR processes have always had as their only rules non-discrimination and the evaluation of skills (recruitment,
access to training, internal mobility, compensation).
 Communications to employees about recruiting more diverse profiles (recruitment of workers with disabilities, taking
into account the employment of older employees, populations that are most removed from employment and
 Telecommuting allows certain management-level employees to achieve a better work-life balance.
 2SIP facilitates the hiring and continued employment of people with disabilities (work scheduling, etc.)
 A second agreement in favor of professional gender equality for 2015-2017 was signed on March 26, 2015.
Omea
Telecom
SAS
Signature of an agreement during the Mandatory Annual Negotiations (Négociations Annuelles Obligatoires or NAO)
2014 + legal notice and posting requirements in relation to professional gender equality (Art. L.1142-1 to L.1144-3 of
the French Labor Code)
SFR
Business
Promoting diversity and equal opportunity
Support of pluralism and research on diversity through recruitments and in career management, which is a progress

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Solution SAS
factor for SFR Business Solutions SAS in its role of social responsibility.
Support for all profiles and career paths
 Assistance of foreign employees in their processes at various administrations;
 Support of recent graduates looking for their first home;
 Support of employees hired in a new region.
Disabilities Task Force
Implementation of a socially responsible, consistent and sustainable policy to promote employment of people with
disabilities.
 Continued employment and improvement of work conditions thanks to training, career management, organization of
positions, schedules and work conditions;
 Recruitment of employees and interns with disabilities;
 Commitment to specific actions at recruitment fairs;
 The organization of actions to raise awareness and training managers about disability issues;
Development of the use of companies in the protected sector for our procurement.
Establishment of a generation contract
Preparation of an action plan which aims to implement the Generation Contract mechanism through three objectives:
 Favoring the sustainable insertion of young people in employment through their access to a permanent contract
within SFR Business Solutions SAS;
 Promoting the hiring and continued employment of employees qualified as “Older Employees”;
 Promoting the transfer of knowledge and skills.
Professional gender equality:
To encourage professional gender equality, SFR Business Solutions SAS prioritizes three work cornerstones with
quantified objectives and indicators for measuring progress:
 Recruitment (cooperative actions with partner schools of SFR Business Solutions SAS and targeted sourcing
actions);
 Combining professional activity and the exercise of family responsibility (actions regarding the organization and
holding of meetings and travel);
 Work conditions (possibility of telecommuting for pregnant women, concierge services for employees).

3.1.2.7.3
Eliminating forced or mandatory work and the effective prohibition of child
labor
These items are addressed in the business code of ethics (see section relating to societal information).
3.2
Environmental information
Environmental conservation is recognized as an important subject for the digital economy. Even though the nature of its
activities presents a limited environmental impact, for a key player in the sector such as the Numericable-SFR Group,
preserving the environment can simultaneously be a lever of savings and growth. The Group is conscious of the
importance of environmental issues in its strategic choices and seeks to promote a responsible attitude through
continuous initiatives to decrease its impact on the environment and to provide support to its customers.
In that sense, the Group is leading a set of actions to promote environmental conservation: landscape integration of base
transceiver stations, a collection system which allows customers to bring back their old mobile phones to a point of sale
and get a purchase voucher, paperless billing and contracts, improvement of waste management in its activities,
recycling of boxes, energy consumption management, etc.
During this period of energy transition, the Group is particularly making an effort to control its own impacts, while
continuing to help its customers reduce their energy consumption.
The Campus in Saint-Denis - a showcase site for this commitment - obtained the High Quality Environmental standard
(HQE®) building certification and the BREEAM certification for the “Design Phase” (Building Research Establishment
Environmental Assessment), two of the most demanding environmental performance certifications for buildings.
Furthermore, it obtained the High Energy Performance label, which was evaluated in conformity with the BBC 2005 level.
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3.2.2 Environmental indicators
3.2.2.1 General environmental policy
3.2.2.1.1
Structure of the Company, taking environmental issues and where applicable
evaluation procedures or environmental certification, into account
The Group established a set of relays at its various subsidiaries, including SFR Service Client SA, SFD SA and Cinq sur
Cinq SA, in order to monitor environmental indicators. Certain subsidiaries like SFR SA, SFR Business Solutions, and
SRR have an environmental supervisor.
In order to roll out its Energy Management System, the Group appointed an “Energy Supervisor” who is in charge of
leading the Energy Steering Committee, which is comprised of “Energy Managers” for subsidiaries involved in the
system.
In 2015, the energy management system for the Numericable-SFR Group was ISO 50 001-certified. The scope of this
certification covers the following companies: SFR SA, NC Numericable SAS, Completel SAS, SRR SCS and SFR
Business Solutions SAS.
The Environmental Management Systems of SFR Business Solutions SAS and SRR SCS are certified according to the
requirements of ISO 14 001.
3.2.2.1.2 Employee training and information actions conducted for environmental
protection matters
In 2015, the Numericable-SFR Group focused its actions on establishing an Energy Management System (EMS). As
part of this, a set of training and awareness sessions were held for employees from various subsidiaries involved in the
system.
All employees of the Group, including employees from SFR Service Client SA, SFD SA and Cinq sur Cinq SA, were
informed via Intranet and digital postings at the Campus of the roll-out of the energy management system, as well as
about the ambitious objectives set by the energy policy.
3.2.2.1.3
Resources devoted to the prevention of environmental risks and pollution
The activities and facilities on the sites of the companies of the Numericable-SFR Group do not generate environmental
risks or pollution. In effect, these activities do not use any production process that could seriously damage natural
resources like water, air or soils.
The Group operates Facilities Classified for the Protection of the Environment (ICPE) that hold a classification that does
not exceed the declaration rules for the categories of the nomenclature related to air-conditioning systems, power
inverter systems and generators.
However, in order to prevent accidental pollution, certain measures are taken:
 exercises for evacuation of the buildings in the event of fire are conducted;
 seal controls are integrated in the maintenance schedules of the air conditioning installations in order to prevent leaks
of cooling fluids, which are greenhouse gases with high global warming power (GWP);
 a procedure for filling fuels is established at the sites that require it.
3.2.2.1.4
The amount of the provisions and guarantees for environmental risks, provided
that this information is not likely to cause serious injury to the company in a
dispute in progress
Environmental risks in terms of the activities of the Numericable-SFR Group do not justify provisions or guarantees.
3.2.2.2 Pollution and waste management
3.2.2.2.1
Measures to prevent, reduce or repair discharges into the air, water and soil
serious affecting the environment
The activities of the Group’s companies do not require the implementation of measures to prevention, reduce or repair
discharges into the air, water or soil that seriously impact the environment.
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However, the Group uses certain facilities, products or substances that could present risks (even minor ones) for the
environment, some of which are governed by specific regulations, such as facilities classified for the protection of the
environment (ICPE).
3.2.2.2.2
Measures to prevent, recycle and eliminate waste
The Numericable-SFR Group organizes the treatment of waste from its operations into adapted and dedicated streams
and ensures traceability of the waste.
Pursuant to regulations, SFR SA has set up the collection of used mobile phones in its distribution network. This process
is completed with an offer to buy back mobile phones that can be reused.
The Group subsidiaries concerned by Extended Producer Responsibility (EPR) are members of the following approved
eco-organizations:
 Ecofolio, paper collection and recycling;
 Eco-systems, collection, clean-up and recycling of electrical and electronic equipment waste at the end of life
(WEEE) ;
 Eco-packaging, sorting and recycling of package;
 Screlec and Corepile, collection and recycling of batteries and accumulators.
By setting up equipment returns (modems, TV set-top boxes and integrated boxes), the Group encourages their reuse in
order to fight the scheduled obsolescence of products and the scarcity of natural resources, raw materials and energy.
To achieve this, the Group is assisted by subcontractors specializing in the area of reconditioning in order to ensure the
quality of the products delivered with the goal of increasing customer satisfaction.
For the network Electrical and Electronic Equipment, the Group always gives priority to reuse in new deployment projects
when this is possible.
Total production of Hazardous Waste (HW)*
Subsidiaries
NC-S FR GROUP TOTAL
SFR SA
SFR SC SA
SFD SA
Cinq sur Cinq SA
Other subsidiaries
*
Result/Description
22,003 KG
19,793 kg
24 kg
434 kg
309 kg
1,443 kg
Hazardous waste (HW) includes fluorescent tubes and bulbs as well as batteries and accumulators.
Total production of Non-Hazardous Waste (NHW)*
Subsidiaries
NC-S FR GROUP TOTAL
SFR SA
SFR SC SA
SFD SA
Result/Description
985,090 KG
605,211 kg
60,862 kg
Data not available
Cinq sur Cinq SA
103,684 kg
Other subsidiaries
215,333 kg
*Non-hazardous waste (NHW) includes papers and cardboard as well as “all other” waste, covers the main technical and tertiary sites of the
different subsidiaries and does not include, depending on their geographic locations, the waste from sites and stores treated by
municipalities.
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Weight of business waste electrical and electronic equipment produced*
Subsidiaries
Result/Description
NC-S FR GROUP TOTAL
SFR SA
706,978 KG
341,035 kg
SFR SC SA
4,467 kg
SFD SA
5,982 kg
Cinq sur Cinq SA
10,574 kg
Other subsidiaries
344,920 kg
*
Waste electrical and electronic equipment (WEEE) corresponds to fiber network equipment, cables, fixed-line and mobile phone,
IS servers, and dismantled office equipment that is then reused or recycled. They cover the main technical and tertiary sites of the
different subsidiaries.
Weight of household waste electrical and electronic equipment collected*
Subsidiaries
Result/Description
NC-S FR GROUP TOTAL
SFR SA
3,863,178 KG
3,355,591 kg
SFR SC SA
Not applicable
SFD SA
Not applicable
Cinq sur Cinq SA
Not applicable
Other subsidiaries
*
507,587 kg
Household waste electrical and electronic equipment (WEEE) collected represents the products and equipment collected (boxes, TV set-top
boxes, mobile phones) to be reused or recycled. It includes the household WEEE collected from customers (mobile phones).
3.2.2.2.3
Consideration of sound nuisances and, if applicable, any other form of pollution
specific to an activity
The Numericable-SFR Group is committed to sustainable development of the territories by working for the landscape
integration of its relay antennas, in accordance with the common policy developed by the industry: before any project to
deploy relay-antennas, the teams from SFR SA and SRR SCS work particularly to consult with elected officials, lessors
and local communities and ensure, if needed, the assistance of architects, urban planners and landscaper architects in
order to take into consideration the visual impact of this equipment.
Although particular attention is paid to the integration of the relay antennas within the landscape on the island of
Réunion, the integration rules defined cannot be completely applied because of the topography.
Given their activities, the companies SFR Service Client SA, SFD SA and Cinq sur Cinq SA do not generate sound
nuisances or any form of specific pollution.
For more information on radio frequencies and health, please refer to the section on “Measures taken for the health and
safety of consumers.”
Rate of integration of new relay antennas in the landscape
Subsidiaries
Result/Description
NC-S FR GROUP TOTAL
NOT S IGNIFICANT
SFR SA
100%
SFR SC SA
Not significant
SFD SA
Not significant
Cinq sur Cinq SA
Not significant
Other subsidiaries: SRR SCS
66%
3.2.2.3 Sustainable utilization of resources
3.2.2.3.1
Water consumption and supply as a function of local constraints
Because of their activities and geographic locations, the companies of the Numericable-SFR Group are not subject to
local water supply constraints. Water management is, therefore, not a critical challenge for the Group. However, actions
have been taken for several years to reduce consumption at certain tertiary sites.
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These include, for example, the installation of pressure reducers and dual control flushing.
Water consumption*
Subsidiaries
Result/Description
NC-S FR GROUP TOTAL
136,433 M3
SFR SA
77,140 m3
SFR SC SA
10,895 m3
756 m3
SFD SA
Cinq sur Cinq SA
7,479 m3
Other subsidiaries
40,163 m3
*
The water consumption of SFR SA is reported for the main technical and tertiary sites.
The water consumption of Numericable SAS is reported for the 15 main sites.
The water consumption of Completel SAS is reported for the 2 main sites.
The water consumption of the leased buildings is not reported, because it is not available and is included in the rental charges.
The water consumption of SFR Service Client SA and SFR SA is calculated and prorated to the work force present at each tertiary site where
these companies are present.
3.2.2.3.2
Co n s u m p tio n of ra w m a te ria ls a n d m e a s u re s ta ke n to im p ro ve th e e ffic ie n c y o f u s e
In addition to substantial reduction in paper consumption, primarily due to changes in communication media, the different
subsidiaries of the Group give priority to the use of environmentally-friendly media (recycled and FSC/PEFC).
The Group is also committed to promoting the deployment of electronic invoices, both for its B2C customers and for its
business customers.
With respect to packaging, SFR SA has deployed communication to encourage selective sorting on a portion of its
logistics packaging targeted at households.
With regard to the use of rare and critical materials, the Group believes that the challenge exceeds the framework of its
own CSR policy and represents a major opportunity for protection of the environment. Nevertheless, by setting up
collection of used cell phones in its retail network and the collections of set-top boxes from its customers, the Group is a
stakeholder in the industry to recover deposits of rare resources contained in WEEE.
In addition, Sagemcom, the Group’s supplier for the LaBox equipment, has initiated work on the traceability of the
minerals coming from conflict zones on the basis of the guidelines of the Electronic Industry Citizenship Coalition (EICC)
and the Global e-Sustainability Initiative (GeSI) which are intended to establish the traceability of 4 minerals:
gold/tin/tungsten/tantalum.
Paper consumption*
Subsidiaries
NC-S FR GROUP TOTAL
SFR SA
SFR SC SA
SFD SA
Result/Description
2,980,350 KG
2,605,410 kg
16,009 kg
100,803 kg
Cinq sur Cinq SA
75,350 kg
Other subsidiaries
182,778 kg
*
Paper consumption includes all printed paper subject to tax under the rules of the Ecofolio eco-organization (for external use, and
primarily customer invoices, sales documentation, marketing mailings) as well as paper for internal use (multi-format copy paper)
The consumption of paper subject to tax under the rules of the Ecofolio eco-organization is not included in the data reported for
NC Numericable SAS.
The paper consumption of SFR Service Client SA, SFD SA and Cinq sur Cinq SA concerns only paper for internal use. The paper
consumption of SFR Service Client SA is calculated and prorated on the basis of the number of employees.
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Consumption of raw materials related to logistics activities*
Subsidiaries
Result/Description
NC-S FR GROUP TOTAL
SFR SA
2,052,350 KG
2,046,878 kg
SFR SC SA
Not significant
SFD SA
Not significant
Cinq sur Cinq SA
Other subsidiaries
*
5,472 kg
Not available
This consumptions includes cardboard, packaging papers and plastic film.
3.2.2.3.3
Energy consumption and measures taken to improve energy efficiency and the
use of renewable energy sources
The energy consumption from the business is primarily related to the technical sites that form the Group’s networks.
Optimizing energy consumption is a priority for the Group.
The network deployment and modernization plan, combined with the constant increase in customer usages (4G, highdefinition content and ultra-high-definition), automatically generate a change in consumption related to their operation.
This is why the Group has begun work and deployed an Energy Management System (EMS) in order to control and
reduce its energy consumption in the medium term.
The Group’s ISO 50 001 certified EMS covers the deployment, operation and maintenance of the network sites of SFR
SA, NC Numericable SAS, Completel SAS and SRR SCS, as well as the tertiary activities, the operation and
maintenance of the corporate headquarters and the transportation of employees of SFR Business Solutions SAS.
Under the principle of ongoing improvement on the basis of a proactive policy, this system includes monitoring
consumption and an action plan.
As the Group makes energy consumption management a major component of its environmental policy, and following the
implementation of European Regulation 801/2013, improvements in standby mode consumption on LaBox have been
made. Consumption dropped from 30.2 W to 11.6 W.
It should be noted that LaBox achieves demonstrable gains in energy consumption when compared with previous
generations. In terms of the requirements of the Voluntary Industry Agreement v3 (VIA), LaBox complies with a
measured energy consumption of 268.8 kWh.
In 2015, SFD SA and Cinq sur Cinq SA completed an energy audit of their activities.
For the use of renewable energies, it should also be noted that photovoltaic panels are installed on the roofs of the SFR
SA tertiary site in Lyon Saint-Priest.
The other group subsidiaries do not use renewable energies.
Electricity consumption*
Subsidiaries
NC-S FR GROUP TOTAL
SFR SA
SFR SC SA
SFD SA
Result/Description
725,149,089 KWH
620,008,536 kWh
6,147,079 kWh
10,354,710 kWh
Cinq sur Cinq SA
7,324,804 kWh
Other subsidiaries
81,313,960 kWh
Fossil fuel consumption (natural gas, fuel oil for generators)*
Subsidiaries
NC-S FR GROUP TOTAL
SFR SA
SFR SC SA
SFD SA
Result/Description
5,760,279 KWH
3,716,375 kWh
986,912 kWh
Not significant
Cinq sur Cinq SA
885,890 kWh
Other subsidiaries
171,102 kWh
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Other direct energy consumption (heating network, cooled water, photovoltaic electricity produced
for internal use)*
Subsidiaries
Result/Description
NC-S FR GROUP TOTAL
SFR SA
7,035,554 KWH
5,053,879 kWh
SFR SC SA
444,261 kWh
SFD SA
0 kWh
Cinq sur Cinq SA
Other subsidiaries
0 kWh
1,537,414 kWh
*
SFR SA energy consumption is reported for the main technical and tertiary sites.
The energy consumption of Numericable SAS and Completel SAS represent 32% of their annual invoices.
The consumption of electrical energy, natural gas, fuel oil and the heating network of SFR SA, SFR Collectivité SA and SFR Service
Client is calculated and prorated to the number of employees present on each tertiary site where these companies are present.
Vehicle fleet*
Subsidiaries
Result/Description
NC-S FR GROUP TOTAL
SFR SA
1,095 vehicles
SFR SC SA
18 vehicles
SFD SA
201 vehicles
Cinq sur Cinq SA
Other subsidiaries
*
3,097 VEHICLES
288 vehicles
1,495 vehicles
The vehicle fleet comprises all service vehicles and company cars for all the companies as of 12/31/2015.
Fuel consumption of the vehicle fleet: gasoline
Subsidiaries
Result/Description
NC-S FR GROUP TOTAL
SFR SA
11,226 L
2,092 l
SFR SC SA
0l
SFD SA
344 l
Cinq sur Cinq SA
2,756 l
Other subsidiaries
6,034 l
Fuel consumption of the vehicle fleet: diesel
Subsidiaries
Result/Description
NC-S FR GROUP TOTAL
SFR SA
4,215,324 L
1,721,833 l
SFR SC SA
18,593 l
SFD SA
351,528 l
Cinq sur Cinq SA
563,729 l
Other subsidiaries
3.2.2.3.4
1,559,641 l
Soil use
Tracking this indicator is not relevant for the activities of the Numericable-SFR Group, because the Group does not
extend its footprint to the soil, except for the building in which it conducts its activities (offices and datacenters) which are
located in urban areas.
For more details on the precautions taken during the deployment of a new network or a new site, refer to Chapter V
“Protection of biodiversity.”
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3.2.2.4 Climate change
3.2.2.4.1
Greenhouse gas emissions
The Group’s greenhouse gas emissions are essentially due first to the energy consumption of the technical and tertiary
infrastructures (67%) and, second, to employee business travel (33%).
Two vectors for improvement are identified to reduce the greenhouse gas emissions due to employee business travel:
 Travel less, replacing travel more often with audio and video conferencing and telepresence. We mention the audiowebconference system used by the employees at the Group’s principal tertiary sites.
 Travel better by having a travel policy that gives priority to traveling by train over air travel.
In addition, an Inter-Enterprise Travel Plan (Plan de Déplacement Inter-Entreprise or PDIE) covers all Group employees
based at the Saint-Denis Campus.
CO2 emissions attributable to energy consumption (electricity, heating oil, natural gas, heating and
cold water network)*
Subsidiaries
TOTAL NUMERICABLE-S FR GROUP
SFR SA
Result/Description
69,617 TCO2E
52,472 tCO2e
SFR SC SA
800 tCO2e
SFD SA
849 tCO2e
816 tCO2e
Cinq sur Cinq SA
Other subsidiaries
*
14,680 tCO2e
GHG emissions are calculated using the Bilan Carbone® method defined by the Bilan Carbone Association in collaboration with
France's Environment and Energy Management Agency (ADEME) and cover all group subsidiaries.
Excluding the emissions factors used to quantify the GHG emissions from business air travel, all the emissions factors used to quantify
the greenhouse gas emissions come from ADEME's Base Carbone®.
The emission factors used to quantify the GHG emissions from business air travel come from the Bilan Carbone method, Version 7.2 of
August 1, 2014.
The GHG emissions attributable to energy consumption (electricity, heating oil, heating and cold water network) of SFR Service Client
and SFR SA are calculated and prorated to the number of employees present at each tertiary site where these companies are present.
The GHG emissions attributable to the short-term car rentals of SFD SA are not reported.
CO2 emissions attributable to business travel by train, plane, and short-term rental car*
Subsidiaries
SFR SA
Result/Description
20,205 TCO2E
8,715 tCO2e
SFR SC SA
2,030 tCO2e
SFD SA
1,789 tCO2e
Cinq sur Cinq SA
Other subsidiaries
*
383 tCO2e
7,288 tCO2e
August 1, 2014.
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CO2 emissions attributable to the vehicle fleet*
Subsidiaries
Result/Description
SFR SA
13,394 TCO 2E
5,464 tCO2e
59 tCO2e
SFR SC SA
SFD SA
1,115 tCO2e
Cinq sur Cinq SA
1,795 tCO2e
Other subsidiaries
4,961 tCO2e
*
August 1, 2014.
3.2.2.4.2
Adaptation to the consequences of climate change
Given their activities and geographic locations, the companies of the Numericable-SFR Group are not forced to
implement action plans to adapt to the consequences of climate change. However, certain specific local features are
taken into consideration. For example, impact studies of the consequences of a potential hundred-year flooding of the
Seine were completed in 2010 for NC Numericable SAS and in 2014 for SFR SA.
3.2.2.5 Protection of biodiversity
Even though the operations of the Numericable-SFR Group have a low impact in this area, for every project to construct
a new network or a new site, primarily the relay antennas of SFR SA and SRR SCS, Local Urban Planning Plans are
studies to determine whether specific requirements for protection of the fauna and flora need to be taken into
consideration. When net sites are located in a natural park, specific requests are also made and the existing
requirements in the protected area are met.
In addition, the majority of the major technical sites and the tertiary sites that house the Group’s employees are located in
urban areas.
Bird houses and insect boxes have been installed on the patios of the Saint-Denis Campus. In 2015, a beekeeper
installed a series of hives in order to produce “Urban” honey.
3.3
Societal information
The digitization of society is transforming our daily lives. Jobs, recreation, social ties, citizenship, and learning: all areas
of our life are impacted. As a committed digital operator, the Group supports its consumer, business and public
customers in this transformation. In this area, consumer protection and health are major priorities.
The Numericable-SFR Group is also working to ensure that the digital revolution does not create new inequalities.
Facilitating digital access for people with disabilities, allowing low-income persons to remain connected, and making
digital a vector toward employment are all initiatives supported by the Group, particularly through the sponsorship
programs of the SFR Foundation.
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3.3.2 Societal indicators
3.3.2.1 Regional, economic and social impact of the business
3.3.2.1.1
For regional jobs and development
In the area of employment, SFR SA has established a regional revitalization program in four French departments (75, 92,
93 and 69) with the goal of creating nearly 600 jobs over two years, starting in 2016. This program encourages local
economic development with innovative digital start-ups and small and medium-sized companies. It is also developing
expert partners in traditional entrepreneurship and in the social solidarity economy.
SFR SA has signed 3 charters in order to encourage access to employment, business integration or creation in working
class areas. These charters are:
1. the national “Enterprises and Districts”
2. the departmental charter “Enterprise and Region”
3. the “Seine Saint Denis Equality” charter
SFR Communities and SFR Business act on jobs and integration through the social clauses stipulated in the majority of
bid tenders issued in the regions.
The objective of such clauses represents several hundred thousand hours of work for the integration of people in the
regions in question.
The SFR Foundation is part of the “Collective for employment,” which is designed to develop employability for permanent
jobs in three regions: Seine Saint Denis, Lyon and Marseille.
 Set up a search/action process to find vectors for employment in the regions, by targeting careers under stress
 Establish a structured organization and participation from all players in the field in setting up a process toward the
labor market.
SFR Service Client SA and NC Numericable SAS contribute to the development of jobs in the basins in which they are
present by using subcontractors for their call centers, or when installing fiber.
Investment in the networks
The year 2015 was marked by the accelerated deployment of fixed-line and mobile very-high-speed broadband in the
country.
In the mobile network the continued deployment of 4G/4G+ was facilitated by the connection of the SFR SA radio sites to
the fiber network of NC Numericable SAS. In addition, the agreement to pool a portion of the mobile access networks
with Bouygues Telecom will provide better coverage and better quality in the zones affected.
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Network investment
Subsidiaries
Value (€ million)
TOTAL NC-S FR GROUP
878.1
SFR SA*
854.4
SFR SC SA
N/A
SFD SA
N/A
Cinq sur Cinq SA
N/A
Other subsidiaries
23.7
incl. 20.8 for SRR SCS, 2.2 for OMEA and 0.7 for SMR SAS
*Consists of SFR SA, SFR Collectivités SA, NC SAS, Completel SAS.
Calculation method: CAPEX for network infrastructures and equipment, less income from disposal and subsidies received.
3.3.2.1.2
On local and resident populations
Mobile coverage rate of the population
Mobile coverage rate of the 4G population
Subsidiaries
Value
TOTAL NC-S FR GROUP
64%
SFR SA
64%
SFR SC SA
NA
SFD SA
NA
Cinq sur Cinq SA
NA
Other subsidiaries
NA
The SFR 3G network covers 99.3% of the population.
The SFR 2G network covers 99.7% of the population.
Number of fixed-line very-high-speed lines
Subsidiaries
Value
Comment
TOTAL NC-S FR GROUP
7,711,032
SFR SA
7,711,000
SFR SC SA
SFD SA
N/A
Cinq sur Cinq SA
N/A
Other subsidiaries:
Includes the very-high-speed lines of NC Numericable SAS
N/A
32
incl. 25 for SRR SCS and 7 for SMR SAS
Refer to the section on regional development for the impacts on the local and resident population.
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3.3.2.2 Relations maintained with persons or organizations concerned by the
company’s activities
3.3.2.2.1
Conditions of the dialogue with these persons or organizations
Information on the conditions of the dialogue with consumer groups
The Group’s policy for dialogue with consumer groups is based on the brands that market the B2C offers and is
organized into three components:
 Listening, to obtain a better understanding of consumer expectations;
 Respect for the opinions of the Groups;
 Transparency in explaining our services, requirements and decisions.
Number of meeting with consumer groups
Thanks to this approach, the Group has been able to build relations of trust with consumer representatives over the
years. In 2015, SFR SA, on behalf of the Group, participated in four official meetings with the major associations and
nearly thirty meet-ups with the relevant associations, a total of 34 meetings with the national representatives of several
consumer groups. These meetings are organized at the initiative of the associations, which request them during the year.
3.3.2.2.2
Partnership and sponsorship programs
Within the Group, SFR SA conducts a particularly active sponsorship policy. This policy takes of form of financial
support, through in-kind support and through expertise.
For financial giving, the SFR Foundation for Equal Opportunity supports more than 100 projects for disadvantaged
people every year.
In 2015, the SFR Foundation wanted to refocus its efforts on professional employment for groups unable to find work.
For example, the initiative “Digital in the service of jobs in the 93rd district” was a response to one of the principal needs
of the Seine Saint Denis district: jobs for the residents.
Description of projects that are representative of the corporate sponsorship policy
EXAMPLE OF AN EXTERNAL CALL FOR PROJECTS: DIGITAL IN THE SERVICE OF JOBS IN THE
93RD DISTRICT
One of the main challenges of the Seine Saint Denis district is employment for the residents, who are often very lowincome and excluded.
For the associations working in this area and for these stakeholders, digital increasingly appears to be a critical vector.
In 2015, the Foundation expanded its project for digital as a business employment vector in the area of Seine-SaintDenis by launching a call for proposals from associations responsible for integrating people with few job skills: the
program’s approach consisted of bringing together a group of associations working to provide job search support in
Seine Saint Denis in order to perform an assessment of their digital practices and, in this way, find digital projects that
could benefit from the support of the SFR Foundation.
Eleven associations were selected to participate in this program, involving meet-ups, networking, a subsidy of €1500 to
each association to finance digital usages (purchase of a PC, software, etc.) and the launch of a call for dedicated digital
proposals.
Eight associations responded to the call for proposals and thus received financial assistance to implement them: for
example, the establishment of digital workshops to direct the public to the business of tomorrow, the development of a
skills valuation tool to generate “certificates of skills” remitted to each employee at the end of the course, or the creation
of a training room for the beneficiaries within a detention center in order to optimize their job search and their digital
skills, among other proposals.
EXAMPLE OF INTERNAL CALL FOR PROPOSALS: CITIZEN SUPPORT FUND
Every year, the SFR Foundation launches two sessions of the Citizen Support Fund internally. Through this mechanism,
an employee sponsors a charitable project important to him or her and offers the association the benefit of financing from
the Foundation.
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For example, the Second Chance School (École de la 2ème chance) in Marseille received financial support of €6,000 for
its project to create an apprenticeship program to promote the independence of 4,500 young people through a job or
entrepreneurial project via the creation of an innovative platform to access content, the development of 10 to 15
interactive learning modules on the creation and management of a micro-business, a “first-support” for project holders to
assist them to organize their project and ensure their autonomy, and the creation of an incubator at the School to offer
ongoing support to young people in their efforts to become socially independent and permanently employable.
The employees of SFR SA play a key role in the Foundation’s sponsorship policy. In fact, they can make a commitment
in several ways, particularly through the status of citizen employee (a skills sponsorship that allows employees to work in
an association during working hours), solidarity leaves (to allow employees to make a commitment to international
development assistance missions), tutoring (where employees support a young person with few financial resources or
who has a disability in higher education or in the construction of his or her business project), or by sponsoring an
association (allows the SFR Foundation to finance a project sponsored by an employee).
NC Numericable SAS attaches particular and ongoing importance to support for higher education and research in
information and communication sciences and technologies; this is why NC Numericable SAS has expressed continuing
interest in the activities deployed by the Telecom Foundation of the Institut Mines-Télécom. The enterprise wanted to
support the general interest programs offered by the Institute in training, research, innovation and planning through the
establishment of a three-year (2014-2016) sponsorship agreement for €150,000.
Consolidated budget allocated to financial sponsorship programs
Consolidated budget allocated to financial sponsorship programs (in €)
Subsidiary
Value
TOTAL NC-S FR GROUP
3,212,447
SFR SA
3,155,077
Comments
SFR SC SA
-
No sponsorship
SFD SA
-
No sponsorship
CINQ SUR CINQ SA
-
No sponsorship
Other subsidiaries
57,400
incl. 50,000 NC Numericable SAS and 7400 OMEA Telecom SAS
Digital breakthrough and positive impacts made by the products and services
SFR SA works to ensure that the digital revolution does not create new inequalities
For customers with disabilities:
1. after implementing DEAFI, a customer service adapted to the deaf, SFR continued to develop this service through a
smartphone interface
2. telephony offer intended for deaf persons with free data options and videophony
3. a partnership with Handicap Zero for adapted customer relations and adaptation of the communication media in
braille, large print or audio.
For social integration:
1. airtime refill gifts to Emmaüs Connect within the “solidarity connections” program: a global support program for
disadvantaged people through mobile and Internet access solutions, training and advice;
2. the establishment of the solidarity option with our customers: an option subscribed by our customers to pay €1
monthly to Emmaüs Connect.
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3.3.2.3 Subcontracting and suppliers
3.3.2.3.1
Consideration of the social and environmental stakes in the purchasing policy
Existence of a formal commitment referring to core principles of responsibility in the purchasing
policy
FOR SFR SA
Assist and assess suppliers on their CSR performance
The principal objective of this assistance and assessment approach is to reduce risks in the supply chain.
In 2014, the number of partners evaluated was stable at 172. Specific and targeted actions were conducted at the same
time throughout the year with the suppliers whose results fell below the quality criteria set by SFR SA.
In 2015, SFR SA continued its efforts for a responsible purchasing policy by using the complete review of its panel of
suppliers to optimize its CSR assessment process by changing platform. In addition, efforts also continued with the inhouse teams, since 76% of the buyers in position at year-end have been trained in CSR through a specific training
program and a guide provided to them.
SFR SA plans to relaunch an assessment campaign at group level in 2016.
SFR SA ensures that it upholds the ten core principles of the United Nations Global Compact, of which SFR SA has
been a member since 2011 (Human Rights, labor standards, the fight against discrimination).
Make a commitment to the protected sector
SFR SA has committed approximately €3 million in expenditures to partners working in the adapted and protected sector.
FOR SFR BUSINESS SOLUTIONS SAS
SFR Business Solutions SAS promotes the purchase of services from institutions and agencies for assistance through
work (ESATs) and disability-friendly businesses (EAs).
In fact, SFR Business Solution SAS supports a policy to assistance in the employment of persons in difficulties in the
business environment, by subcontracting printing work, paper and IT equipment recycling to ESATs.
Moreover, SFR Business Solutions SAS has established a policy for purchasing eco-responsible equipment and
supplies. The paper ordered is 100% PEFC-certified and carries a European environmental label.
In addition, 70% of the office supplies ordered are eco-responsible supplies, selected on the basis of their green
specifications (products developed from recycled materials, rechargeable products, toxin-free products, NF
Environnement-certified products, and more).
SFR Business Solutions SAS also gives priority to the purchase of IT equipment that is more environmentally friendly:
the purchase of equipment containing fewer toxic substances, consuming less energy and designed to be more easily
recyclable.
The equipment is selected in accordance with stringent criteria:
 eco labels (Energy Star, Blue Angel, EPEAT, 80 plus, APUR, etc.);
 compliance with the European WEEE and RoHS regulations;
 the pick-up and recycling program set up by the maker (within the framework of the WEEE directive)
3.3.2.3.2
The importance of subcontracting and the consideration in relations with
suppliers and subcontractors of their social and environmental responsibility
In 2015, the NC-SFR Group consolidated nearly ten companies, including certain companies that were significant in
terms of size. At that time, and traditionally during these consolidation phases, the Group conducted a complete review
of its eco-purchasing system and its processes. To do this, the Group was forced to take measures that had impacts on
the automated order and payment mechanisms. In a context marked by the changing telecommunications market and
the consolidation of the Group, the harmonization of purchasing conditions became crucial. In one year, and with all our
suppliers, relations were reorganized beginning in the second half of 2015, which allowed some of them to benefit from
higher volumes of business than previously. During this transformation phase, the Group paid careful attention to its
small suppliers and subcontractors by implementing a dedicated process. The Group wanted to go further in this area by
participating in the SME Pact, which will allow the Group to build, implement and assess its actions to strengthen SMEmajor account relations.
Concerning the main subcontracted activities, in the sense of the use of services performed under a service agreement,
and the location in 2015:
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 Contact centers: the Group subcontracts a large portion of the customer service and retention services, primarily in
France, Portugal and North Africa;
 Network deployment and maintenance: these activities on the Group’s fixed-line and mobile network are primarily
subcontracted in France;
 Information systems: certain developments and operating maintenance, as well as supervisory activities, are also
subcontracted in France, but also in Europe.
The service agreements include a CSR clause which commits the subcontractor to comply with the provisions set forth in
the conventions of the International Labor Organization, particularly respect for the dignity and basic rights of its
employees.
In 2007, the Group decided to outsource a majority of its call centers (to service providers operating in France and North
Africa). Moreover, the end-to-end deployment model for the networks relies very heavily on subcontractor partners: the
installer subcontractors (STITS). The information system, most of which has historically been subcontractor, was
transformed in 2015 in order to internalize the expertise.
The Group is planning to launch a project to map the subcontracting activities, meaning the use of services performed
under a service contract, during 2016.
CSR clauses in the contracts
The existing CSR (Corporate Social Responsibility) clause at SFR SA was progressively included in all new Group
contracts signed in 2015.
At the level of the subsidiaries, with the exception of SFR Business Solutions SAS, no CSR clause is included in the
contracts.
CSR clauses in the contracts (qualitative information on the process to include the clauses in the
contracts)
Subsidiaries
Results/Description

SFR SA


Inclusion of a CSR clause in the contracts.
Harmonization of purchasing processes.
Generalized inclusion of this clause in all new contracts.
SFR SC SA
No inclusion of a specific CSR clause with service providers.
SFD SA

Cinq sur Cinq SA

However, inclusion of the subsidiary in the calls for proposals from ESATs which the company
uses periodically.
Other subsidiaries:
No CSR clause, with the exception of SFR Business Solution SAS
SFR Business Solution SAS includes environmental and social clauses in its contracts, establishes prevention plans with the service
providers working on the subsidiary’s sites (association of Environmental and Safety rules), selects suppliers that integrate
environmental criteria (compliance with regulations, ISO 14001 certification, consideration of product life cycles, etc.) and regularly
evaluates the CSR performance of its suppliers (via a questionnaire that covers the various CSR topics)
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3.3.2.4 Fair practices
3.3.2.4.1
The measures initiated to prevent corruption
Business ethics
In 2015, the Group drafted its new code of ethics and commitment, which applies to all the subsidiaries. It can be found
on the Group’s institutional site. It forms the foundation for the Compliance program and will be cited in all components of
this program. It will be reviewed during the deployment of the training sessions in four principal areas: competition, anticorruption, data privacy and CSR. This code will also be distributed to every new employee. A charter and a user’s guide
have been prepared and will soon be available on the Group’s intranet site.
An e-learning training module and “serious games” are currently being deployed on the competition component.
Business ethics
Subsidiaries
Results/Comments

SFR SA


SFR SC SA

Particular vigilance for fraud (specifically in contracts)
Regular performance of verifications and audits at points of sale
No specific initiative
Covered by the “ethics code” of the NC-SFR Group
SFD SA
Inclusion of a “Code of good conduct” in the internal rules:
Affirmation of the values of Customer Satisfaction, Team Spirit, Honesty, Responsiveness, Rigor and
Profitability) with the goals of preventing any potential conflict concerning compliance with internal
procedures, any privileged relationship, pressure, insider trading, corruption, and the management of
supplier and customer gifts
Cinq sur Cinq SA
Modification of the Ethics Code and commitment in 2014 with the launch of the “Top
5 knowing the customer” program
 Search for correct behavior both in-house and outside
 Sellers awareness of the risk of equipment misappropriation starting with on-boarding
 Particular vigilance for fraud (specifically in contracts)
 Regular performance of verifications and audits at points of sale
Other subsidiaries:



SFR Business Solutions
SAS



3.3.2.4.2
Strict application of the regulations (most of the activities are related to French companies)
Regular evaluation of compliance with regulations by the competent authorities
Compliance with special anti-corruption measures proposed/requested by customers
Ban on personnel accepting any form of corruption from suppliers and partners
Company compliance with the protection of international laws on Human Rights and the
application of the laws, conventions and regulations in force in France.
Assurance of respect for Human Rights of partners and subcontractors (with a certification
system)
Measures taken for consumer health and safety
Initiatives to support the visibility of health information with customers
Initiatives to support the visibility of health information with customers
Subsidiaries
Result/Description
SFR SA
Massive distribution of the information contained in the brochure from the French Telecom
Federation (FFT) “My mobile phone and my health”
 Provision of these items to every new customer, along with the general subscription terms and
conditions
 Regular updates
 Contribution of complete, updated information via the dedicated website: www.mobile-etradiofrequences.com
 Provision of the information to Business customers via the general sales terms and conditions
Distribution of usage precautions recommended by the health authorities
 Reduction of the exposure to radio waves, such as the use of a headset (provided free of charge in
all mobile packages sold by SFR SA) and the recommendation to telephone in zones with good
reception
 Display of the maximum exposure level (SAR: specific absorption rate) of the phones in its sales
brochures, on the shelves of its retail network, on its Internet sites, and in its advertising, as
required by regulations.
138
3
Availability of online information about radiofrequencies and health for the sales teams in the
metropolitan distribution network to provide better answers to customer questions
SFR SC SA
Not concerned
SFD SA
Not concerned
Cinq sur Cinq SA
Distribution of information on the questions relating to mobile phones and Health to the stakeholders.
Reliance on SFR SA, which massively distributes the brochure from the French Telecom Federation
(FFTelecoms) with similar actions and objectives.
Relay of the precautions for use recommended by the health authorities to reduce exposure to
radio waves:
 Use of a headset (provided at no charge with all mobile phones sold by 5 sur 5)
 Recommendation to phone in zones with good reception
 Display of the maximum exposure level (SAR: specific absorption rate) of the phones in its sales
brochures, on the shelves of its retail network, on its Internet sites, and in its advertising, as
required by regulations.
Availability of online information about radiofrequencies and health for the sales teams in the
metropolitan distribution network to provide better answers to customer questions
The Corporate sales teams also take various awareness training programs.
Number of health and radiofrequency information meetings with stakeholders
Number of health and radiofrequency information meetings with stakeholders (in 2015)
Subsidiary
TOTAL
Value
Comments
349
SFR SA
349
Highly varied requests:
Support for deployment teams to support a project and respond to any
questions
 Contact with the regional authorities during negotiations of mobile
telephony deployment charters, or meetings held at the request of the
CHSCT of the business customers of SFR.
 224 of the 349 meetings were public meetings.
SFR SC SA
-
Shared with SFR SA
SFD SA
-
Shared with SFR SA
Cinq sur Cinq SA
-
Shared with SFR SA

Other subsidiaries:
Not concerned, excluding SRR SCS and not available for SMR SCS
The Wi-Fi boxes carry the EC marking and therefore comply with the European regulations in force.
Independent measurements of the electromagnetic field performed in accordance with the ANFR
protocol in force
The National Agency of Frequencies (ANFR) is the operational manager of the electromagnetic field measurement
control mechanism, the cost of which is supported by the telecom operators via a public fund paid for by a surtax on the
Flat Tax on Network Enterprises (IFER) under Budget Act 2010-1657 of December 29, 2010 and the related
implementing decree. The total amount paid by the industry (around €5 million/year) is used to finance measurements of
electromagnetic field and, secondly, research on radiofrequencies, through a subsidy of €2 million/year paid back to the
French National Agency for Health Safety in food, the environment and the workplace (ANSES).
Through the ANFR website cartoradio.fr, it is possible to know the location of all radioelectric stations of more than 5 W
in the national territory (mobile telephony relay antennas, television or radio broadcasters, private networks) as well as
the results of the measurements taken.
139
3
Description of the mechanisms set up for ethical content
Subsidiaries
Result/Description
SFR SA
Customers are offered different solutions to protect their data and usages from digital risks on
mobile devices or Mac or PC computers;
Fight against voice spam and spam via SMS on mobile.
 Commitment made in the fight against spam and contribution to the improvement work with the
different stakeholders: participation with Orange and Bouygues Telecom in the work of the French
Association of Mobile Multimedia (AFMM) to establish a 33700 telephone platform that allows
customers to report, at no cost, when they are victims of telephone spam, i.e., the receipt of voice
spam or a text spam; and active participation in work in progress with governmental bodies
(DGCCRF, ARCEP) and the industry associations (AFMM, SVA+) to develop the possibilities of
actions against fraudulent players.
 Every day, an SFR SA unit specialized in fighting spam suspends reported toll numbers or toll SMS
so that other customers cannot get scammed.
 Work to improve the detection of mobile lines sending spam directly in its network (new action
process created and suspension of these lines should be implemented in 2016)
 Inclusion in its contracts with its own customers buying toll numbers of clauses on compliance with
the “Ethical Recommendations” issued in collaboration with the other operators in the fight against
spam. As a result, SFR SA can terminate a contractual relationship with a customer that generates
spam.
SFR SC SA
Not concerned
SFD SA
Not concerned
Cinq sur Cinq SA
Not concerned
Other subsidiaries:
Not concerned or identical to SFR SA for OMEA Telecom SAS.
NC Numericable SAS has established a parental control system for its box. TV and VOD offers containing Category V (Rrated) programs can be locked and require the entry of a parental code for viewing.
Identification/age: the identification provided by the publishers in the TV flow is displayed. This is explained to customers in the
rate brochure.
Adult content: in addition to the fact that adult content is signaled and locked, it has also been isolated from the other content.
This is the case for the VOD portal dedicated to adult viewing. Customer must enter their parental code to access the
programming. Finally, no adult content is distributed on computers or tablets. In addition, NC Numericable SAS complies with
the CSA recommendations on broadcast schedules for adult programs between midnight and 5:00 am. Outside this time
period, the customer does not access the streaming, or it is not adult programming (only erotic).
Identification of under three years old: the CSA amendment on the protection of children under the age of 3 is presented in the
rate brochure given to all customers for any subscription, and it is also available online. The Baby TV channel also broadcasts
this message on its channel.
Formal commitment to protect personal data
Consumer trust in the digital economy and the new services offered to them depends on the effective protection of their
data. For this reason, SFR SA is committed to the protection, confidentiality and security of the personal data of the
users of its services and to respect for their privacy. In 2015, the Numericable-SFR SA Group defined a General
Information Security Policy approved by Management, which provides a set of Group standards based on the ISO 27001
standard and applicable to all subsidiaries of the Group.
To support this ambitious process, a number of measures were implemented in 2015 to secure the information system
and the personal and/or confidential data of the customers, subscribers and/or consumers:
 A quarterly meeting of the Information Security Committee with Management, led by the Director of Fraud and
Information Security;
 A Network of Information System Security Officers (RSSI) and security agents for the entire Group;
 The definition and monitoring of a plan of group-wide security actions throughout the entire Group;
 The definition of a risk analysis methodology and support for the different subsidiaries in order to identify their
critical resources and conduct the first risk analyses;
 The offer of 15 security training sessions for administrators and developers and 12 sessions to improve
awareness of the fight against fraud;
 The performance of security audits: exposures of the operator networks from the outside, the LTE network core,
the box, IPv6 implementation, self-care;
 The definition and implementation of a tool to detect the GP Selfcare customers pirated as a result of phishing
campaigns targeting customers directly;
 Reinforcement of the consumer Selfcare mechanisms for mobile customers (OTP SMS for certain sensitive acts
such as consulting the SEPA mandate);
 Continuation of the PCI DSS designed to delete the Bank Card data of our customers from our systems;
 Signature of the Charter on securing the emails of B2C customers with the French National Agency on
Information Systems Security (ANSSI).
140
3
THE FIGHT AGAINST “PHISHING”
Phishing is a technique used by con artists to obtain personal information in order to steal an identity. The technique
consists in making the victim believe that he/she is writing to a trusted third party - a bank, government agency, etc. - in
order to obtain personal information from the victim: password, credit card number, date of birth, etc. This is a form of
data attack based on social engineering.
SFR SA continues its customer information campaign. The communication initiative to increase the awareness of all its
customers about phishing was repeated in October 2015 with the transmission of an educational information email to its
entire base.
In addition, the educational tool deployed in 2014 to make customers aware of phishing is kept up to date, particularly the
help page “Phishing: 12 simple acts to fight fraudulent emails.”
SFR SA is also an active member of the Signal-Spam association of public and private players to fight undesirable
emails.
141
3
Formal commitments to protect data
Subsidiary
Comments
SFR SA
SFR SA is committed to the protection, confidentiality and security of the personal data of the users of
its services and to respect for their privacy.
SFR SC SA
Covered by the Group policy
SFD SA
Cinq sur Cinq SA
Cinq sur cinq SA is committed to compliance with the laws and regulations governing data protection,
using software that is also secured.
Other subsidiaries
NUMERICABLE SAS
SRR SCS
COMPLETEL SAS
SFR Business Solutions
SAS
OMEA TELECOM SAS
Since September 2013, SFR Business Solutions SAS has been ISO 27001 certified on ROC activities
(Supervision and Operation), Support (Warranty, Maintenance and Proactive Support) and ISD
(Information Systems Department).
The purpose of the SMSI of SFR Business Solutions SAS is to measure and verify our commitments
to availability, confidentiality and integrity of the information, based on a process of continuity of
activity and traceability over a perimeter with high interactions with the infrastructures of our
customers.
SFR Business Solutions SAS is committed to taking into consideration effectively the expectations of
its customers for information security, while comply with the laws and regulations governing its
activity, its contractual obligations, and the requirements of ISO 27001.
Compliance with the laws and declaration obligations with the CNIL, but no additional formal
commitment on the protection of data.
FUTUR TELECOM SAS
Declaration of customers files to the CNIL and indication in the General Terms and Conditions of
Sale.
2SIP SAS
The company has made a commitment to comply with the laws and regulations on the protection of
employee data, particularly by using software that complies with these same principles.
3.3.2.4.3
Actions in support of human rights
Information on non-discrimination/equal opportunity for both internal and/or external populations
This information is discussed in the section on the elimination of job and professional discrimination (see social
information).
142
3
3.4
Cross-reference table(s)
Legend
CE
STA
N
SSI
E
Total workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Male workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Female workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Total workforce under 26
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Total workforce age 26-29
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Total workforce age 60 or older
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Number of new hires
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Number of terminations
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Total payroll
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Agreements signed regarding compensation
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Full-Time Male Workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Part-Time Male workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Full-Time Female Workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Part-Time Female Workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Number of days absent
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Absenteeism rate
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Social dialogue
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Number of agreements signed with union organizations
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Description of "occupational health and safety conditions"
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Number of agreements signed relating to health, safety and work conditions
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Number of occupational accidents
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Frequency rate of occupational accidents
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Severity rate of occupational accidents
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Training policy
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Male management-level workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Male non-management-level workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Female management-level workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Female non-management-level workforce
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Promotions given to men
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Promotions given to women
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
Employees with disabilities
OS
X
X
X
X
X
X
X
X
X
X
TBD
OS
X
X
Number of managers trained in non-discrimination and diversity
OS
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
NNE
CT
A
CO
SFR
CO
SM
R
LLE
C
TIV
IT
M
LTI
TEL
ECO
FUT
UR
CO
M
SRR
NCE
RA
ELE
EA
T
US
F
OM
IND
CO
NC
TEL
ERI
CAB
LE
MP
LET
EL
UR
5
NUM
5S
EC
SFD
SER
VIC
SFR
Num
eric
Social indicators
SFR
able
SFR
LI E
N
SA
T
OS: outside scope of consolidation
NA: not available
N/A: not applicable
TBD: to be defined
143
Environmental Indicators
Amount of provisions and guarantees for environmental risks
Total production of Hazardous Waste (HW)
Total production of Non-Hazardous Waste (NHW)
Weight of business electrical and electronic equipment produced
Weight of household waste electrical and electronic equipment
collected
Rate of integration of new relay antennas in the landscape
Water consumption
Paper consumption
Consumption of raw materials related to production and logistics
activities
Direct consumption of electrical energy
Direct consumption of fossil energy: natural gas and fuel oil
Other direct energy consumption
Corporate fleet
Consumption of fuel of vehicle fleet: gas and diesel
CO2 emissions attributable to energy consumption
CO2 emissions for business travel by train, plane, or short-term rental
car
CO2 emissions attributable to business travel of corporate fleet
NUM
ERI
CAB
LESFR
SFR
SFR
SER
VIC
EC
LIE
NT
SFD
5S
UR
NC
5
NUM
ERI
CAB
CO
LE
MP
SFR
L
E
BUS
TEL
INE
SS
SOL
OM
UTI
EA
ON
TEL
S
ECO
M
SRR
FUT
UR
TEL
ECO
M
LTI
SM
R
SF R
CO
LLE
CO
CTI
NNE
VIT
CT
E
ASS
IST
ANC
E
3
OS
X
X
X
X
X
X
X
X
X
X
OS
OS
X
X
OS
X
X
X
X
NA
NA
N/A
N/A
X
N/A
OS
OS
N/A
N/A
OS
X
X
NA
X
X
X
X
X
X
X
OS
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
OS
OS
X
X
OS
X
N/A
N/A
N/A
X
N/A
N/A
NA
X
N/A
OS
OS
N/A
N/A
OS
X
N/A
N/A
N/A
N/A
N/A
N/A
N/A
X
N/A
OS
OS
N/A
N/A
OS
X
X
X
X
X
X
X
X
X
X
OS
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
OS
OS
X
X
OS
X
N/A
N/A
X
NA
N/A
N/A
NA
NA
N/A
OS
OS
N/A
N/A
OS
X
X
X
X
X
X
X
X
X
OS
OS
X
X
OS
X
X
X
N/A
NA
NA
X
N/A
X
N/A
OS
OS
X
N/A
OS
X
X
N/A
N/A
N/A
N/A
X
N/A
N/A
N/A
OS
OS
X
N/A
OS
X
X
X
X
X
X
X
X
X
X
OS
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
OS
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
OS
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
OS
OS
X
X
OS
X
X
X
X
X
X
X
X
X
X
OS
OS
X
X
X
144
E
STA
NCE
TIV
IT
Reduction of digital invoices
Investment in networks
OS
X
X
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
OS
X
N/A
N/A
N/A
X
X
N/A
X
X
N/A
N/A
X
X
N/A
Mobile coverage rate of the population
OS
X
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Number of very-high-speed fixed lines
OS
X
N/A
N/A
N/A nclusiv N/A
N/A
N/A
X
N/A
N/A
X nclusive N/A
Information on the conditions of the dialogue with consumer groups
OS
X
N/A
N/A
N/A
N/A
X
X
N/A
N/A
X
Number of meetings with consumer groups
OS
X
N/A
N/A
N/A nclusiv N/A
Consolidated budget allocated to financial sponsorship actions
OS
X
X
X
X
X
X
X
X
X
X
X
X
X
Description of projects that are representative of the corporate sponsorship policy
Existence of a formal commitment in reference to the core principles of responsibility in the purchasing policy
CSR clauses in contracts
OS
X
X
X
X
X
X
X
X
X
X
X
X
X
OS
X
X
X
X
X
X
X
X
X
X
X
X
X
X
OS
X
OS
OS
OS
OS
OS
X
OS
OS
OS
OS
OS
OS
OS
Business ethics
OS
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Initiatives to support visibility of health information with customers
OS
X
N/A
N/A
N/A
N/A
N/A
N/A
N/A
X
N/A
N/A
N/A
N/A
N/A
Number of health and radiofrequency information meetings with stakeholders
OS
X
N/A
N/A
N/A
N/A
N/A
N/A
N/A
X
N/A
N/A
NA
N/A
N/A
Independent measurements of the electromagnetic field performed in accordance with the ANFR protocol in force
OS
X
N/A
N/A
N/A
N/A
N/A
N/A
N/A
X
N/A
N/A
N/A
N/A
N/A
OS
X
N/A
OS
OS
X
N/A
N/A
X
X
N/A
N/A
X
N/A
N/A
Formal commitment to protect personal data
OS
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Information on non-discrimination/equal opportunity for both internal and/or external populations
OS
X
X
X
X
X
X
OS
X
X
X
X
OS
X
X
X
N/A
N/A nclusive
nclusiv N/A
SSI
NNE
CT
A
R
LLE
C
CO
SM
CO
SFR
UR
5
ERI
CAB
CO
LE
MP
LET
SFR
EL
BU
SIN
ESS
SOL
OM
UTI
EA
ON
TEL
ECO
M
SRR
FUT
UR
TEL
ECO
M
LTI
5S
NC
NUM
EC
SFD
SER
VIC
SFR
Num
éric
Societal indicators
SFR
able
SFR
LI E
N
SA
T
3
N/A
N/A
N/A nclusive N/A
N/A
X
X
145
3
Report by one of the Statutory Auditors, appointed as
independent third party, on the consolidated human resources,
environmental and social information included in the
management report
This is a free English translation of the Statutory Auditors’ report issued in French and is provided solely for the
convenience of English-speaking readers. This report should be read in conjunction with, and construed in
accordance with, French law and professional standards applicable in France.
For the year ended 31 December 2015
To the Shareholders,
In our capacity as Statutory Auditor of Numericable-SFR S.A. Company, (the “Company”), appointed as independent
1
third party and certified by COFRAC under number 3-1049 , we hereby report to you on the consolidated human
resources, environmental and social information for the year ended 31 December 2015, included in the management
report (hereinafter named "CSR Information"), pursuant to article L.225-102-1 of the French Commercial Code (Code de
commerce).
Company’s responsibility
The Board of Directors is responsible for preparing a company's management report including the CSR Information
required by article R.225-105-1 of the French Commercial Code in accordance with the protocol used by the Company
(hereinafter the "Guidelines"), summarised in the management report and available on request from the company's head
office.
Independence and quality control
Our independence is defined by regulatory texts, the French Code of ethics (Code de déontologie) of our profession and
the requirements of article L.822-11 of the French Commercial Code. In addition, we have implemented a system of
quality control including documented policies and procedures regarding compliance with the ethical requirements, French
professional standards and applicable legal and regulatory requirements.
Statutory Auditor’s responsibility
On the basis of our work, our responsibility is to:
attest that the required CSR Information is included in the management report or, in the event of non-disclosure of a part
or all of the CSR Information, that an explanation is provided in accordance with the third paragraph of article R.225-105
of the French Commercial Code (Attestation regarding the completeness of CSR Information);
express a limited assurance conclusion that the CSR Information taken as a whole is, in all material respects, fairly
presented in accordance with the Guidelines (Conclusion on the fairness of CSR Information).
Our work involved seven persons and was conducted between December 2015 and March 2016 during a five week
period. We were assisted in our work by our CSR experts.
We performed our work in accordance with the French professional standards and with the order dated 13 May 2013
2
defining the conditions under which the independent third party performs its engagement and with ISAE 3000
concerning our conclusion on the fairness of CSR Information.
1.
Attestation regarding the completeness of CSR Information
Nature and scope of our work
On the basis of interviews with the individuals in charge of the relevant departments, we obtained an understanding of
the Company’s sustainability strategy regarding human resources and environmental impacts of its activities and its
social commitments and, where applicable, any actions or programmes arising from them.
We compared the CSR Information presented in the management report with the list provided in article R.225-105-1 of
the French Commercial Code.
1
2
Whose scope is available at www.cofrac.fr
ISAE 3000 – Assurance engagements other than audits or reviews of historical financial information
146
3
For any consolidated information that is not disclosed, we verified that explanations were provided in accordance with
article R.225-105, paragraph 3 of the French Commercial Code.
We verified that the CSR Information covers the scope of consolidation, i.e., the Company, its subsidiaries as defined by
article L.233-1 and the controlled entities as defined by article L.233-3 of the French Commercial Code within the
limitations set out in the “III – Informations Sociales, Environnementales et Sociétales” section of the management report.
Conclusion
Based on the work performed and given the limitations mentioned above, we attest that the required CSR Information
has been disclosed in the management report.
2.
Conclusion on the fairness of CSR Information
Nature and scope of our work
We conducted fifteen interviews with the persons responsible for preparing the CSR Information in the departments in
charge of collecting the information and, where appropriate, responsible for internal control and risk management
procedures, in order to:
 assess the suitability of the Guidelines in terms of their relevance, completeness, reliability, neutrality and
understandability, and taking into account industry best practices where appropriate;
 verify the implementation of data-collection, compilation, processing and control process to reach completeness and
consistency of the CSR Information and obtain an understanding of the internal control and risk management
procedures used to prepare the CSR Information.
We determined the nature and scope of our tests and procedures based on the nature and importance of the CSR
Information with respect to the characteristics of the Company, the human resources and environmental challenges of its
activities, its sustainability strategy and industry best practices.
1
Regarding the CSR Information that we considered to be the most important :
at parent entity level, we referred to documentary sources and conducted interviews to corroborate the qualitative
information (organisation, policies, actions), performed analytical procedures on the quantitative information and verified,
using sampling techniques, the calculations and the consolidation of the data. We also verified that the information was
consistent and in agreement with the other information in the management report;
2
at the level of a representative sample of entities selected by us on the basis of their activity, their contribution to the
consolidated indicators, their location and a risk analysis, we conducted interviews to verify that procedures are properly
applied and to identify potential undisclosed data, and we performed tests of details, using sampling techniques, in order
to verify the calculations and reconcile the data with the supporting documents. The selected sample represents 42% of
headcount and between 19% and 100% of quantitative environmental and social data disclosed.
For the remaining consolidated CSR Information, we assessed its consistency based on our understanding of the
company.
We also assessed the relevance of explanations provided for any information that was not disclosed, either in whole or in
part.
We believe that the sampling methods and sample sizes we have used, based on our professional judgement, are
sufficient to provide a basis for our limited assurance conclusion; a higher level of assurance would have required us to
carry out more extensive procedures. Due to the use of sampling techniques and other limitations inherent to information
and internal control systems, the risk of not detecting a material misstatement in the CSR information cannot be totally
eliminated.
1
Human resources information: Total headcount at end of period and breakdown by sex and age; Number of hires; Number of redundancies;
Absenteeism rate; Frequency rate and severity rate of work accidents; Number of signed agreements on safety, health and working conditions issues;
Number of agreements signed with trade unions; Total number of training hours.
Environmental information: Total energy consumption; Fuel consumption of the vehicle fleet (petrol and diesel); CO2 emissions attributable to energy
consumption; CO2 emissions for business travel by train, plane and short-term rental car; CO2 emissions attributable to movements of the vehicle fleet;
Total production of hazardous and non-hazardous waste; Weight of professional electronic and electrical equipment produced; Weight of household
waste electronic and electrical equipment collected.
Social information: Mobile coverage rate of the population; number of very high-speed fixed lines; Investment in networks; Number of meetings with
consumer associations; Number of information meetings on the topic of Health and radiofrequencies to stakeholders.
Material qualitative information: Organization of social dialogue including information procedures, consultation and negotiation with the employees; The
organization of the company to integrate environmental issues and, if appropriate, the assessments and certification process regarding environmental
issues; Resources allocated to prevention of environmental risks and pollution; Consideration of noise and of any other activity specific pollution;
Integration of social and environmental issues into the company procurement policy; Importance of subcontracting and consideration, in the
relationship with subcontractors and suppliers of their social and environmental responsibility.
2
SFR S.A.
147
3
Conclusion
Based on the work performed, no material misstatement has come to our attention that causes us to believe that the
CSR Information, taken as a whole, is not presented fairly in accordance with the Guidelines.
Paris La Défense, on March 29, 2016
French original signed by
KPMG S.A.
Philippe Arnaud
Grégoire Menou
Partner
Partner
Climate Change & Sustainability Services
148
4
Corporate governance
4
4.1
4.2
4.3
Administrative and management bodies ....................................................................... 160
4.1.1 Board of Directors
160
4.1.2 Management Team
167
4.1.3 Executive committees
167
4.1.4 Statement concerning members of the Board of Directors and of the Management
Team, conflicts of interest
169
Interests and remuneration ............................................................................................. 170
4.2.1 Compensation and benefits of executives and corporate officers
170
Corporate governance and internal control ................................................................... 176
4.3.1 Corporate governance
176
4.3.2 Procedures governing shareholder participation in shareholders’ meetings
176
4.3.3 Internal control and risk management
181
149
4
4.1
4.1
Administrative and management bodies
4.1.1 Board of Directors
The table below shows the composition of the Company’s Board of Directors as of the date of this Registration
Document.
Name; business
address; number of
Company shares
held
Age
Michel Combes
Appointed by Altice
Eric Denoyer
Appointed by Altice
Principal appointments and positions held
outside the Company and the Group within the
last five years
Expiration of term
of office
Main position held
within the Company
53
years
Ordinary
Shareholders’
Meeting called to
approve the financial
statements for the
fiscal year ending
December 31, 2017
Chairman and CEO
Appointments and positions held:
 Director of HDL Développement
 CEO of Altice BV
 Chairman and CEO of Numericable-SFR
 Director of Mobile Telesystems OJSC
Appointments and positions held during the last
five years that are no longer held:
 Director of Assystem
 CEO of Vodafone Europe
 Director of Vodafone plc
 Chairman of the Supervisory Board of Assystem
 Director of ISS
 CEO of Alcatel Lucent SA
 Director of Altice and member of the Audit
Committee
51
Ordinary
Shareholders’
Meeting called to
statements for the
fiscal year ending
December 31, 2017
Director
Appointments and positions held as of the date of
this Registration Document:
 Director of S Inter SA
 Chairman of EDEN
None
150
4
4.1
Name; business
address; number of
Company shares
held
Jérémie Bonnin
Appointed by Altice
Age
41
3 boulevard Royal,
L-2449 Luxembourg
Number of Company
shares held: 325(9)
Expiration of term
of office
Ordinary
Shareholders’
Meeting called to
statements for the
fiscal year ended
December 31, 2015
Main position
held within the
Company
Principal appointments and positions held outside
the Company and the Group within the last five
years
Director
Appointments and positions held:
 Permanent representative of A4 S.A. to the Board of
Directors of Altice N.V.
 Director of Altice Management Europe S.A.
 Chairman of the Supervisory Board of Altice Blue
Two SAS
 Director of Altice Portugal
Mr. Bonnin holds other directorships or management
posts in subsidiaries of the Altice Group.
 Director of Hot Telecommunication Systems
 Director of Hot Mobile
 Director of Titan Consulting
 Director of Altice Blue One SAS
 Director of Cabovisao Televisão por Cabo, SA
 Director of Winreason, SA
 Director of ONI SGPS, SA
 Director of ONIMaderia - Infocomunicaçoes, SA
 Director of ONITelecom - Infocomunicaçoes, SA
 Director of F300 - Fiber Communications SA
 Director of Hubgrade SA
 Director of Next GP
 Director of Uppernext GP
 Director of Altice SA
 Manager of Altice Pool Sàrl
 Director of Before S.A.
 Director of Next Alpha SA, SPF
 Director of BYEBYE S.A.S
 Manager of SDP Lux Sàrl
 Director of FFV GP
 Director of CVC 1 B.V.
Jean-Michel
Hegesippe
Appointed by Altice
67
Ordinary
Shareholders’
Meeting called to
statements for the
fiscal year ended
December 31, 2015
Director
 Chairman and member of the Executive Board of
Altice Blue Two SAS
 Chairman and chairman of the Executive Board of
OMT Invest SAS
 Chairman of the Executive Board of Outremer
Télécom SA
 Chairman and chairman of the Executive Board of
OPS SAS
 Chairman of Mobius SAS
 Manager of Informatique Télématique Océan Indien
SARL
 Chairman of Martinique TV Cable SA
 Director of Outremer Telecom Limited
 Chairman of Word Satellite Guadeloupe SA
 Director of television channel ATG
65
Ordinary
Shareholders’
Meeting called to
statements for the
Independent
Director
 Chairman of the Supervisory Board of IDI
 Chairman of Cavamont Holdings Ltd
109 rue du Faubourg
Saint Honoré, 75008
Paris
Number of Company
shares held: 100
Luce Gendry
23 bis avenue de
Messine, 75008 Paris
(9)
In addition, Jérémie Bonnin indirectly has a marginal equity investment in Altice S.A.
151
4
4.1
Name; business
address; number of
Company shares
held
Number of Company
shares held: 100
Age
Expiration of term
of office
fiscal year ended
December 31, 2015
Main position
held within the
Company
years
 Director of FFP
 Director of Nexity
 Director of SUCDEN
 Senior advisor of Rothschild & Cie
 Managing Partner of Rothschild & Cie
 Managing Partner of Rothschild & Cie Banque
 Director of INEA
152
4
4.1
Name; business
address; number of
Company shares
held
Age
Bernard Attali
70
52
2 rue de Villersexel,
75007 Paris
Number of Company
shares held: 100
Angélique Benetti
Appointed by Altice
Campus SFR
Rue Jean-Philippe
Rameau
93210 Saint-Denis
Main position
held within the
Company
years
Ordinary
Shareholders’
Meeting called to
statements for the
fiscal year ending
December 31, 2016
Independent
Director
 Senior Advisor of TPG Capital (San Francisco,
London, Paris)
 Senior Advisor (London, Paris) of Bank of America
Merrill Lynch,
 Chairman of Financière de l’Audière
 Director of Air Canada
 Director of Eurotunnel
 Director of TDF
 Director of International Power Plc
Ordinary
Shareholders’
Meeting held to
approve the 2017
financial statements
Director
Executive Vice
President, Content
- Member of the
Executive
Committee
 Director of Televista
 Member of the Supervisory Board of VOD Factory
 None
Shareholders’
Meeting held to
statements for the
fiscal year ending
December 31, 2016
Director
Deputy Chief
Executive Officer,
Media/Advertising
this Registration Document
Chairman of News Participations SAS
Chairman of Groupe News Participations SAS
Chairman of the Board of Directors of Groupe News
Participations SAS
Chairman of WMC SAS
Chairman and CEO of NextRadioTV SA
Chairman of BFM TV SASU
Chairman of Business FM SASU
Chairman of BFM Business TV SASU
Chairman of CBFM SASU
Deputy Chairman of RMC SAM
Chairman of RMC Sport SASU
Chairman of RMC Découverte SASU
Chairman of RMC-BFM Edition SASU
Chairman of RMC BFM Production SASU
Chairman of NextRadioTV Production SASU
Chairman of NextDev SASU
Chairman of Groupe Tests Holding SAS
Chairman of NextInteractive SASU
Chairman of Next Régie SASU
Chairman of BFM Sport SASU
Chairman of NextServices SASU
Chairman of SportsCoTV SASU
Chairman of New Co B SASU
Chairman of NewCo C SASU
Chairman of NewCo E SASU
Chairman of BFM Paris SASU
Chairman of La Banque Audiovisuelle SASU
Permanent representative of NextRadioTV to the Board
of Directors of Médiamétrie SA
President of the SRGP (Syndicat des Radios
Généralistes Privées)
Chairman of ACF
Expiration of term
of office
Number of Company
shares held: 100
Alain Weill
Appointed by Altice
153
4
4.1
Name; business
address; number of
Company shares
held
Age
Expiration of term
of office
Main position
held within the
Company
years
Chairman of Internext S.A.S.
Manager of GT LABS S.A.R.L.
Chairman of Seliser
Chairman and CEO of Cadre Online
Chairman of La Tribune Holding S.A.S.
Chairman of La Tribune Régie S.A.S.
Chairman of La Tribune Desfossés S.A.S.
Chairman of Paris Portage S.A.S.
Chairman of RMC Régie S.A.S.
Manager of La Chaine Techno S.A.R.L
Director of ILIAD
Chairman of Moneyweb
The Board of Directors is partially re-elected each year to ensure that the Board is staggered.
The expiration dates of the terms of office of the seven current Board members as of the date of this Registration
Document are as follows: (i) a first group of three directors (Michel Combes, Eric Denoyer - who was co-opted for the
remaining term of office of Dexter Goei - and Angélique Benetti), appointed for a term that will expire at the end of the
ordinary general shareholders’ meeting called to approve the financial statements for 2017, (ii) a second group
composed of three directors (Jérémie Bonnin, Jean-Michel Hégésippe and Luce Gendry), appointed for a term that will
expire at the end of the ordinary general shareholders’ meeting called to approve the financial statements for 2015, and
(iii) a third group composed of Bernard Attali and Alain Weill, appointed for a term that will expire at the end of the
ordinary general shareholders’ meeting called to approve the financial statements for fiscal year 2016.
The directors representing Vivendi resigned in 2015 after the Company and Altice acquired Vivendi’s stake in the
Company on May 6, 2015. Patrick Drahi and Dexter Goei also resigned during the year, while Michel Combes joined the
Board as Chairman to replace Patrick Drahi.
In early 2016, Colette Neuville tendered her resignation and former Chief Executive Officer Eric Denoyer was appointed
as director of the Company to replace Dexter Goei. In addition, Isabelle Giordano, appointed as independent director at
the Board meeting on March 11, 2016 to replace Colette Neuville, resigned on March 17, 2016. Alain Weill was
subsequently co-opted by the Board on May 9, 2016. The Board nominated Alexandre Marque (appointed by Altice) and
Manon Brouillette as independent directors at the shareholders’ meeting on June 21, 2016.
4.1.1.1 Evaluation of the independence of directors
The criteria used by the Board of Directors to evaluate the independence of directors are those defined by the AFEPMEDEF Code.
In accordance with the AFEP-MEDEF Code, which the Company has adopted, directors are considered to be
independent when they have no relationship of any kind whatsoever with the Company, its Group or the management of
either that could compromise their judgment.
In particular, the criteria to be reviewed by the Nominating and Compensation Committee and the Board in order for a
director to qualify as independent are as follows:
(i) not to be an employee or executive director of the Company, or an employee or director of a company that the latter
consolidates, and not having been in such a position for the previous five years;
(ii) not to be an executive director of a company in which the Company holds a directorship, directly or indirectly, or in
which an employee appointed as such or an executive director of the Company (currently in office or having held
such office for less than five years) is a director;
(iii) not to be a customer, supplier, investment banker or commercial banker that is material to the Company or its Group,
or for whom the Company or its Group represents a significant part of its business;
(iv) not to be related by close family ties to an executive director;
(v) not to have been an auditor of the Company within the previous five years;
(vi) not to have been a director of the Company for more than 12 years.
154
4
4.1
According to the AFEP-MEDEF Code, for the criterion mentioned in point (iii) above, the evaluation of the material nature
of the relationship with the Company or its Group must be debated by the Board and the basis of the evaluation must be
clearly stated in this Registration Document.
For directors holding more than 10% of the Company’s share capital or voting rights, or representing a legal entity
holding such an interest, the AFEP-MEDEF Code further recommends that the independent status take into account the
composition of the Company’s share capital and the existence of a potential conflict of interest.
The directors’ independence was evaluated by the Board of Directors, on the basis of these criteria, on April 26, 2016
and by the Nominating and Compensation Committee on the same date, according to the criteria set out in the AFEPMEDEF Code. Similarly, the independence of Manon Brouillette was evaluated by the Board of Directors, on the basis of
these criteria, on May 19, 2016 and by the Nominating and Compensation Committee on the same date, according to the
criteria set out in the AFEP-MEDEF Code.
Following this analysis, the Board of Directors concluded that Luce Gendry, Bernard Attali and Manon Brouillette fulfilled
the independence criteria set out in the rules of procedure of the Nominating and Compensation Committee and in the
AFEP-MEDEF Code, and were therefore independent directors according to those criteria.
Since the departure of Colette Neuville in January 2016 and Isabelle Giordano in March 2016, and the appointment of
Alain Weill in April 2016, two of the Company’s eight directors are independent as of the date of this Registration
Document. However, Alexandre Marque (appointed by Altice) and Manon Brouillette will be elected as independent
directors at the Shareholders’ Meeting on June 21, 2016. Following this meeting, three of the Board’s ten members will
thus be independent, bringing the percentage of independent directors to 30% of the Board, or just below the 33%
threshold. The Company plans to reach the percentage of independent directors stipulated by the AFEP-MEDEF Code
by the end of 2016.
4.1.1.2 Directors’ biographies
Michel Combes, 53, is Chief Operating Officer of Altice NV and previously served as CEO of Alcatel-Lucent, CEO of
Vodafone Europe, and Chairman and CEO of TDF. He has also held the posts of Chief Financial Officer and Deputy
Chairman of France Télécom. Mr. Combes has over 25 years’ experience in the telecommunications industry. He is a
graduate of the École Polytechnique and Télécom ParisTech.
Eric Denoyer, 52, French, has been Chairman and CEO of the Company since it was formed on August 2, 2013, and
Group CEO since January 2011. He served as CEO of Completel’s wholesale division from September 2008 to January
2011, and CEO of Numericable from April 2005 to September 2008. He is a graduate of the École Nationale Supérieure
de Télécommunications de Paris (class of 1988) and École Polytechnique de Palaiseau (class of 1986). On January 7,
2016 Eric Denoyer decided to leave the Company, but will remain on the Board and act as advisor to the Chairman until
July 7, 2016.
Dexter Goei, 43, British, is Chairman and CEO of Altice. He joined Altice in 2009, having previously been with Morgan
Stanley. He is a graduate of Georgetown University’s School of Foreign Service (class of 1993).
Jérémie Bonnin, 41, French, is in charge of corporate and business development and is Altice’s Corporate Secretary. He
joined Altice in 2005, having previously been a manager in KPMG’s transactions department. He is a graduate of Institut
d’Informatique d’Entreprise (class of 1998) and of DECF (accounting and finance degree) (class of 2000).
Jean-Michel Hégésippe, 67, founded his own company, Infotel, in 1986. Based in French overseas departments and
territories, Infotel provided transaction processing services for the banking sector. In 1998, Infotel obtained a license from
the French regulatory authorities to deploy fixed telecommunications networks. From 1998 to 2004, Infotel (which
changed its name to Outremer Telecom in 2000) developed telephony and DSL services. In 2013, Altice acquired control
of Outremer Telecom, which had become a fixed and mobile quadruple play and mobile telephony provider in French
overseas departments and territories. Jean-Michel Hégésippe is a computer sciences engineer and holds a master’s
degree and advanced studies degree (DEA) in information technology from the University of Paris VII.
Luce Gendry, 66, French, began her career with Générale Occidentale (1971-1990), a diversified Anglo-French group of
which she was, successively, legal representative (fondé de pouvoir), Corporate Secretary and CFO. She joined the
Bolloré Group (1990-1993) as Deputy Managing Director in charge of administration and finance, before moving to
Banque Rothschild, where she was a Managing Partner until mid-2011, specializing in mergers and acquisitions advice.
Currently, Ms. Gendry is a Senior Advisor of Rothschild & Cie Banque, Chairman of the Supervisory Board of IDI, a
member of the Board of Directors of FFP (the Peugeot family group), Nexity and INEA, and Chairman of Cavamont
Holdings Ltd. She is a graduate of École des Hautes Études Commerciales (HEC) (JF) and a Knight in the French
Legion of Honor.
155
4
4.1
Bernard Attali, 72, French, is Chairman of Financière de l’Audière, Senior Advisor at TPG Capital (San Francisco,
London, Paris), member of the European Advisory Board (London, Paris) of Bank of America Merrill Lynch, director of
the Association française des investisseurs pour la croissance, director of TDF, director of International Power Plc, and
member of the European Advisory Board of Proudfoot and the Advisory Board of LEK. Prior to this, he was director of Air
Canada, Eurotunnel, Detroyat and Baccarat, Chairman of the Association of Managing Partners of ARJIL Bank,
Chairman of the IAYA Executive Committee, Air France Group, GAN Group, Banque pour l’Industrie Française, director
of CIC, BNP, Société Générale, SNCF and La Poste, CFO of Club Méditerranée and Advisor for European affairs at
Commercial Union (London). He has also worked as a Professor at New York University (NYU) and Senior Lecturer at
Sciences Po, Dauphine and ENA, in addition to serving as an auditor at the Cour des Comptes. Bernard Attali is a
graduate of Institut d’Études Politiques in Paris and the École Nationale de l’Administration. Furthermore, he is Honorary
Chairman of Air France, Commander of the French Legion of Honor and Commander of the National Order of Merit. He
has also been awarded the Médaille de l’Aéronautique.
Angélique Benetti, 52, is Executive Vice President, Content. She has been a member of the Management Committee
since 2008. She joined the Group in 2003 and left in December 2015. She holds a master’s degree in public law.
Alain Weill, 55, is Deputy Chief Executive Officer of the Group and Chairman of NextRadioTV. Mr. Weill began his career
in 1985 as an executive for the NRJ network. In 1992, he became CEO of NRJ Group (NRJ, Chérie FM, Nostalgie, Rire
et Chansons), followed by NRJ Régie. In 2000, he took over the radio station RMC and created the NextRadioTV group.
He repositioned RMC around three pillars (news, talk, and sports) and boosted audience share. In 2002, Alain Weill
acquired BFM and refocused the station on economic affairs. In 2005, in view of the allocation of free-to-air digital
terrestrial television (DTT) frequencies, he launched BFM TV, which would become France’s leading news channel.
Alexandre Marque, 57, is a graduate of Sciences Po Paris and holds two advanced studies degrees (DEA) in
international law and public law. Mr. Marque began his professional career at First Boston Bank and then Chase
Manhattan Bank in New York before joining the law firm Salès Vincent in 1987, where he became a partner in 1993. In
2000 he founded the firm Franklin, where he was co-managing partner, mainly involved in mergers and acquisitions,
privatization, private equity and equity, industrial and commercial partnerships on behalf of French and foreign groups
(public and private sector), investment funds and financial institutions. In 2005, he began advising the Altice Group on
nearly all of its acquisitions and restructuring operations in France and abroad. He left Franklin in 2015 to join Altice as
General Counsel.
Manon Brouillette, 48, has been President and CEO of Videotron since May 2013. Videotron is an integrated
communications company involved in cable television, interactive multimedia development, Internet, telephony and
wireless telephone services in Canada. Over the past 12 years, she has played a key role in Videotron’s growth,
successfully spearheading some of the most important projects in the company’s history, including Videotron’s entry into
the mobile market, the launch of its cable telephone service, the development of Ultimate Speed Internet access
services, and the introduction of illico TV new generation, illico mobile, Club illico and the illico app for iPad. Ms.
Brouillette has held several key executive positions with Videotron. In 2011, while continuing to serve as Executive VicePresident, she also took charge of digital development for Québecor Média (QMI). In 2012, she became President,
Consumer Market, responsible for the key sectors of Videotron’s business, including residential services.
4.1.1.3 Equal representation on the Board of Directors
As of the date of this Registration Document, the Board of Directors was composed of eight directors, including two
women - Luce Gendry and Angélique Benetti - who make up 25% of the Board.
The Company therefore complies with the relevant provisions of Law 2011-103 of January 27, 2011 on the balanced
representation of men and women on the Board of Directors. It is proposed that Manon Brouillette and Alexandre Marque
be elected at the Shareholders’ Meeting on June 21, 2016, thereby increasing the percentage of women on the Board to
30%.
In addition, the Company will take the necessary measures in view of the fact that at least 40% of its Board members
must be women as of January 1, 2017.
4.1.2 Executive management
Unification of the roles of the Board Chairman
and CEO
In spring 2016, the Board decided to combine the roles of Chairman and CEO, considering this governance model to be
more suited to implementing its strategic project for the convergence of telecoms/media content/advertising under Michel
Combes, Chief Operating Officer of the Altice Group. On May 9, 2016, the Company announced that Michel Combes,
Chairman of the Board, would continue as CEO of the Company (a position he has held since January 2016, following
Eric Denoyer’s resignation), while Michel Paulin would take over as Deputy Chief Executive Officer in charge of
Telecoms, and Alain Weill as Deputy Chief Executive Officer in charge of Media/Advertising.
156
4
4.1
Previously, the Company’s Executive Management had been separate from the position of Chairman. Eric Denoyer
served as Chief Executive Officer in 2015 and until January 7, 2016. During this time, the role of Chairman was held
initially by Patrick Drahi, and then by Michel Combes.
4.1.3 Executive committees
4.1.3.1 Management Committee
At the date of this Registration Document, the Company had an Executive Management Committee overseeing the
Company’s operations, including the Executive Committees for Telecom and Media/Advertising. The members of this
committee are:
-
Michel Combes (Chairman and CEO);
-
Michel Paulin (Deputy Chief Executive Officer);
-
Alain Weill (Deputy Chief Executive Officer);
-
Jean Raby (Chief Financial Officer);
-
Régis Turrini (Corporate Secretary).
4.1.3.2 Executive Committee, Telecoms
At the date of this document, and following the changes that occurred in January 2016, the members of the Executive
Committee for Telecoms were:
Michel Paulin, Deputy Chief Executive Officer
Sales
Jean-Pascal Van Overbeke, Executive Vice President, B2C, replacing Eric Klipfel, who joins the Altice Group as Head of
B2C.
Eric Pradeau, Executive Vice President, Wholesale
Guillaume de Lavallade, Executive Vice President, B2B, replacing Pascal Rialland, who joins the Altice Group as Head
of B2B.
Operations
Philippe Le May, Executive Vice President, Networks
Emeric Dont, Executive Vice President in charge of processes and service quality
Christophe Delaye, Chief Information Officer replacing Olivier Urcel
Support
Jean Raby, Chief Financial Officer
Florence Cauvet, Executive Vice President, Human Resources, replacing François Rubichon
Régis Turrini, Corporate Secretary
Jérôme Yomtov, Deputy Corporate Secretary, Director representing the Chairman
Biographies of Executive Committee Members (Telecoms)
Jean-Pascal Van Overbeke has over 20 years’ experience in telecommunications in Belgium and abroad. Having cofounded a start-up specializing in marketing in 1990, he joined the operator Cellway in 1996 as Sales and Marketing
Director. The operator merged with Mobistar, where Jean-Pascal Van Overbeke held various positions before being
appointed head of strategy and transformation programs. In 2005, he joined Orange UK in London, initially as head of
marketing, then of distribution. In 2009, he joined the group Maxis Communications, the leading mobile operator in
Malaysia, as Chief Operating Officer based in Kuala Lumpur, before transferring to its Indian subsidiary Aircel in New
Delhi. In 2014, he became Deputy Group CEO of Lebara, a mobile telephony and digital services provider. Jean-Pascal
Van Overbeke is a graduate of the University of Leuven and Solvay Business School.
157
4
4.1
Guillaume de Lavallade began his career as GSM presales engineer at Nortel Networks from 1997 to 1999. He
subsequently spent three years as strategy consultant at Boston Consulting Group. In 2002, he became head of
Thomson’s premium TV business, before joining the joint venture with the Chinese company TCL. He became SFR’s
Network Marketing Manager in 2007, later moving on to Product Marketing Manager, before heading the B2B customer
relations department. Guillaume de Lavallade is a graduate of Supélec and Sciences Po Paris.
Eric Pradeau, 45, French, joined the Group in 2000 and was made Executive Vice President of the Group’s Wholesale
Division in December 2014. He is a graduate of École Nationale Supérieure des Mines de Paris.
Philippe Le May, 46, French, joined the Group in 2006 and was appointed Group Chief Technology Officer in December
2014. From 2006 to 2008 he was Numericable’s Network Director. He graduated from École Nationale Supérieure de
Télécommunications de Paris in 1991.
Emeric Dont started his career in 1991 as R&D engineer for Matra Communications. He joined Nortel Networks in 1998,
where he was in charge of the deployment of BTS networks. From 2002 to 2005, he held the positions of Technical
Manager for Customer Services, then Head of Customer Care at NC Numericable. After this was taken over by Altice, he
became Regional Director and Head of B2C Operations for Numericable, with responsibility for the entire NumericableSFR group. Emeric Dont is also Head of Processes for the Altice group.
Emeric Dont is a graduate of ESME-Sudria.
Christophe Delaye began his career working on major network projects with Thomson CSF (now Thales). He joined SFR
in 1998, holding various positions within the Network Department before becoming Network Director for the Northeast
Region. He later joined the information systems division, becoming Chief Information Officer for the consumer market. In
2013, he was appointed as Chief Purchasing Officer. Mr. Delaye is a graduate of the École Polytechnique and the École
Supérieure d’Électricité.
Before being appointed Chief Financial Officer of SFR Group, Jean Raby was Chief Financial & Legal Officer of AlcatelLucent. Prior to that he enjoyed a 16-year career in the Investment Banking Division of Goldman Sachs, being appointed
a partner in 2004 and subsequently serving as co-CEO and then CEO of Investment Banking in France, Belgium and
Luxembourg from 2006 to 2010, and CEO of Investment Banking in Russia and the CIS (including co-CEO of Goldman
Sachs’ Moscow office) from 2011 to the end of 2012. During his career at Goldman Sachs, Jean Raby advised French
and international clients on various funding transactions in the global capital markets, M&A and corporate restructuring.
From 1989 to 1992, Jean Raby was an associate attorney for Sullivan & Cromwell in New York, before moving to the
Paris office where he was based from 1992 to 1996. Born in Canada, Jean Raby holds an LLB from Laval University
(Quebec), an MPhil in International Relations from the University of Cambridge, and an LLM from Harvard Law School.
Jean was admitted to the New York Bar in 1988.
Florence Cauvet began her career in 1995 with the IT services company Electronic Data Systems. In 1996, she joined
France Telecom, where she held various HR positions at different subsidiaries, before joining the R&D department in
2002 as Human Resources Manager. In 2005, she joined Areva as Head of Employee Relations at the La Hague site.
She became Human Resources Director for the chemistry and enrichment business unit, before being appointed Human
Resources Director for France in 2012. Florence Cauvet joined SFR in 2014 as Head of Labor Affairs. Florence Cauvet
has an advanced studies degree (DEA) in labor law from Paris II Panthéon-Assas University and a postgraduate diploma
(DESS) in human resources management from Paris II University.
Régis Turrini, an attorney at the Paris Bar, began his career as a judge in the French administrative courts. He then
joined law firms Cleary Gottlieb Steen & Hamilton (1989-1992), followed by Jeantet & Associés (1992-1995), as a
corporate lawyer. In 1995, Mr. Turrini joined the investment bank Arjil & Associés (Lagardère group) as Executive
Director. He was then appointed Managing Director and, from 2000, Managing Partner. He joined Vivendi in 2003 as
Executive Vice President in charge of Mergers & Acquisitions, before becoming Senior Executive Vice President for
Strategy and Development. In 2014, Régis Turrini was appointed Commissioner to the French state holdings agency
APE.
Régis Turrini is member of the Paris Bar. He is a graduate of the Faculties of Literature and Law and of the Institut
d’Études Politiques in Paris , and an alumnus of the École Nationale d’Administration.
Jérôme Yomtov, 43, French, joined the Group in 2009 and has been the Group Corporate Secretary since December
2014. From 2007 to 2009, he was a director in the mergers and acquisitions department of HSBC France. He is a
graduate of École Nationale Supérieure de Télécommunications de Paris (class of 1996) and of École Polytechnique
(class of 1991).
The Group’s Executive Committee meets weekly to review the Group’s operational and financial performance and to
discuss strategic products and business operations.
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4
4.2
Interests and compensation
4.1.3.3 Executive Committee, Media and Advertising
At the date of this Registration Document, and following the acquisition of NextRadioTV and Altice Media France in May
2016, the Media and Advertising divisions are headed by Alain Weill, Deputy Chief Executive Officer of the Company.
Since these divisions were only recently created, the members of the Executive Committee are still to be finalized and
will be named in 2016.
4.1.4 Statement concerning members of the Board of Directors and
Management Team, conflicts of interest
4.1.4.1 Statement relating to members of the Board of Directors
and Management Team
To the Company’s knowledge, as of the filing date of this Registration Document, there are no family ties between
members of the Company’s Board of Directors and senior management.
To the Company’s knowledge, within the last five years: (i) none of the persons referred to above has been convicted of
fraud, (ii) none of the persons referred to above has been associated with any bankruptcy, receivership, or liquidation,
(iii) none of the persons referred to above has been the subject of any official public charge or sanction by statutory or
regulatory authorities (including relevant professional organizations), and (iv) none of the persons referred to above has
been disqualified by a court from serving as a member of an administrative, management, or supervisory body of any
issuer or from being involved in the management or business affairs of any issuer.
To the Company’s knowledge, as of the filing date of this Registration Document, there are no family ties between
members of the Company’s Board of Directors and senior management.
To the Company’s knowledge, within the last five years: (i) none of the persons referred to above has been convicted of
fraud, (ii) none of the persons referred to above has been associated with any bankruptcy, receivership, or liquidation,
(iii) none of the persons referred to above has been the subject of any official public charge or sanction by statutory or
regulatory authorities (including relevant professional organizations), and (iv) none of the persons referred to above has
been disqualified by a court from serving as a member of an administrative, management, or supervisory body of any
issuer or from being involved in the management or business affairs of any issuer.
4.1.4.2 Conflicts of interest
To the Company’s knowledge, as of the date of this Registration Document, there are no potential conflicts of interest
between the members of the Board of Directors, its Management Team and the Company’s founders and their private
interests.
To the Company’s knowledge, there are no other restrictions accepted by members of the Board of Directors or the Chief
Executive Officer, except for rules on the prevention of insider trading and the recommendations of the AFEP-MEDEF
Code requiring the Chief Executive Officer to hold shares.
4.2
4.2.1 Compensation and benefits of executives and corporate officers
The Company was incorporated on August 2, 2013 as a public limited company with a Board of Directors. At the date of
this Registration Document, the offices of Chairman of the Board of Directors and Chief Executive Officer were held by
Michel Combes. In addition, two Deputy Chief Executive Officers, Michel Paulin and Alain Weill, took office on May 9,
2016.
159
4
4.2
4.2.1.1 Compensation of non-executive members of the Board of Directors
The Company’s Shareholders’ Meeting of October 21, 2013 set the total amount of attendance fees granted to the Board
of Directors at €180,000 per year, to be split among the Board’s independent members. This amount will be confirmed
each year, unless a subsequent Shareholders’ Meeting amends the annual amount in the future. No directors other than
the independent directors will receive attendance fees.
The attendance fees granted to the independent members of the Board are allocated as follows on an annual basis:
 an overall amount of €40,000 per year is allocated to each independent member of the Board; each absence from a
Board meeting is penalized by deducting €3,000 from said amount;
 compensation of €18,000 per year is allocated to each member of the Audit Committee; each absence from a
committee meeting is penalized by deducting €4,500 from said amount;
 compensation of €4,500 per year is allocated to each member of the Nominating and Compensation Committee;
each absence from a Committee meeting is penalized by forfeiting said amount;
 the compensation described in the two paragraphs above is €22,000 per year for the Chairman of the Audit
Committee and €11,000 per year for the Chairman of the Nominating and Compensation Committee; any absence by
a Chairman from a meeting he or she chairs is penalized by deducting €5,500 from said amount.
This overall amount will apply each year, unless a shareholders’ meeting should subsequently decide in the future to
amend the overall amount of attendance fees allocated to the Board.
Moreover, the amount of attendance fees is allocated annually and will therefore be prorated in the event of termination,
for any reason, of the office of an independent Board member during the Company’s fiscal year.
Attendance fees are generally paid quarterly.
The attendance fees and other compensation paid by the Company or by any Group company to non-executive Board
members of the Company were €178,500 in 2015, €219,000 in 2014 and €0 in 2013 and 2012.
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4
4.2
Table
showing
the
attendance
fees
and
other
compensation
by non-executive corporate officers (Table 3 of the AMF Recommendation)
Non-executive corporate officers
(amount paid in €)
Amounts paid
in fiscal year 2014
received
Amounts paid
in fiscal year 2015
Attendance fees
Other compens ation
Attendance fees
Other compens ation
Marco de Benedetti(1)
0
0
0
0
Dexter Goei
0
0
0
0
Jérémie Bonnin
0
0
0
0
Max Aaron(2)
0
0
0
0
Jean-Michel Hégésippe(3)
0
0
0
0
Luce Gendry(4)
74,445
0
56,500
0
(4)
Olivier Huart
54,934
0
0
0
Yaffa Nilly Sikorsky(4)
62,345
0
0
0
Bernard Attali(5)
27,276
0
64,000
0
(6) (7)
0
225,599
0
226,170
Jean-René Fourtou(6)
0
0
0
0
Stéphane Roussel(6)
0
0
0
0
Colette Neuville
0
0
58,000
0
Patrick Drahi(8)
0
0
0
0
Michel Combes(9)
0
0
0
0
219,000
225,599
178,500
226,170
Angélique Benetti
(6)
TOTAL
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Marco de Benedetti was appointed by the Company’s Shareholders’ Meeting of September 6, 2013 and resigned from his office of director
on February 14, 2014.
Max Aaron was appointed by the Company’s Shareholders’ Meeting of October 21, 2013 with effect from November 12, 2013, and resigned
from his office of director on November 27, 2014.
Jean-Michel Hégésippe was co-opted as director by the Board of Directors on February 14, 2014, to replace Marco de Benedetti. He
resigned from office with effect from November 27, 2014 and was re-appointed by the Company’s Shareholders’ Meeting held on the same
date.
Luce Gendry, Olivier Huart, and Yaffa Nilly Sikorsky, independent directors, were appointed by the Company’s Shareholders’ Meeting of
October 21, 2013 with effect from November 12, 2013. Olivier Huart resigned from his office of Company director with effect from May 20,
2014 and Yaffa Nilly Sikorsky resigned from her office of Company director with effect from November 27, 2014.
Bernard Attali was appointed as director by the Company’s Shareholders’ Meeting of May 20, 2014 and is considered independent by the
Company’s Board of Directors.
Angélique Benetti was appointed as director of the Company by the Shareholders’ Meeting held on November 27, 2014.
This compensation was received by virtue of Angélique Benetti’s employment contract.
Patrick Drahi was appointed as director on November 27, 2014 and resigned on September 8, 2015.
Michel Combes was co-opted by the Board of Directors as Chairman of the Board on September 8, 2015, replacing Patrick Drahi, who had
resigned.
4.2.1.2 Compensation of executive corporate officers
The terms of the compensation and other benefits awarded to Michel Combes, Michel Paulin, and Alain Weill are
described below. Any compensation paid by the company that controls the Company within the meaning of Article L.
233-16 of the French Commercial Code is not disclosed, since this is not awarded in consideration of positions held
within the Company or its subsidiaries.
a. Michel Combes
For fiscal year 2015, Michel Combes received no compensation of any kind whatsoever from the Company in respect of
his duties as Board Chairman.
For fiscal year 2016, Michel Combes will receive no compensation of any kind whatsoever from the Company in respect
of his duties as Chairman and CEO.
161
4
4.2
b. Michel Paulin
Fixed compensation
At its meeting of April 26, 2016, the Company’s Board of Directors resolved, following a proposal from the Nominating
and Compensation Committee, that as Chief Executive Officer of the Company, Michel Paulin would receive gross
annual fixed compensation of €400,000, payable monthly in arrears.
Variable compensation
At its meeting on April 26, 2016, the Board of Directors of the Company resolved, following a proposal from the Nominating
and Compensation Committee, that it would grant Michel Paulin, as Company CEO, additional variable compensation to
be paid annually. The amount of this compensation would be determined on the basis of performance criteria set by the
Board before the end of the previous year or at the start of the fiscal year (and in any event within the first six months).
Michel Paulin would receive variable compensation of €600,000 in respect of the fiscal year under review if the targets set
by the Board were achieved. If the targets were exceeded, this could increase to €900,000.
Michel Paulin’s variable compensation will be determined on the following basis:
-
one third subject to the achievement of financial criteria for the Altice Group;
-
one third subject to the achievement of financial criteria for SFR;
-
one third subject to the achievement of personal targets.
The financial criteria for the Altice Group and SFR are:
-
revenues;
-
EBITDA;
EBITDA - CAPEX + Change in working capital.
The thresholds would be:
-
less than 95% of the target: 0% distributed;
-
95% of the target: 50% distributed;
-
100% of the target: 100% distributed;
110% of the target: 150% distributed.
A linear interpolation will be applied between each threshold.
Retirement benefits
Michel Paulin does not receive retirement benefits.
Non-compete and severance pay
Michel Paulin is also entitled to a severance pay. Severance pay only applies in the event of forced termination as a
result of a change in control or strategy (except in the event of gross negligence or misconduct in the performance of his
duties). Severance pay for Michel Paulin is set at six months’ compensation (fixed and variable), which will only be paid if
the performance criteria of the variable component of said compensation have been achieved during the two years prior
to Michel Paulin leaving office.
Michel Paulin is not bound by a non-compete clause and therefore will not receive non-compete pay if he leaves the
Company.
Stock options and performance shares
At the date of this Registration Document, no stock options or performance shares were granted to Michel Paulin.
Other benefits
Michel Paulin has the use of a company car for 2016.
162
4
4.2
c. Alain Weill
For the 2016 fiscal year, Alain Weill will not receive any compensation whatsoever from the Company as Deputy Chief
Executive Officer.
d. Eric Denoyer
Fixed compensation
At its meeting of November 27, 2014, the Company’s Board of Directors resolved, following a proposal from the
Nominating and Compensation Committee, that Eric Denoyer would receive gross annual fixed compensation of
€400,000, payable monthly in arrears. Consequently, as Company CEO, Eric Denoyer received gross annual fixed
compensation of €400,000 for fiscal year 2015, payable monthly in arrears.
For 2016, Eric Denoyer received gross fixed compensation of €200,000.
The Board of Directors was able to grant Eric Denoyer, as Company CEO, variable compensation for 2015 determined
on the basis of performance criteria that were set at the Board meeting on November 27, 2014.
However, following Eric Denoyer’s resignation on January 7, 2016, the Company’s Board of Directors resolved that he would
receive no variable compensation for 2015 but would be awarded extraordinary compensation.
Extraordinary compensation
On a recommendation from the Nominating and Compensation Committee, the Board of Directors, in view of Eric
Denoyer’s outstanding contribution to the successful operational integration of SFR within Numericable - a particularly
delicate phase, given the human and operational issues he had to face (size of the two organizations, migration of
teams, corporate culture, etc.) - resolved to grant him an exceptional payment of €2,000,000 for fiscal year 2015.
Retirement benefits
Eric Denoyer does not receive retirement benefits.
Non-compete and severance pay
Eric Denoyer was eligible for severance pay in the event of a change of control or strategy (except in the event of gross
negligence or misconduct). This was set at six months’ compensation (fixed and variable), only payable if the
performance criteria of the variable component of said compensation were achieved during the two years prior to him
leaving office. Mr. Denoyer did not receive severance pay when he resigned as CEO of the Company on January 7,
2016, since the criteria had not been met. Upon stepping down as CEO, Mr. Denoyer was not bound by a non-compete
clause and therefore did not receive non-compete pay upon his departure.
Other benefits
Eric Denoyer had the use of a company car for 2015.
163
4
4.2
Stock options and performance shares
In April 2015, the Board noted that Eric Denoyer had achieved the performance criteria set for him. In November 2015,
he therefore exercised 50% of the options granted to him under the stock option plan of November 7, 2013.
On January 7, 2016, following the favorable opinion of the Board of Directors and the Nominating and Compensation
Committee, the Chairman and Chief Executive Officer of the Company, pursuant to Rule 4.7 of the stock option plan of
November 7, 2013, released Eric Denoyer from his obligation to continue serving under the 2013 plan (and not under
the 2014 plan). Therefore, Eric Denoyer was authorized to vest and exercise 50% of the options granted to him under
the stock option plan of November 7, 2013. Exercising these options entitled him to subscribe for 1,241,193 Company
shares at an exercise price of €11.37 per share, corresponding to a total of €14,112,364.40.
However, all unvested options under the plan of November 28, 2014 will lapse if Eric Denoyer leaves the group.
He was granted 203,210 options to subscribe for or purchase stock of the company Altice S.A., replaced by options to
subscribe for or purchase shares of Altice NV following its merger with Altice S.A. Eric Denoyer waived these options in
a letter dated March 16, 2016.
The tables below show the compensation paid to Eric Denoyer, Chairman and CEO of the Company until November 27,
2014 and CEO of the Company after that date and until January 7, 2016, by the Company and by all Group companies,
in 2014 and 2015:
Summary table of compensation and stock options awarded to Eric Denoyer (Table 1 of the AMF
Recommendation)
Fiscal year 2014
Fiscal year 2015
1,639,815.37
2,400,000
4,438,737
0
(1)
Compensation due for the fiscal year
(detailed in Table 2)
Valuation of options awarded in the fiscal year
Valuation of performance shares awarded
in the fiscal year (detailed in Table 6)(2)
None
TOTAL
(1)
6,078,552.37
Summary
table
of
compensation
(Table 2 of the AMF Recommendation)
paid
to
2014
Fixed compensation(1)
(1)(2)
Extraordinary compensation(1)
Attendance fees
(7)
Benefits in kind
TOTAL
(1)
(2)
(3)
(4)
(5)
(6)
(7)
2,400,000
On a gross basis (before social security charges and tax).
Eric
Denoyer
2015
Amounts due
Amounts paid
Amounts due
Amounts paid
308,333.33
308,333.33
400,000
400,000
(3)
(4)
0
0
1,000,000(6)
0
2,000,000
1,000,000
--
--
295,500
37,565
6,482.04
6,482.04
6,482.04
6,482.04
1,639,815.37
352,380.37
2,406,482.04
1,406,482.04
On a gross basis (before social security charges and tax).
Variable compensation based on the achievement of the EBITDA-CAPEX budget and growth in revenues during the year.
Theoretical amount to achieve 100% of targets for 2014, payable in 2015.
Balance of the compensation paid for 2013, but actually paid in 2014.
Paid leave payments in relation to the termination of the employment contract held by Eric Denoyer until November 12, 2013, the date on
which he resigned from said employment contract in compliance with the recommendations of the AFEP-MEDEF Code.
This extraordinary compensation corresponds to the bonus that the Board of Directors, at its meeting of November 27, 2014 and on the
recommendation of the Nominating and Compensation Committee, decided to pay Eric Denoyer due to the successful acquisition of SFR.
This compensation was paid in 2015.
Company car.
164
4
4.2
Employment
contracts,
supplementary
payments or benefits (Table 10 of the AMF Recommendation)
Executive corporate officers
Employment
contract
retirement
plans
and
Payments in
Payments or benefits due or connection with a
Supplementary potentially due as a result of the
non-compete
retirement plan termination or change of duties
clause
Eric Denoyer
Office: Chairman and CEO until
November 27, 2014
and CEO thereafter
No(1)
No
No
No
Office start date: August 2, 2013
Office end date: January 7, 2016
following his resignation
(1)
Eric Denoyer was an employee of Ypso France SAS until November 12, 2013, the date on which he resigned from said employment
contract in compliance with the recommendations of the AFEP-MEDEF Code.
4.2.1.2.1
Amounts accrued or recorded by the Company or its subsidiaries for the
payment of pensions, retirement or other benefits
The Group has set aside approximately five hundred thousand (€500,000) as of December 31, 2015 for retirement
benefits (general pension plan) for Executive Committee members.
Compensation paid by the subsidiaries or parent company of the Company, in accordance with
Article L. 233-16 of the French Commercial Code
This information is not provided as the compensation paid by the Company’s parent companies is not to compensate the
powers exercised within or on behalf of the Numericable-SFR Group.
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4
4.3
4.3
Corporate governance and internal control
The Chairman’s report on corporate governance and internal control, and the Statutory Auditors’ report on the
Chairman’s report on corporate governance and internal control, are included in the annual report published on the
Company’s website.
4.3.1 Corporate governance
4.3.1.1 Corporate governance code
In corporate governance matters, the Company follows, except as detailed in this report, the Corporate Governance
Code for Listed Companies published by AFEP and MEDEF in December 2008 and revised in April 2010, June 2013 and
November 2015 (the “AFEP-MEDEF Code”).
The AFEP-MEDEF Code can be found on the websites of AFEP (www.afep.com) and of MEDEF (www.medef.com).
Recommendations not applied
Reasons
With respect to the number of independent
directors on the Board of Directors:
Since the departure of Colette Neuville in January 2016 and Isabelle Giordano in
March 2016, and the appointment of Alain Weill in April 2016, among the
Company’s eight directors at the date of this Registration Document, the Board
has two independent directors. However, Alexandre Marque (appointed by Altice)
and Manon Brouillette will be elected as independent directors at the
Shareholders’ Meeting on June 21, 2016. Following this meeting, three of the
Board’s ten members will thus be independent, bringing the percentage of
independent directors to 30% of the Board, or just below the 33% threshold. The
Company plans to reach the percentage of independent directors stipulated by
the AFEP-MEDEF Code by the end of 2016.
The stock options granted to the Chief Executive Officer represented a significant
proportion of his total annual compensation (including options) due for the year
ended December 31, 2015. This proportion reflects the amount of fixed and
variable compensation paid to the Chief Executive Officer, which is significantly
below the average for (non-founder) Chairmen and Chief Executive Officers from
a sample of French telecoms, television and Internet companies.
Eric Denoyer received no further grant of stock options in 2015.
“In controlled companies, at least one third of
directors should be independent” (Section 9.2 of
the AFEP-MEDEF Code)
With respect to the stock subscription options
awarded to the Chairman and CEO in 2013, 2014
and 2015:
“Balance between compensation items” (Section
23.1 of the AFEP-MEDEF Code)
"balanced distribution: the package comprising
fixed and variable annual and, as the case may
be, multi-annual compensation plus any stock
options or performance shares awarded must be
balanced" (Section 23.1 of the AFEP-MEDEF
Code)
“Stock options and performance shares valued in
accordance with IFRS must not be a
disproportionate percentage of the total
compensation, options, and shares awarded to a
corporate officer” (Section 23.2.4 of the AFEPMEDEF Code)
“Grant compensation and benefits over the same
calendar periods, for example after the publication
of the previous year’s financial statements, and
without fail every year, which should limit windfall
effects” (Section 23.2.4 of the AFEP-MEDEF
Code)
This recommendation was not applied for stock options granted in September
2015 due to the arrival of a new executive director within the Group. Given the
significant number of exceptional events experienced by the Company in the
previous three years (IPO, acquisition of SFR, change in the Executive
Committee, etc.), the Company was forced to grant options on different dates
than those recommended.
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4.3
4.3.1.2 Composition and operation of the Board of Directors
4.3.1.2.1
Composition
The Company’s articles of association provide that there can be between 3 and 18 members of the Board of Directors.
They may not be over 78 years of age and are appointed for a three-year term of office. They may be re-appointed. The
directors are appointed by the Shareholders’ Meeting on recommendation of the Board of Directors, which itself receives
recommendations from the Nominating and Compensation Committee. Their appointments may be revoked at any time
by an Ordinary Shareholders’ Meeting.
Each director’s term of office expires at the close of the Ordinary Shareholders’ Meeting called to approve the financial
statements for the previous fiscal year, which is held in the year in which the term of office expires. To facilitate the
phased re-appointment of the Board and to ensure the Company complies with the recommendations of the AFEPMEDEF Code, the Company’s articles of association provide for the rolling reappointment of directors on an annual
basis.
The composition of the Board is illustrated in Section 4.1.1 of this Registration Document.
4.3.1.3 Conditions governing the preparation and organization of the work
of the Board
4.3.1.3.1
Bylaws
The Board of Directors has bylaws, which came into force on November 8, 2013, updated on November 27, 2014 and
which are intended to specify the modus operandi of the Board, in addition to the applicable laws and regulations and the
Company’s articles of association. The respective bylaws of the two Board Committees are also appended to the Board’s
bylaws.
In accordance with Article 1.3 of the AFEP-MEDEF Code, the Company’s bylaws can be found on the Company’s
website (www.sfr.com).
4.3.1.3.2
Responsibilities of the Board
The Board of Directors assumes the responsibilities and exercises the powers attributed to it by law, the Company’s
articles of association and the bylaws of the Board and its Committees. It defines and assesses the strategy, goals, and
performance of the Company and ensures their implementation. It must in particular give prior approval for the
implementation of every Strategic Decision (as this term is defined below). Subject to the powers expressly given to
shareholders’ meetings and within the limits of the corporate purpose, it addresses all questions related to the proper
functioning of the Company and governs, by its decisions, the affairs that concern it.
The Board also carries out all checks and controls it considers appropriate and may request any documentation it deems
necessary for its work.
The Board of Directors oversees the proper governance of the Company and Group, in accordance with the Corporate
Social Responsibility principles and practices of the Group, its directors, and its employees.
4.3.1.3.3
Work of the Board in 2015
For the Company’s Board of Directors, 2015 was a busy year. The Board met 14 times to discuss operations such as
the buyback of Vivendi shares, the appointment of a new chairman, and the special dividend distribution. The
Board and Committees also performed their normal duties (preparation of the financial statements, governance reviews).
4.3.1.3.4
Frequency of Board meetings and average attendance rate of directors
Pursuant to the terms of its bylaws, the Board of Directors must meet at least four times a year. In 2015, the Board of
Directors met 14 times.
Directors’ attendance was high, with a significant attendance rate.
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4.3.1.4 Board Committees
The Board decided to establish two committees, the Audit Committee and the Nominating and Compensation
Committee, to help with some of its work and enable the effective preparation of certain specific issues submitted for its
approval. Each of these Committees has its own bylaws (appended to the Board’s bylaws) and makes recommendations
to the Board. Minutes of Board Committee meetings are prepared and circulated to members of the Board of Directors.
The composition of these Committees in 2015 complied with the recommendations of the AFEP-MEDEF Code. The new
composition of these Committees, which was approved by the Board on November 27, 2014, also complies with the
recommendations of the AFEP-MEDEF Code.
Pursuant to the terms of its bylaws, the Audit Committee must meet at least twice a year. In 2015, the Audit Committee
met 5 times. The average attendance rate of members of the Audit Committee in 2015, in person or by teleconference,
was over 90%.
Under the bylaws of the Nominating and Compensation Committee, the Nominating and Compensation Committee must
meet at least once a year. In 2015, the Nominating and Compensation Committee met 5 times. The average attendance
rate of members of the Nominating and Compensation Committee in 2015, in person or by teleconference, was over
90%.
4.3.1.4.1
a)
Audit Committee
Composition
After having received a positive endorsement from the Nominating and Compensation Committee, the Board of
Directors, at its meeting of November 27, 2014, resolved to appoint Luce Gendry (independent director), Colette Neuville
(independent director), Bernard Attali (independent director), and Jérémie Bonnin (director nominated by Altice), in light
of their financial expertise, as the first members of the Audit Committee. In line with the recommendations of the AFEPMEDEF Code, the Board also resolved to appoint Luce Gendry, independent director, as chairperson.
Following Colette Neuville’s resignation in January 2016, the members of the Audit Committee at the date of this
Registration Document were Luce Gendry, Bernard Attali and Jérémie Bonnin.
The term of office of Audit Committee members is concurrent with their term of office as members of the Board of
Directors. They may be reappointed to both bodies at the same time.
b)
Responsibilities of the Audit Committee
Pursuant to Article 1 of the bylaws of the Audit Committee, the Audit Committee is responsible for monitoring matters
relating to the preparation and control of accounting and financial information and for ensuring the effectiveness of the
operational risk monitoring and internal control system, in order to help the Board of Directors carry out its oversight and
control duties.
To this end, the Audit Committee’s main duties are as follows:
 monitoring the process of preparing the financial information;
 monitoring the effectiveness of the systems for internal control, internal audit, and management of risks pertaining to
financial and accounting information;
 monitoring the auditing of the statutory and consolidated financial statements by the Company’s Statutory Auditors;
and
 monitoring the independence of the Statutory Auditors.
Under the bylaws, the Committee regularly reports on its work to the Board of Directors and immediately informs it of any
difficulties encountered.
4.3.1.4.2
a)
Nominating and Compensation Committee
Composition
As of the date of this Registration Document, the Nominating and Compensation Committee had three members:
Bernard Attali (independent director), Luce Gendry (independent director), and Eric Denoyer (director nominated by
Altice), who replaced Dexter Goei in January 2016.
The members of the Nominating and Compensation Committee were appointed by the Board from among its members
on the basis of their independence and their expertise in the selection and compensation of executive corporate officers
of listed companies.
In accordance with the AFEP-MEDEF Code, the Board, at its meeting of November 27, 2014, resolved to appoint
Bernard Attali, independent director, as chairman.
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The term of office of Nominating and Compensation Committee members is concurrent with their term of office as
members of the Board of Directors. They may be reappointed to both bodies at the same time.
b)
Responsibilities of the Nominating and Compensation Committee
Pursuant to Article 1 of its bylaws, the Nominating and Compensation Committee is a sub-committee of the Board of
Directors. Its primary responsibility is to help the Board select members of Company and Group governing bodies and to
determine and regularly review compensation and benefit packages awarded to Group executive corporate officers and
senior management, including any deferred benefits and/or severance benefits in the event of voluntary or involuntary
departure from the Group.
To this end, the Committee’s main duties are:
 Recommendation of candidates for membership on the Board of Directors, Executive Management Team, and Board
Committees;
 Annual review of the independence of the Board of Directors;
 Review and recommendation to the Board of Directors regarding all the components and terms of compensation of
the Group’s key executives;
 Review and recommendation to the Board of Directors regarding the method for distributing attendance fees;
 Compensation of directors for special assignments.
4.3.1.5 Assessment of the operation of the Board
In accordance with Article 7.1 of the bylaws, the Board of Directors must carry out an annual assessment of its
operational procedures, composition, and organization.
The assessment of the Board’s work was very positive, with directors commenting in particular:
 Directors praised the quality of the discussions and the contribution of management. They also noted that important
issues are properly prepared and discussed and that the effective contribution of each director to the work of the
Board is satisfactory with regard to his or her expertise and involvement in the various discussions.
 The directors also pointed out that certain procedural issues could be better dealt with in advance, making it possible
to get to grips with issues faster and avoid unnecessary discussions. They also expressed a desire for documents to
be sent to them more quickly and for better meeting scheduling, which is still too unpredictable.
4.3.1.6 Exercise of Executive Management. Restrictions on powers
a)
Exercise of Executive Management
On November 27, 2014 (the date of completion of the SFR acquisition), the Board of Directors resolved to split the roles
of Chairman of the Board of Directors and CEO, which had been combined since the Company’s incorporation.
The Board felt that separating the roles in this way would allow Executive Management, in the period following the SFR
acquisition, to focus on the Group’s operational strategic priorities, particularly the integration of the two groups, and that
this separation would be in line with the Group’s growth.
The roles of Chairman of the Board of Directors and CEO were separated, in accordance with the law, the articles of
association of the Company and the bylaws of the Board of Directors, on the basis of the following principles:
 The Chairman of the Board of Directors chairs meetings of the Board of Directors, coordinates and supervises its
work and meetings, on which the Chairman reports to the Shareholders’ Meeting, and monitors the proper operation
of the Company’s bodies, particularly ensuring that directors are able to fulfill their responsibilities;
 The CEO is fully empowered to act in the Company’s name in all circumstances, subject to the restrictions
established by law, the articles of association, and the bylaws of the Board of Directors, and represents the company
in dealings with third parties and in legal proceedings.
 It should nevertheless be noted that under the Board’s bylaws, there are a series of decisions that require the
approval of the Board of Directors.
Under the Board’s Bylaws, the Chairman is responsible for coordinating the work of the Board in close cooperation with
the CEO.
b)
Restrictions on the powers of Executive management.
The CEO is fully empowered to act in the Company’s name and on its behalf in all circumstances, representing it in
dealings with third parties.
Nevertheless, in accordance with Articles 3.1 and 3.2 of the bylaws of the Board of Directors, he must get the Board’s
approval before committing the Company to the following strategic decisions (the “Strategic Decisions”) relating to the
Company and its subsidiaries:
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 the adoption or modification of the annual budget including investments and divestments as well as related financing
plans;
 the adoption and modification of business plans;
 the appointment, revocation, and compensation paid (and changes to pay) to the Chairman, Chief Executive Officer,
Deputy Executive Officer, Chief Financial Officer, and co-opting of members of the Board of Directors to comply with
Section 18.3.1 “Composition of the Company’s Board of Directors” of this Registration Document;
 the hiring/appointment, revocation/dismissal, and compensation (including change to pay) of the Chairman and/or
one or more senior executives of the Subsidiaries;
 the convocation and adjournment of Company Shareholders’ Meetings and the adoption of draft resolutions and
reports to be presented to such Shareholders’ Meetings;
 the approval of annual financial statements (statutory and consolidated) and the Company’s and SFR’s annual
management reports, the allocation of profits and any change to accounting methods not resulting directly from
legislative or regulatory changes;
 the granting of sureties, endorsements, or guarantees (in the sense of Article L. 225-35 of the French Commercial
Code) by the Company or one of its Subsidiaries (with the exception of sureties, endorsements or guarantees by the
Company or one of its Subsidiaries for commitments of Company Subsidiaries) exceeding more than €200 million
each (excluding guarantees and sureties authorized in the annual budget), it being understood that the Board of
Directors will each year give to the Chief Executive Officer all power regarding the granting of sureties, endorsements
and guarantees covering less than €200 million each, in accordance with Article R. 225-28 of the French Commercial
Code, subject to an overall ceiling of €500 million;
 the signing of any transaction or initiation of any court, administrative, or arbitration proceedings to which the
Company or a Subsidiary is party if the potential stake exceeds €100 million;
 the signing by the Company or by any of its Subsidiaries of a sale, acquisition, investment, or divestment (in any form
whatsoever including as part of an exchange or contribution transaction, equity stake, formation and/or winding up of
a subsidiary, partnership, joint venture, total asset transfer, etc.) representing an investment or divestment exceeding
€200 million (in terms of enterprise value in the case of sales and acquisitions) as well as any major change to the
substantive terms and conditions of such sale, acquisition, investment, or divestment;
 the signing of any contract to acquire or sell indefeasible rights of use (IRUs) that is entered into by the Company or
one of its Subsidiaries;
 the distribution of dividends or any similar distribution of proceeds (such as buybacks or redemptions of treasury
shares or securities in general);
 all decisions relating to the decrease or amortization of the Company’s share capital;
 authorization to implement share buyback plans by the Company;
 the signing of new borrowings or issuances of debt instruments, when the total additional borrowing or financial debt
entered into by the Company and its Subsidiaries exceeds a combined total of €500 million approved in the Initial
Business Plan;
 change to financing terms adversely impacting the Company;
 the signing, amendment, and/or renewal of any contract, any investment decision by the Company or one of its
Subsidiaries, that represents a total expense or disbursement over its lifetime of at least €200 million, the funding of
which the budget does not specifically provide for (excluding internal allocation swaps);
 the implementation of any stock subscription or purchase plan, any shareholding plan for employees and corporate
officers, including incentives, profit-sharing, company savings plans, group savings plans, and any major change to
such plans or programs, with the exception of legally required changes (and if the plan has not been approved in the
annual budget);
 any merger, demerger, or partial contribution of assets (or similar transaction) involving the Company or one of its
Subsidiaries and in general any legally enforced restructuring of the Company and its Subsidiaries, when the
potential amount involved is less than €500 million;
 all decisions relating to increasing the Company’s share capital or that of a Subsidiary and any issuance of securities
or rights giving direct or indirect access to the Company’s share capital or that of a Subsidiary (with the exception of
the issues referred to above), unless such issuance is needed to reduce the Company’s external debt or that of a
Subsidiary, or is intended to prevent the Company’s insolvency or that of a Subsidiary resulting from that debt;
 any merger, demerger, or partial contribution of assets (or any similar transaction) involving the Company or a
Subsidiary and in general any legally enforced restructuring of the Company and its Subsidiaries, when the amount
involved exceeds €500 million (in terms of enterprise value), with the exception of transactions between Company
Subsidiaries (and not involving the Company directly);
 any proposal to amend the articles of association at the Extraordinary Shareholders’ Meeting and, if the purpose is to
directly or indirectly reduce the Company’s rights, any proposal to amend the articles of association of the
Subsidiaries at the Extraordinary Shareholders’ Meeting of the Subsidiary concerned;
 any decision by the Company or a Subsidiary to sign, amend, terminate, or renew an agreement between any
Associate or Related Entity on the one hand, and the Company or any of its Subsidiaries on the other, and/or any
other agreement referred to in Articles L. 225-38 et seq. of the French Commercial Code, with the exception of:
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(i) any agreement (including sureties) signed for, or as part of, external financing arrangements, and
(ii) regarding
- agreements signed between the Company and its Subsidiaries, or between the Company’s Subsidiaries:
those relating to ongoing activities and signed under normal terms and conditions;
- agreements signed between an Associate or Related Entity (with the exception of the Company and its
Subsidiaries) on the one hand, and the Company or a Subsidiary on the other: relating to ongoing operations
and signed on normal terms and conditions amounting to less than €20 million per agreement;
 all new borrowings or issuances of debt instruments, when the total additional borrowing or financial debt entered into
by the Company and its Subsidiaries exceeds the total €500 million threshold approved in the Initial Business Plan;
 any signing by the Company or a Subsidiary of an investment, acquisition, divestment, or sale of industrial assets
excluding ongoing operations or any transaction of at least €500 million, it being understood that no transaction shall
be considered an ongoing operation if it is not part of the normal operations of a telecommunications group, or if they
risk unbalancing major financial or asset positions at Company level, and that the right of veto by Board members
designated by Vivendi does not apply in the case of the divestment or sale of industrial assets intended to reduce the
Company’s external debt or that of a Subsidiary, or to prevent the default of the Company or one of its Subsidiaries
on that debt.
4.3.2 Procedures governing shareholder participation in shareholders’
meetings
The procedures governing shareholder participation in shareholders’ meetings are described in Article 20 of the bylaws
and on the Company’s website (www.sfr.com).
4.3.3 Internal control and risk management
4.3.3.1 Context
The new Group was formed on November 27, 2014. Through the operations of each of its constituent entities, it is active
in the B2C, B2B, Government, and Wholesale markets.
In 2015, synergy was generated around three strategic pillars defined by the management team. As a result, measures
could be taken to harmonize the organization and its operating procedures.
While consolidating its operations within the new entity, the Group has endeavored to address the risks associated with
structural and organizational change.
4.3.3.2 Scope
In a bid to minimize risk and integrate the various entities, the Management Team has opted for a broad-based risk
management policy in which the Internal Audit, Internal Control, Risk Management, Legal Obligations and Security
(physical and logical) departments are housed within the same division. This policy covers all activities of the various
Group entities and gives proper consideration to key operational, financial, and compliance risks.
The Management Team has tasked this new Audit and Risk Management Division with defining and implementing
methodologies to harmonize control environments across all structures while factoring in risks linked to the changing
environment.
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4.3.3.3 Internal control and risk management mechanisms
4.3.3.3.1
Organization
The internal control and risk management policy is coordinated by the Audit and Risk Management Division. It covers all
Group subsidiaries.
In a bid to minimize and monitor risks, the Audit and Risk Management Division, in addition to defining a methodology to
harmonize control environments, has consolidated its resources, tools and expertise within a single Internal Control
department for the entire Group.
4.3.3.3.2
Control environment
When defining the Group’s Internal Control and Risk Management policy, the Audit and Risk Management Division
referred to the AMF reference framework as well as major international standards (COSO 2013 and ISO 31000), which
are necessary to create an efficient system and manage the Group’s operations effectively.
In 2015, to establish a Group policy, the Audit and Risk Management Division, through the Internal Control Department,
followed the approach previously taken with the Numericable Group. One of the key elements of the internal control
policy was the introduction of a reference document (in accordance with the international standards adopted by the
Group). This document links the key processes of entities and the various business risks with their control environments.
The new policy was introduced in late 2015. It is built around a specific organizational structure and competencies, as
well as internal guidelines based on the international standards mentioned earlier.
a)
Code of Ethics and Commitments
The Group has a Code of Ethics and Commitments (fully revised in 2015) that sets out best business practices and
reiterates the Group’s objectives and commitments towards its key stakeholders (customers, consumers, employees,
shareholders, industrial and business partners, authorities, government, etc.). The Code of Ethics and Commitments is
available to employees and the public on the website www.numericable-sfr.com.
b)
Internal guidelines
The internal control system is structured around various guidelines:
(i) the rules to be observed by employees are mainly set out in the bylaws;
(ii) “charters” or guides on specific topics that could potentially be covered by training courses, such as IT security and
relations with service providers and competitors. These aspects are included in the internal guidelines and convey
the rules to be applied and the accountability of employees;
(iii) different procedures and operational methods to be applied by staff;
(iv) a system for delegating powers and signing authorities.
4.3.3.3.3
Actors
The internal control system also relies on key actors represented by various corporate committees and departments, all
of whom help to manage risk and ensure that the Group’s processes function properly.
a)
Audit and Risk Management Division
The Audit and Risk Management Division consists of five departments: (i) Processes, (ii) Internal Control, (iii) Internal
Audit, (iv) Risk Management, and (v) Legal Obligations. These departments are composed of individuals whose
multidisciplinary skills enable all of the activities of Group companies to be covered in each department. The employees
of these departments are from different Group entities, a reflection of the Management’s aim of harnessing skills and
knowledge from different environments to obtain a comprehensive overview.
The department’s role is to: (i) see that a comprehensive internal control framework exists in line with the activity covered
by each key process, (ii) evaluate the internal control system, (iii) provide oversight of control activities, and finally (iv)
monitor Group risks by defining standards, tools and notification thresholds for implementing the risk management policy
and preempting any aggravation of risks.
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b)
Financial Division
The main responsibilities of the Group’s Financial Division include: (i) producing the consolidated financial statements, (ii)
budget preparation and monitoring, (iii) drafting reports on the consolidated financial statements, both financial and
operational reporting and finally (iv) preparation of the information needed for financial communication. Through its
actions in terms of control, the Financial Division is a major stakeholder in the internal control mechanism.
c)
Legal Division
The Legal Division has the role of ensuring compliance with laws and regulations. It is required to manage litigation risks
and risks relating to labor disputes. This department oversees the management of delegated powers and signing
authorities.
d)
Committees
In parallel, and cutting across the Group’s key processes, committees have been established to strengthen the internal
control system. They are directly or indirectly tasked with limiting and/or managing risks within the Group.
For example, these committees include:
(i) Management committees, whose primary purpose is to monitor and manage the key business indicators;
(ii) Commitment Committees, tasked with monitoring expenditure incurred by the Group for each division;
(iii) Security Committee, responsible for the security of information and telecommunications systems;
(iv) Audit Committee, which has the specific task of monitoring:
(a) financial reporting processes,
(b) the effectiveness of the internal control and risk management systems,
(c) the auditing of financial statements by the Statutory Auditors,
(d) the independent character of the Statutory Auditors.
4.3.3.3.4
Permanent supervision and control
Throughout 2015, the Audit and Risk Management Division deployed various components of the internal control
framework to enable the Group to have standardized and harmonized control and monitoring across all Group entities.
The division has established a framework describing all key processes of the Group and related audit points. The model
applied to Numericable Group was replicated, both in terms of the identification of key processes and the formalization
method. The framework consists of a map of key processes, a documentary process repository and a list of identified
audit points. The Process and Internal Control departments oversee these two systems to ensure that they dovetail with
the existing framework.
The department also went on to develop the Group’s risk matrix. Based on the process repository, an inventory was
created for the operational and financial risks associated with the most detailed processes. This was then used to assess
their criticality.
Through its Internal Control department, the division conducts regular tests and thus evaluates the internal control
system while following up on any shortcomings identified. In 2015, one of the objectives of the Internal Control
department was to ensure a seamless transition from 2014, with a 30% rotation of tests performed at the corporate level
on SFR and Numericable. For subsidiaries, 100% of the key controls identified when creating the process repository
were tested.
In parallel, and as part of its regular system monitoring, the division conducted audits through its Internal Audit
department in accordance with the audit plan drawn up in January. The audits cover all environments: Financial,
IT/Networks, Operational, Support, and Corporate. They concern core functions as well as specific subsidiaries. The
audit results are presented to the various operational departments, the Management Team, and the Audit Committee.
The findings and actions to be taken are monitored in a database of recommendations.
In 2015, the work carried out did not identify any serious failing or shortcoming that might undermine the reliability of the
financial information.
4.3.3.3.5
Risk identification and assessment
To gain an insight into the risks that the Group is exposed to, a comprehensive approach had to be defined. This could
then be used as a basis for the internal control system and audits.
The risk management system implemented within the Group is based on:
(i) the list of key financial, operational, technical, or support processes, as well as the analysis of points flagged after
these were formally identified;
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(ii) the results of various tests performed by staff, Internal Control and Internal Audit departments, and Statutory
Auditors;
(iii) the findings of all audits conducted by the Internal Audit department;
(iv) the results of self-assessment questionnaires sent to central teams and to all subsidiaries.
To control and manage these risks effectively, the Audit and Risk Management Division ensures that these are fully
covered by checking that appropriate controls exist or have been put in place.
4.3.3.4 Internal control procedures relating to the preparation and processing of
accounting and financial information
The Group has set up specific procedures relating to the preparation and processing of accounting and financial
information, including, in particular:
(i) Approval of the financial statements, which the Statutory Auditors subject to:
- a limited review as at June 30,
-
a review as part of the limited audit of Altice’s quarterly financial statements as at March 31 and September 30,
-
and an audit as at December 31 of each year;
(ii) preparation of a monthly statement of financial position, income statement and cash flow statement;
(iii) preparation of the consolidated financial statements.
These procedures are designed to ensure the consistency and accuracy of information throughout the various
processing chains. These provide assurances from data creation through to recognition and disclosure.
The following processes are specifically covered:
 subscribing to an offer and monitoring the contract with the customer,
 managing the different distribution channels and inventory,
 the breakdown of revenues, monitored by teams testing traffic flows, customer billing, collection, and recovery,
 fixed assets, including management of telecommunications network assets, as well as other purchases initiated by
staff,
 interconnection costs,
 employee payroll,
 cash management and off-balance sheet commitments,
 preventive risk management, including risks related to business-critical information systems.
In 2015, the team in charge of internal control conducted several rounds of first and second-level tests. First-level tests
are performed by staff under the supervision of the Internal Control Department, on a selection of key process controls
with a material impact on the financial statements. Second-level tests are performed by the Internal Control Department.
They consist of an independent review of tests on major controls carried out by staff. The work of the Internal Control
Department is made available to the Statutory Auditors.
In addition, the efficiency of the system was tested by Internal Audit during the implementation of the 2015 audit plan.
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Comments on the financial year
5
Comments on the
financial year
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
Analysis of the Group’s results of operations ............................................................... 186
5.1.1 General Presentation
186
5.1.2 Presentation of the consolidated pro forma financial statements and financial
information
187
5.1.3 Analysis for the year ended December 31, 2015
193
Analysis of the Group’s financial position ..................................................................... 199
5.2.1 General Presentation
199
5.2.2 Financial resources
199
Recent acquisitions and sales ........................................................................................ 218
Recent events .................................................................................................................. 219
5.4.1 Change in governance
219
5.4.2 Takeover of Numergy
219
5.4.3 Agreement of the Kosc consortium by the Competition Authority for the acquisition of
the Completel DSL network
219
5.4.4 Swaps trading
219
5.4.5 The Group has refinanced US$5.2 billion of its debt as “Senior Notes”
220
5.4.6 Competition Authority sanction against Numericable-SFR
220
5.4.7 Numericable-SFR took over the minority stake of Altice N.V. in NextRadioTV group and
acquired Altice Media Groupe France
220
Trends and outlook.......................................................................................................... 221
Profit forecasts or estimates ........................................................................................... 222
Company results over the past five years...................................................................... 222
Dividend policy ................................................................................................................ 222
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Readers are asked to read the following information on the Group’s consolidated and pro forma results of operations in
conjunction with the Group’s consolidated financial statements for the fiscal year ended December 31, 2015, and the
comparative information for the fiscal year ended December 31, 2014, as set out in Section 6.1 “Consolidated financial
statements of the Group” of this Registration Document. The consolidated financial statements have been prepared in
accordance with IFRS as adopted by the European Union and have been audited by Deloitte & Associés and KPMG
Audit, Statutory Auditors. The Statutory Auditors’ report on the consolidated financial statements can be found in Section
6 “Financial disclosures” of this Registration Document. These financial statements include a condensed pro forma
income statement for the 12 months ended December 31, 2014, intended to present the impact of the acquisitions of
SFR Group (SFR SA, SIG 50, and their subsidiaries, including Telindus, acquired by SFR Group on April 30, 2014) and
of Virgin Mobile Group (Omer Telecom Limited and its subsidiaries) and the associated financing, as if these transactions
(acquisitions, financing of acquisitions, and refinancing transactions connected with the acquisitions) had occurred on
January 1, 2014.
5.1
Analysis of the Group’s results of operations
5.1.1 General presentation
Created as a result of the merger of Numericable Group and SFR, Numericable-SFR Group aims to become, using the
largest fiber optic network and a leading mobile network, the national leader in France in the convergence of Very High
Speed fixed-line/mobile. A global player and leading alternative operator in France, the Group operates in three
segments of the French telecommunications market:
 The B2C segment, which encompasses fixed-line and mobile product and service offers for residential customers
under the Group’s brands. The B2C segment represents the bulk of Group revenues, contributing €7,595 million for
the year ended December 31, 2015 (i.e., 69% of total Group revenues).
 The B2B segment, which encompasses service offers for SMEs, large corporations, and public authorities. The B2B
segment is the second-largest source of revenues for the Group, contributing €2,116 million in revenues for the year
ended December 31, 2015 (i.e., 19% of total Group revenues).
 The Wholesale segment, which encompasses wholesale mobile and fixed-line voice call connectivity services,
wholesale data connectivity services, wholesale fiber infrastructure services as well as white label triple play DSL and
Very High Speed offers for telecommunications operators and Internet service providers. The wholesale segment is
the third-largest source of revenues for the Group, contributing €1,328 million in revenues for the year ended
December 31, 2015 (i.e., 12% of total Group revenues).
The Group’s service and product offers are tailored to the characteristics and requirements of each market segment:
 In the B2C segment, the Group offers television, very high speed broadband, fixed-line and mobile telephony
services, in the form of bundles and on a stand-alone basis. The Group also offers analog television services to
individual subscribers and bulk digital services to managers of residential buildings.
 In the B2B segment, the Group offers data services, in particular IP VPN (IP Virtual Private Network), LAN to LAN
(local network), Internet, and security, hosting and cloud computing services, as well as fixed-line voice and mobile
telephony services, including voice calls, VoIP and Centrex.
 In the Wholesale segment, the Group offers wholesale mobile and fixed-line voice call connectivity services,
wholesale data connectivity services, wholesale fiber infrastructure services as well as white label triple play DSL and
Very High Speed offers for telecommunications operators and Internet service providers. It also offers wholesale
services built around the fiber optics network for other telecommunications operators, as well as for the B2B segment.
This segment also includes services sold to virtual mobile operators and roaming services for foreign visitors on the
SFR mobile network (“roaming in”).
At December 31, 2015, the Group had a fixed-line subscriber base of 6,353,000, including 1,814,000 very high speed
subscribers (30 Mbit/s and over) and 4,538,000 ADSL subscribers. At December 31, 2015, the Group had a total mobile
customer base of 21,948,000, including 15,137,000 residential mobile customers.
The Group recorded consolidated revenues of €11,039 million and adjusted EBITDA of €3,860 million in the year ended
December 31, 2015.
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5.1.2 Presentation of the consolidated pro forma financial statements
and financial information
The Group’s consolidated financial statements were prepared in accordance with International Financial Reporting
Standards (IFRS) as published by the International Accounting Standards Board (IASB) and adopted by the European
Union at December 31, 2015. The consolidated financial statements include a condensed pro forma statement of income
for the 12-month period ended December 31, 2014, intended to present the impact of the acquisitions of SFR Group
(SFR SA, SIG 50, and their subsidiaries, including Telindus (renamed SFR Business Solutions in 2015), acquired by
SFR Group on April 30, 2014) and of Virgin Mobile Group (Omer Telecom Limited and its subsidiaries) and the
associated financing, as if these transactions (acquisitions, financing of acquisitions, and refinancing transactions
connected with the acquisitions) had occurred on January 1, 2014.
Change in accounting method
To improve its financial reporting and to ensure uniformity of treatment among Altice Group companies, the Group has
opted to capitalize, in accordance with IAS 38 - Intangible Assets and future standards, its customer acquisition costs for
plans with commitments beginning on or after January 1, 2015. The charge is presented in the “Amortization and
depreciation” caption of the Consolidated Statement of Financial Performance. The Group believes that by doing so, the
financial information provided is more reliable and relevant, particularly for the purposes of a market practice analysis of
the Telecom industry at the international level. This change of method has no material impact on the comparative
financial information presented for 2014. However, the pro forma financial information has been restated for the impact of
that change. Furthermore, intangible assets with a net carrying amount of €98 million were recognized provisionally at
November 30, 2014 under capitalized acquisition costs, as part of the allocation of goodwill related to the acquisition of
SFR and Virgin Mobile.
Harmonization of management rules
As part of the acquisition of SFR, the Group has also harmonized its rules for estimating and capitalizing internal costs
related to network development and information systems, costs for introducing Service Access Fees, and costs for the
refurbishment of set-top boxes returned by customers. Accordingly, intangible assets in the amount of €287 million were
recognized at November 30, 2014, as part of the allocation of goodwill related to the acquisition of SFR.
Changes in the preparation of the consolidated financial statements
To improve its financial reporting and ensure uniformity in the presentation of financial statements among Altice Group
companies, Numericable-SFR Group has changed the presentation of its financial statements. The Group believes that
the new presentation of the financial information is more relevant and provides better comparability for the purposes of a
market practice analysis of the Telecom industry at the international level.
5.1.2.1 Material factors affecting results of operations
Certain key factors along with certain past events and transactions have had, and may continue to have, an effect on the
operations and operating income of the Group presented below. Looking beyond the regulatory and macroeconomic
environment and changes in scope, the main factors affecting the normal course of the Group’s operations and its
income include (i) changes in scope, (ii) financial expenses, (iii) costs of integration and achievement of acquisitionrelated synergies, (iv) the competition and the attractiveness of the Group’s products and services compared with those
of competitors, (v) pricing changes, (vi) customer acquisition and cancellation rates, (vii) the structure of the Group’s
costs and its programs to optimize these costs, and (viii) the upgrade and maintenance of the network, and related costs.
5.1.2.1.1
Financial income and expenses
Net interest and other income amounted to a net expense of €46 million in 2015 versus a net expense of €600 million in
2014.
Interest income was impacted in 2015 by the recognition of interest income of €643.5 million corresponding to the
discounted value of the price supplement in the Group’s non-current financial liabilities at December 31, 2014. As a result
of the buyback of Numericable-SFR shares held by Vivendi on May 6, 2015, Vivendi permanently waived the earn-out
payment of €750 million which would have been owed by Numericable-SFR to Vivendi if EBITDA - Capex reached at
least €2 billion in any given fiscal year by December 31, 2024. Interest expense for 2015 was also impacted by new
tranches of debt in July 2015 and October 2015.
Interest and other expenses were impacted in 2014 by successive refinancing and notably the acquisition of SFR, for
which the sums raised in April 2014 were placed in escrow until the acquisition was completed in November 2014.
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5.1.2.1.2
Costs of integration and achievement of synergies
The synergy plan announced during Numericable’s acquisition of SFR is ahead of its targets. It will continue to be
implemented over the next few years. This strategy has enabled Numericable-SFR to reposition itself, rebound, and thus
generate the expected earnings more quickly. The Group has achieved synergies in various sectors, both in terms of
costs and investment expenses, particularly as concerns the network, the B2C market, the B2B market, and operating
activities. The Group estimates that in 2015 it saved around €590 million in operating expenses, about €75 million in
costs of goods sold (COGS), and approximately €90 million in capital expenditure. The Group therefore estimates that in
2015 it made expenditure savings in the region of €755 million.
5.1.2.1.3
Changes in the scope of consolidation
The Group’s results of operations are affected by acquisitions and disposals.
In 2014, Numericable-SFR acquired the SFR and Virgin Mobile operators. These acquisitions had a very significant
impact on the Group’s results, even if the companies acquired were only consolidated for one month in 2014 (from
November 27, 2014 for SFR and from December 5, 2014 for Virgin Mobile). SFR also acquired Telindus (renamed SFR
Business Solutions in 2015) in 2014. SFR and Virgin Mobile respectively contributed €835 million and €28 million to
Group revenues in 2014. SFR and Virgin Mobile respectively contributed a loss of €34 million and a loss of €8 million to
Group net income in 2014. In the 2014 pro forma statement of income, SFR contributed €9,788 million to revenues, or
86.6% of total pro forma revenues, and €251 million to net income in 2014.
The Group did not carry out any acquisition or significant disposal in 2015.
5.1.2.2 Main performance indicators
5.1.2.2.1
Connected sites and number of individual subscribers
The Group uses as management indicators the potential number of customers passed by its cable/fiber fixed-line
network and the number of fixed-line subscribers, including the number of Very High Speed subscribers (FTTH and
FTTB), and the number of mobile subscribers, including the number of subscribers on plans, the number of B2B
subscribers, and the number of white-label end users (fiber and DSL). These indicators allow the Group to analyze the
success of its various offers and to adjust its offers based on its research.
The Group remains the leading player in the roll-out of fiber optics in France, with a network of more than 7.7 million
households with fiber optics (100 Mbps and more) as of late 2015, compared with 6.4 million in late 2014, or 1.3 million
additional connections.
The table below sets out the Group’s operating data: (i) pro forma for the fiscal year ended December 31, 2014; and (ii)
actual at December 31, 2015. The pro forma operating data for the fiscal year ended December 31, 2014 seeks to
present this operating data as if the acquisitions of the SFR Group (SFR SA, SIG 50, and their subsidiaries, including
Telindus (now SFR Business Solutions), acquired by SFR Group on April 30, 2014) and of Virgin Mobile Group (Omer
Telecom Limited and its subsidiaries) had occurred on January 1, 2014.
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Operating data
As of and for the year ended
December 31
(in thousands)
2014
2015
10,394(4)
9,323
B2C operating data
Footprint(1)
Homes served(2)
(5)
7,711
16,238
15,137
Of which postpaid
13,004
12,604
Of which prepaid
3,234
2,533
6,577
6,353
Of which ADSL
5,030
4,538
1,547
1,814
22.5
22.5
26.6
25.9
Of which Fiber connections
Mobile subscribers
6,451
(3)
Monthly ARPU
Mobile subscribers
Of which postpaid
Of which prepaid
7.4
7.4
34.1
35.1
Of which ADSL
32.6
33.4
Of which FTTH
28.5
34.9
Of which FTTB
41.0
40.8
6,701
6,811
4,225
4,649
1,007
692
364
327
B2B operating data
Postpaid mobile subscribers
Of which M2M
Operating data for the fixed-line wholesale segment
White-label end users
Of which Fiber
(1) The operating data pertaining to the Group’s footprint and penetration are presented as of the relevant reporting date.
(2) A home is considered to have “passed” if it can be connected to the distribution system without further extension of the network.
(3) ARPU operating data are presented in euros per month (excluding VAT) for the periods indicated and do not reflect ARPU from white label end users
or bulk subscribers.
(4) Not including homes passed by SFR Group and purged of duplications and connections not available as from 2015.
(5)
Data not inclusive of SFR Group Fiber connections.
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5.1
5.1.2.2.2
ARPU (Average Revenue Per User)
The Group uses ARPU as an indicator to track the performance of its B2C operations. ARPU cannot be used to measure
financial performance under IFRS, and is not reviewed by the auditors, a consultant, or outside expert. ARPU is
calculated internally on the basis of assumptions made by management. The definition used by Group management may
not be comparable with other similar terms used by other companies.
The table below presents the Group’s pro forma ARPU for the year ended December 31, 2014 and actual ARPU for the
year ended December 31, 2015. The pro forma ARPU is intended to present the Group’s ARPU as if the acquisitions of
SFR Group (SFR SA, SIG 50, and their subsidiaries, including Telindus (now SFR Business Solutions), acquired by SFR
Group on April 30, 2014) and of Virgin Mobile Group (Omer Telecom Limited and its subsidiaries) had occurred on
January 1, 2014.
As of and for the year ended
December 31
2014
2015
Change
Mobile subscribers
16,238
15,137
-7%
Of which postpaid
13,004
12,604
-3%
Of which prepaid
3,234
2,533
-22%
6,577
6,353
-3%
Of which ADSL
5,030
4,538
-10%
1,547
1,814
17%
(in thousands)
Mobile ARPU remained stable at €22.5 in 2015 compared with 2014 (pro forma). Postpaid ARPU decreased from €26.6
to €25.9 between 2014 and 2015, reflecting increased competition in the market for postpaid customers, while prepaid
ARPU remained stable at €7.4. The stability of mobile ARPU reflects the trends described above, offset by a change in
the mix between prepaid and postpaid customers, the number of prepaid customers falling more quickly than the number
of postpaid customers.
Fixed-line ARPU increased from €34.1 to €35.1 over the same period, representing a rise of 2.9% from 2014 to 2015.
This growth was due to the strong performance of Very High Speed activities, where stronger growth in the customer
base and average revenue per user was enough to offset the decline in DSL operations. In 2015, the Group increased
the rate for its Very High Speed plans. This resulted in a rise in ARPU for Very High Speed Customers, from €28.5 in
2014 to €34.9 in 2015. The Group also slightly increased the rate of its ADSL plans, triggering a rise in ARPU for ADSL
subscribers from €32.6 to €33.4.
5.1.2.2.3
Growth in net sales
The Group uses the growth in net sales of these mobile and fixed-line plans as a performance indicator. In the B2C fixedline segment, the Group focused in 2015 on reducing churn and selling additional services on fixed-line plans, as well as
on the migration of ADSL customers to Very High Speed packages. For the year ended December 31, 2015, net sales in
the B2C Fixed-Line market reflected a decrease in customer base of 224,000 customers. This is due to the fall of
491,000 in the number of ADSL customers, partly offset by the extra 268,000 Fixed-Line Very High Speed customers.
In the B2C mobile segment, the Group focused in 2015 on increasing the number of high-value subscribers. It also
sought to attract customers on entry-level mobile plans by launching new streamlined packages. For the year ended
December 31, 2015, the number of B2C mobile customers fell by 534,000. This is linked to the decrease in the mobile
customer base in the first three quarters of 2015, partly offset by positive net sales of 140,000 in the fourth quarter. In the
mobile B2B segment, net sales were down 313,000 for 2015. While the decrease in churn in the B2C and B2B mobile
segments and growth in the B2C mobile customer base in the fourth quarter of 2015 reflected the initial return on
investment in the mobile network, the level of churn remains significantly higher than the market average.
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5.1
5.1.2.3 Main elements of the income statement
A brief description of various line items on the Group’s income statement and certain other measurements used by the
Group are presented below.
5.1.2.3.1
Revenues
Revenues are calculated on the basis of (i) volume, which depends on the number of subscribers, sites connected, or
lines supplied for subscription offers and usage levels, and (ii) prices, subscription fees, minutes, line rental, and other
services, depending on the chosen offer.
The principles governing revenue recognition can be found in Note 2.3 to the Group’s consolidated financial statements.
5.1.2.3.2
Purchasing and outsourcing
Purchasing and outsourcing mainly include fixed-line interconnection and termination costs (which are regulated),
interconnection costs of high speed broadband, the cost of mobile handsets, and the cost of content (TV, music, etc.).
They also include the cost of outsourced services, mainly for installation work.
5.1.2.3.3
Other operating expenses
Other operating expenses mainly include costs incurred for customer service, advertising and marketing, network
maintenance, information system and network maintenance, and general expenses. They also include taxes and duties,
which are primarily comprised of general direct and indirect taxes, such as the flat-rate tax on network businesses, the
value-added contribution, as well as the taxes that apply to telecommunications operators and television providers, such
as the tax on television providers, the audiovisual program industry support contribution, and the taxes on VOD.
This line item does not include income tax, which is recognized under the “Income tax expense (income)” line item.
5.1.2.3.4
Personnel expenses
Personnel expense mainly includes (i) salaries and bonuses, statutory and contractual profit-sharing, social security
charges and related levies, (ii) expenses related to the employee pension plan and other post-employment benefits, (iii)
the IFRS 2 expense relating to the stock subscription option plan. Personnel expense is shown net of capitalized payroll.
The Group’s personnel expense reflects the number of employees and payroll levels. The Group believes that current
payroll levels are adequate and does not expect any significant increase in the near future. Salary negotiations are
typically held once a year.
5.1.2.3.5
Other non-recurring income and expenses
Other non-recurring income mainly consists of proceeds from the sale of property, plant, and equipment and various
other non-recurring income.
Other non-recurring expenses mainly consist of the net carrying value of sold assets, consulting fees for refinancing
and acquisitions, restructuring costs, and other sundry non-recurring expenses.
5.1.2.3.6
Adjusted EBITDA
The Group monitors this indicator to manage and measure operating profit, make capex and asset allocation decisions,
and measure the personal performance of its management team.
Adjusted EBITDA consists of the Group’s earnings before interest, taxes, depreciation and amortization, adjusted for
certain items that it considers to be non-recurring or that are non-cash in nature. During the periods presented, these
items mainly consisted of: fees paid in connection with refinancing and acquisitions transactions, restructuring costs, the
impact during the period of added costs before contract renegotiations, provisions and costs relating to tax and social
security audits, and expenses relating to stock option plans.
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5.1
The process used by the Group to calculate adjusted EBITDA may not be comparable with other similarly titled
measurements used by other companies. Furthermore, this measurement should not be viewed as an alternative to
operating income in that the effects of depreciation and amortization and impairment excluded from this measurement
ultimately affect operating income. Accordingly, the Group also presents the "Operating income" line item, which includes
all amounts affecting its operating income.
The Group feels that this indicator is helpful to readers of its financial statements, as it provides them with a
measurement of its operating results that excludes non-cash items such as depreciation, amortization and impairment,
increasing the projected value of its consolidated financial statements and providing information on the results of the
Group’s normal business activities and cash flow generation, which allow investors to better identify financial
performance trends.
5.1.2.3.7
Depreciation, amortization, and impairment
Depreciation, amortization, and impairment mainly consist of straight-line depreciation and impairment of non-current
assets such as network assets.
5.1.2.3.8
Operating income
Accordingly, the Group also presents the “Operating income” line item, which includes all amounts affecting its operating
income.
5.1.2.3.9
Net interest and other income
Net interest and other income consist of interest income, the cost of gross debt, and other financial expenses. Interest
income is mainly comprised of revenues from the investment of cash and cash equivalents and other interest income.
The cost of gross debt mainly consists of interest expense on lines of credit related to the Group’s Senior Facilities
(calculated after taking into account the impact of interest rate derivatives) and using the effective interest rate (EIR)
method. It also includes changes in the fair value of derivative instruments that do not qualify for hedge accounting and
are accordingly recognized at fair value through profit or loss. Other financial expenses mainly consist of fees (other than
consulting fees, which are recognized under other operating expenses) paid in connection with the amending and
refinancing of the Group’s debt and provisions for financial risk.
5.1.2.3.10 Income tax
Income tax includes income tax, the value-added contribution for businesses (CVAE), and the portion of provisions for
tax audits relating to corporate income tax. It does not include other taxes owed by the Group, excluding the CVAE,
recognized under operating income.
The Group has substantial tax losses that can be used to limit the amount of corporate income tax payable.
However, the ability to effectively use these losses (and to effectively achieve all or part of the theoretical tax saving they
represent) will depend on a range of factors, including:
 the ability of the Group or certain Group companies to generate taxable profits and the extent of these profits
compared to the losses;
 the general limitation under French tax regulations, whereby the percentage of tax loss carryforwards that can be
offset against taxable profits of over €1 million is limited to 50% for fiscal years ended on or after December 31, 2012,
along with certain more specific restrictions relating to certain categories of losses;
 the consequences of current or future tax audits and litigation; and
 possible changes to applicable laws and regulations.
5.1.2.4 Other performance indicators
Adjusted EBITDA - CAPEX
CAPEX corresponds to investment in property, plant, and equipment and intangible assets, excluding telecommunication
licenses and changes in debt for suppliers of non-current assets. CAPEX is not a financial measure defined by IFRS and
may not be comparable to the equivalent measure of the same name used by other companies. The Group therefore
uses the performance indicator Adjusted EBITDA - CAPEX to monitor its financial performance.
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5.1
5.1.2.5 Key accounting principles
For a description of the Group’s main accounting principles and use of estimates, see Notes 2 and 3 to the Group’s
consolidated financial statements for the year ended December 31, 2015.
5.1.3 Analysis of the fiscal year ended December 31, 2015
The table below presents the Group’s consolidated income statement for the fiscal years ended December 31, 2014 and
2015, in millions of euros and percentages of revenues for the periods under review. This financial information is drawn
from the Group’s audited consolidated financial statements.
Year ended December 31
2014
restated
2015
(in € millions)
(as a % of
revenues)
(in €
millions)
(as a % of
revenues)
Change
Revenues
11,039
100.0%
2,170
100.0%
8,869
(3,890)
-35.2%
(630)
-29.0%
(3,260)
(2,467)
-22.3%
(670)
-30.9%
(1,796)
(877)
-7.9%
(170)
-7.8%
(707)
(2,554)
-23.1%
(496)
-22.8%
(2,058)
(314)
-2.8%
(112)
-5.2%
(202)
Operating income
937
8.5%
91
4.2%
846
Interest income
782
7.1%
15
0.7%
767
Personnel expenses
(781)
-7.1%
(504)
-23.2%
(277)
Other financial expenses
Cost of gross financial debt
(47)
-0.4%
(111)
-5.1%
64
(46)
-0.4%
(600)
-27.6%
554
6
0.1%
4
0.2%
2
Share of net income (loss) of associates
Income before taxes
Income tax income (expense)
Net income (loss) from continuing operations
Net income (loss) from discontinued operations
898
(505)
1,403
(215)
317
(532)
682
(188)
870
-
-
-
NET INCOME
682
6.2%
(188)
N/A
870
Attributable to owners of the entity
675
6.1%
(188)
N/A
N/A
7
0.1%
0
N/A
N/A
Attributable to non-controlling
interests
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5.1
5.1.3.1 Analysis of results by segment
5.1.3.1.1
Revenues
Contribution of segments to consolidated revenues
(in € millions)
2015
2014
restated
change
B2C
7,595
1,409
439%
B2B
2,116
464
356%
Wholesale
1,328
297
347%
11,039
2,170
409%
TOTAL
The Group’s revenues for fiscal year 2015 totaled €11,039 million, as against €2,170 million in fiscal year 2014. This
409% increase compared with 2014 revenues is primarily due to the full-year contribution from SDF - and to a lesser
extent Virgin Mobile - for the year ended December 31, 2015, compared with only December in 2014. In 2014, SFR and
Virgin respectively contributed €835 million and €28 million to Group revenues.
B2C activities represent the highest share of consolidated revenues at €7,595 million, compared with €1,409 million for
the year ended December 31, 2014. This 439% increase on 2014 is mainly due to the full-year contribution of the B2C
activities of SFR and Virgin Mobile in 2015, rather than for December alone in 2014.
As of December 31, 2015, the Group had 15.137 million mobile customers, over 83% of whom were subscribers and the
remainder prepaid customers, and 6.353 million fixed-line customers, including 1.814 million Very High Speed
customers, versus 1.514 million High Speed broadband customers at the end of 2014.
Revenues from B2B operations totaled €2,116 million in 2015 versus €464 million in 2014, a year-on-year increase of
close to 356%. Going forward, the business will be developed under the name “SFR Business.” The addition of SFR
supplemented B2B fixed-line operations, operated under the Completel brand, with a mobile component as well: at endDecember 2015, the Group thus had over 6.800 million B2B mobile customers.
Revenues from Wholesale operations grew by 347% between 2014 and 2015, from €297 million in 2014 to €1,328
million in 2015. The increase is mainly due to SFR’s activities for 12 months in 2014 (compared with only one month in
2014), involving the Wholesale business with MVNOs for Mobile and DSL vis-à-vis Bouygues.
5.1.3.1.2
Purchasing and outsourcing were up 517% to €3,890 million in 2015, versus €630 million in 2014. This increase is mainly
linked to the integration of SFR and to a lesser extent Virgin Mobile for 12 months in 2015, compared with one month in
2014. This includes acquisition costs, and specifically the cost of purchasing mobile handsets sold to customers on
subsidized handset plans.
5.1.3.1.3
Other operating expenses amounted to €2,467 million for the year ended December 31, 2015, as against €670 million in
2014. This 268% increase on 2014 is essentially due to the integration of SFR and its subsidiaries and Virgin Mobile,
partly offset by synergies due to the acquisition of SFR and Virgin, the Group managing to swiftly implement the
synergies forecast from 2015. These consisted of: (i) €230 million from the restructuring of sales and marketing
operations, (ii) €55 million from the optimization of Customer Service, (iii) €235 million in savings generated from
operations and network maintenance, (iv) €35 million from payroll streamlining measures, and (v) €35 million from
structural cost savings. In addition, synergies also include €90 million in cost savings from the reduction in the cost of
goods sold, resulting from renegotiated contracts and other cost-efficiency measures, and reductions in cost base linked
to the fall in revenues. Added to this are capital expenditure savings of around €90 million, bringing the total savings for
2015 to €755 million.
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5.1
5.1.3.1.4
Personnel expenses
Personnel expenses totaled €877 million in 2015 versus €170 million in 2014, an increase of 416% compared with 2014.
This increase is due to the full-year effect in 2015 of the integration of employees from SFR and its subsidiaries and from
Virgin Mobile.
5.1.3.1.5
Other operating income and expenses represented an expense of €314 million in 2015, against an expense of €112
million in 2014. For 2015, this included proceeds from the disposal of intangible assets and property, plant and
equipment of -€188 million, versus -€16 million in 2014.
5.1.3.1.6
Depreciation and amortization rose €2,058 million from 2014 to 2015, from €496 million to €2,554 million. Aside from
higher depreciation and amortization on a like-for-like basis due to Numericable’s substantial capital expenditure in rolling
out its fiber infrastructure, the bulk of the increase was driven by the integration of SFR.
5.1.3.1.7
Operating income
Operating income rose by €847 million between 2014 and 2015, from €91 million to €937 million.
This mainly reflected the increase in adjusted operating income before depreciation and amortization due to the
consolidation of SFR and Virgin.
Reconciliation of operating income to Adjusted EBITDA
12-month period
ended December 31
2015
2014
restated
937
91
2,554
496
SFR and Virgin Mobile acquisition expenses
16
61
Restructuring costs(a)
80
10
9
9
263
42
3,860
708
(in € millions)
Operating income
Costs relating to stock option plans
Other non-recurring costs
(b)
ADJUSTED EBITDA
(a)
(b)
Includes €37 million in costs for the restoration of tertiary sites resulting from the relocation of employees to the Saint-Denis site, €15 million
in costs for the termination of contracts related primarily to the network, and €14 million in provisions related to store closures. For 2014, it
includes restructuring costs relating to the acquisition of SFR and the acquisition of LTI Telecom in 2013.
For 2015, this notably includes capital gains or losses from intangible assets and property, plant, and equipment totaling €188 million,
including a loss of €116 million due to the unfavorable outcome of a dispute over ownership of the DSP 92 network and the impact on the
period of additional costs before contract renegotiations (€45 million), €14 million in litigation expenses, and €16 million in other nonrecurring expenses.
5.1.3.1.8
Net interest and other income amounted to an expense of €46 million in 2015, versus €600 million in 2014.
Financial income rose significantly from €15 million in 2014 to €782 million in 2014. This is mainly due to non-recurring
income in connection with the Vivendi share buyback on May 6, 2015:
 Vivendi permanently waived the potential earn-out payment of €750 million that the Group would have owed it if
annual cash flow generated reached €2,000 million before December 31, 2024. The Group has therefore recognized
net financial income of €644 million corresponding to the discounted value of the earn-out payment recorded in the
Group’s non-current financial liabilities at December 31, 2014;
 financial income of €124 million was also recognized for guarantees given by Vivendi in 2015.
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The cost of gross debt was up from €504 million in 2014 to €781 million in 2015. It is primarily composed of the following
elements:
 €616 million in interest on senior facilities in 2015, versus €433 million in 2014, up 42%. The increase in interest over
2014 comes from the new fixed-term loans arranged in July and November 2015 and the full-year effect of the facility
arranged in May 2014 for the SFR acquisition;
 the amortization of financial expenses relating to the arrangement of the financing, which represents an expense of
€49 million in 2015 versus €55 million in 2014 (in 2014, this amount included a non-recurring expense of €22 million
for the unamortized portion of the expenses on the debt discharged in May 2014);
 currency translation adjustments on the financial debt and instruments in dollars, recognized through profit or loss for
€30 million in 2015 compared with €17 million in 2014. It should be noted that the Group arranged cross-currency
swaps to hedge the EUR/USD exchange rate risk stemming from the interest payments and repayment of principal to
be made in US dollars for the bonds and bank loans related to the 2014 refinancing and the acquisition of SFR, as
well as for the new fixed-term loans contracted in 2015. See section on “Currency risk”;
 an expense of €86 million in 2015 (zero in 2014) corresponding to the negative fair value of the interest rate swaps
contracted by the Group in July 2015 for the purpose of cancelling the interest rate hedge on coupons over the period
2019-2022 on the 2022 and 2024 Bonds against payment of a cash balance to Numericable-SFR. As these swaps
were not classified as hedges, their fair value at December 31, 2015 was recognized directly in financial income.
Other financial expenses were down at €47 million in 2015 as against €111 million in 2014. This decrease is mainly due
to the fact that in 2014, they included €89 million of premiums paid in connection with early bond redemptions following
the SFR acquisition.
5.1.3.1.9
Income tax
Corporate income tax expense amounted to €215 million for the year ended December 31, 2015, versus income of €317
million for the year ended December 31, 2014.
This is mainly due to corporate income tax expense on Group companies of €232 million (versus income of €33 million in
2014).
For the record, following the acquisition of SFR, in 2014 the Group recognized a deferred tax asset of €298 million based
on updated forecasts of the use of tax losses carried forward over a medium-term horizon. The change in deferred taxes
over the year is largely due to the partial use of deferred taxes related to tax loss carryforwards for €168 million and the
reversal of a portion of net deferred taxes recorded on Purchase Price Accounting for €173 million.
5.1.3.1.10 Net income
Net income went from a net loss of €188 million for the year ended December 31, 2014 to net income of €682 million for
the year ended December 31, 2015.
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5.1
5.1.3.2 2014 and 2015 pro forma results
In order to facilitate understanding of the Group’s results, pro forma financial statements were also prepared.
The condensed pro forma income statement for the year ended December 31, 2014 is intended to present the impact of
the acquisition of SFR Group (SFR SA, SIG 50, and their subsidiaries, excluding SFR Business Solutions (formerly
Telindus), acquired by SFR Group on April 30, 2014) and of Virgin Mobile, as well as the financing and refinancing
transactions, as if they had occurred on January 1, 2014.
12-month period ended December 31
2014
pro forma
2015
(in € millions)
(as a % of
revenues)
(in € millions)
(as a % of
revenues)
11,039
100%
11,436
100%
(10,102)
-92%
(10,961)
-96%
937
8%
475
4%
Revenues
Operating expenses
OPERATING INCOME
5.1.3.2.1
Revenues (pro forma)
Contribution from
segments to the
consolidated revenues
(in millions of euros)
B2C
B2B
Mobile
Fixed
Mobile
Fixed
Wholesale
Total
Fiscal year ended December 31
2015
2014 (Proforma)
7,595
4,722
2,873
2,116
713
1,403
1,328
11,039
7,888
4,965
2,923
2,223
779
1,444
1,325
11,436
change
-3.7%
-4.9%
-1.7%
-4.8%
-8.5%
-2.9%
0.2%
-3.5%
Pro forma revenues declined by -3.5%, from €11,436 million to €11,039 million between the year ended December 31,
2014 and the year ended December 31, 2015. The decline mainly affected the B2C and B2B segments.
Revenues from B2C operations were down €293 million, from €7,888 million for the year ended December 31, 2014 to
€7,595 million for the year ended December 31, 2015, a -3.7% decline. This decrease primarily reflects the erosion of
revenues from the mobile segment, which at December 31, 2015 amounted to €4,722 million against €4,965 million at
December 31, 2014. This is mainly due to the decline in the total base of -6.8%, which fell from 16.238 million customers
(pro forma) to 15.137 million customers between December 31, 2014 and December 31, 2015. Average revenue per
user remained stable over the period at €22.5.
In the fixed-line segment, revenues slipped 1.7% to €2,873 million at December 31, 2015, as against €2,923 million at
December 31, 2014. This was attributed to a -3.4% contraction in customer base, with 6.353 million customers at
December 31, 2015 versus 6.577 million customers at December 31, 2014, a reflection of the mixed performance. The
ADSL customer base fell by -9.8% from 5.030 million customers as of December 31, 2014 to 4.538 million customers as
of December 31, 2015. The number of Very High Speed customers rose by 17.3%, from 1.547 million customers as of
December 31, 2014 to 1.814 million customers as of December 31, 2015. In line with this trend, ARPU rose by 2.9%
from €34.1 (pro forma) to €35.1 between the year ended December 31, 2014 and the year ended December 31, 2015.
These results reflected strong business in the Very High Speed segment, with growth in its customer base and average
revenue per customer offsetting the decline in DSL operations.
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5.1
Revenue from B2B operations declined by €107 million, down -4.8 %, from €2,223 million in the year ended December
31, 2014 to €2,116 million in the year ended December 31, 2015. This decline was mainly due to the erosion of Mobile
ARPU, which has spread from B2C operations to mobile B2B. In addition, there was also the erosion of fixed-line voice
rates, which are becoming commoditized.
Revenues from the Wholesale business rose by €3 million, up 0.2%. This increase reflected the solid performance of
MVNO operations, robust growth in data roaming volumes, and strong business in Fixed-Line.
5.1.3.2.2
Transition from Operating Income to Adjusted EBITDA (pro forma)
12-month period
ended December 31
2015
(in € millions)
Operating income
2014
pro forma1
937
475
2,554
2,299
SFR and Virgin Mobile acquisition expenses(a)
16
61
Restructuring costs(b)
80
52
9
13
Costs relating to stock option plans(c)
(d)
ADJUSTED EBITDA
(a)
(b)
(c)
(d)
(1)
263
313
3,860
3,213
For 2015, includes costs relating to the purchase of shares held by Vivendi on May 6, 2015. For 2014, includes costs relating to the
acquisition of SFR and Virgin Mobile.
In 2015, includes €37 million in costs for the restoration of tertiary sites resulting from the relocation of employees to the Saint-Denis site,
€15 million in costs for the termination of contracts related primarily to the network, and €14 million in provisions related to store closures. In
2014, these restructuring costs included settlement payments and other costs relating to strategic workforce planning (Gestion
Prévisionnelle de l’Emploi et des Compétences, or GPEC) for €42 million and restructuring costs linked to the acquisition of SFR and of LTI
in October 2013 for €10 million.
Expenses related to the application of IFRS 2.
For 2015, this notably includes capital gains or losses from intangible assets and property, plant, and equipment (€188 million), including
an expense of €116 million relating to the unfavorable outcome of a dispute over ownership of the DSP 92 network and the impact on the
period of additional costs before contract renegotiations (€45 million), €14 million in litigation expenses, and €16 million in other nonrecurring expenses. In 2014 it includes the additional depreciation and amortization recognized on asset disposal for €54 million. It also
includes costs relating to tax audits notified during the fiscal year, advisory fees connected with refinancing transactions by the
Numericable-SFR Group totaling €20 million, and costs relating to non-recurring disputes incurred by SFR for the first 11 months of 2014,
totaling €196 million.
The impact of the harmonization of management rules on estimating and capitalizing internal costs linked to the network and information
systems on the annual 2014 pro forma statements has not been taken into account. See Note 1 of the consolidated financial statements for
the year ended December 31, 2015.
Pro forma adjusted EBITDA rose between the year ended December 31, 2014 and the year ended December 31, 2015
by €648 million, an increase of 20%. This growth mainly reflects the effect of synergies linked to the acquisition of SFR
and Virgin Mobile: the synergies envisaged by the Group were implemented swiftly in 2015 and consisted of: (i) €218
million from the restructuring of sales and marketing operations, (ii) €47 million from the optimization of Customer
Service, (iii) €218 million in savings generated from operations and network maintenance, (iv) €34 million from payroll
streamlining measures, and (v) €34 million from structural cost savings. In addition, synergies also include cost savings
from the reduction in the cost of goods sold, resulting from renegotiated contracts and other cost efficiency measures,
and reductions in cost base linked to the fall in revenues.
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5.2
5.2
Analysis of the Group’s financial position
5.2.1 General presentation
The Group’s primary financing needs include its working capital requirements, capital expenditures, interest payments,
and loan repayments. The Group’s financing needs also include the financing of acquisitions such as SFR and Virgin
Mobile, which occurred in 2014, or financing distributions to its shareholders or share buybacks, as in 2015.
The Group’s main source of regular cash consists of its operating cash flows. The Group’s capacity to generate cash
through its operations in the future will depend on its future operational performance, which is itself to some extent
dependent on economic, financial, competitive, market, regulatory, and other factors, the majority of which are beyond
the Group’s control. The Group has cash and cash equivalents to finance its current operating activities needs.
The Group has also regularly refinanced its debt. In 2014, as part of the Acquisition of SFR, the Group issued bonds with
a total principal of €7,873 million and took out a new Term Loan (defined below) with a total principal of €3,780 million.
The Group also took out a new revolving line of credit, €300 million of which was available immediately, with an
additional €450 million becoming available after the Acquisition of SFR was completed. In the second quarter of 2015,
the €750 million ceiling on this credit facility was raised to €1.125 billion. A portion of the drawdowns under the Term
Loans served to refinance existing facilities prior to the Group’s acquisition of SFR, including the related repayment fees
and charges. The balance resulting from the Term Loan drawdowns (after refinancing and payment of related charges
and expenses), as well as all bond proceeds, were used to finance the Acquisition of SFR and certain related charges,
and were placed in escrow while awaiting the completion of this acquisition In 2015, the Group completed two major debt
raising operations. In July, the Group completed new term loans totaling €798 million to refinance the outstanding RCF
used. This was drawn down in May to finance the repurchase of shares held by Vivendi. In October, the Group raised
additional term loans totaling €1.684 million to finance part of the distribution in December 2015. These new term loans
were structured as additional tranches in the existing legal documentation of the term loans arranged in 2014.
The Group also raised new equity capital in 2014. The Company financed a portion of the price of the SFR Acquisition
through a capital increase, maintaining shareholders’ preferential subscription rights, for a total amount of €4,733 million.
The Group estimates that in 2016 its financing needs will mainly include its working capital requirements, capital
expenditure, interest expense, and loan repayments.
5.2.2 Financial resources
5.2.2.1 Overview
In 2014 and 2015, the Group primarily used the following sources of financing:
 Cash flows generated by operating activities, which amounted to €893 million in 2014 and €3,135 million in 2015;
 Free cash flow. The amounts of cash and cash equivalents as of December 31, 2014 and 2015 totaled €620 million
and €355 million, respectively. The reduction in free cash flow stems from the Group’s operating and financing
activities.
 Debt, which, as of December 31, 2014 and 2015, totaled €13,627 million and €17,500 million respectively. As of
December 31, 2014, debt essentially consisted of Secured Senior Bonds and drawdowns under the Term Loan, as
well as perpetual subordinated notes from NC Numericable, finance leases, deposits made by customers, bank
overdrafts and the potential earn-out payment to Vivendi for SFR. As of December 31, 2015, debt comprised the
same items, except for the earn-out payment, which was cancelled following the repurchase of Numericable-SFR
shares by the Group and Altice in May 2015. As of December 31. 2015, debt included the following new items: the
outstanding revolving facility, securitization of receivables by SFR; reverse factoring, and negative fair value of some
interest rate and currency hedging instruments.
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5.2
5.2.2.2 Financial liabilities
The Group’s financial liabilities totaled €13,627 million as of December 31, 2014 and €17,500 million as of December 31,
2015. The table below shows a breakdown of the Group’s gross debt as of December 31, 2014 and December 31, 2015:
(in € millions)
As of December 31, 2014
Bonds
8,735
9,478
Bank borrowings
3,983
6,680
Derivative instruments
-
87
Revolving Line of Credit
-
450
69
66
40
43
676
434
86
135
Bank overdrafts
36
126
13,627
17,500
Finance lease debt
Other financial liabilities
(1)
(1)
As of December 31, 2014, other financial liabilities primarily included the discounted value of the earn-out payment of €750 million
potentially due to Vivendi following the sale of SFR to Numericable-SFR, depending on the future financial performance of the new Group.
Following the repurchase of Numericable-SFR shares by the Group and Altice in May 2015, Vivendi waived this earn-out payment. The
debt was therefore fully extinguished in 2015. The principal of other financial liabilities at December 31, 2015 consists of securitization
commitments (€171 million) and reverse factoring (€241 million)
The following table presents the Group’s current financial rating:
Moody’s
S&P
B1 (stable outlook)
B+ (negative outlook)
Following the announcement of Numericable-SFR’s acquisition of Vivendi’s 10% stake in its capital (the other 10% being
purchased by Altice), Moody’s decided to put the Group’s rating - then at Ba3 - on watch with negative outlook. In
October 2015, Moody’s lowered the Group’s rating to B1 with stable outlook, forecasting an increase in the Group’s debt
to fund distributions to its shareholders.
The following section presents the primary categories of items that comprise the Group’s financial liabilities.
The following table presents the Group’s net financial debt as of December 31, 2014 and 2015:
As of December 31,
2014
As of December 31,
2015
Bonds
8,670
9,392
Bank borrowings
4,047
6,781
(in € millions)
450
Finance lease debt
69
66
70
147
12,856
16,836
Cash
191
211
Cash equivalents(b)
429
144
1,063
2,080
11,178
14,401
Liability items contributing to net financial debt(a)
Exchange rate impact on derivatives(c)
TOTAL NET FINANCIAL DEBT
(a)
(b)
(c)
Liability items correspond to the nominal value of financial liabilities (excluding accrued interest, impact of EIR, perpetual subordinated
notes, operating debts (security deposits paid by customers, securitization, and reverse factoring) and earn-out payments potentially due to
Vivendi) - all these liabilities having been translated at the closing price.
Mainly consist of money market UCITS.
The value of derivative instruments, as of December 31, 2014, can be broken down as an exchange rate impact of €1,063 million and an
interest rate impact of (€151) million. The interest rate impact is not included in net financial debt in the table above, but is included in Note
24.4 to the consolidated financial statements as of December 31, 2014. The value of derivatives as of December 31, 2015 comprises a
positive exchange rate impact of €2,080 million and an interest rate impact of (€252) million. The exchange rate impact is not included in the
net financial debt in the table above, but is included in Note 24.5 to the consolidated financial statements as of December 31, 2015.
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5.2
The following table presents the calculation of the net leverage ratio of the Group, based on the Group’s adjusted
EBITDA for the years ended December 31, 2014 and December 31, 2015, and the Group’s net financial debt as of
December 31, 2014 and December 31, 2015, along with certain adjustments. It should be noted that the calculation of
Adjusted EBITDA at December 31, 2014 is pro forma:
(in € millions)
Adjusted EBITDA of the Group(1)
3,213
3,860
Net Financial Debt of the Group(2)
11,178
14,401
3.5X
3.7X
PRO FORMA NET LEVERAGE RATIO
(1) The calculation of the pro forma Adjusted EBITDA is presented in Note 39.4 to the Group’s annual financial statements.
(2) Net financial debt as defined and broken down in Note 24.5 to the consolidated financial statements as of December 31, 2015, in other
words, excluding accrued interest, impact of EIR, perpetual subordinated notes, and operating debts (deposits paid by customers,
securitization, and reverse factoring), with the exception that the interest rate impact is not included in the net financial debt of the table
above, but is included in Note 24.5 to the consolidated financial statements at December 31, 2015.
SECURED SENIOR BONDS, TERM LOAN, REVOLVING LINES OF CREDIT AND ASSOCIATED
HEDGING OBLIGATIONS
On May 8, 2014, the Group issued bonds and entered into new agreements for a term loan and revolving credit facilities
to fund the Acquisition of SFR and refinance the majority of its debt then outstanding under the Ypso France Senior
Facility Agreement. Prior to these transactions, the Company and its subsidiaries owed €2,638 million under the Ypso
France SFA. On May 21, 2014, Numericable refinanced this debt in full (the “May 2014 Refinancing Transactions”). On
July 31, 2015, the Group arranged new term loans in the form of additional tranches of the term loans set up in 2014 to
refinance a portion of the outstanding revolving facility. Finally, on November 10, 2015, the Group again entered into
term loans, still in the form of additional facilities under the term loans set up in 2014, the proceeds of which were used to
fund a portion of the December 2015 distribution. The Group’s leases and perpetual subordinated notes (see Section b)
“Financial liabilities” above) are still carried in the Group’s balance sheet.
The main stages of the procedure for issuing senior bonds and the May 2014 Refinancing Transactions are described
below:
 On May 8, 2014, prior to the May 2014 Refinancing Transactions, the Company issued Secured Senior Bonds with a
principal equivalent to €7,873 million (as defined below);
- Secured Senior Bonds in the amount of US$2,400 million at the rate of 47/8% maturing on May 15, 2019 (the
“2019 Bonds”);
- Secured Senior Bonds with a principal of €1,000 million at the rate of 53/8% maturing on May 15, 2022 (the “2022
Euro Bonds”);
-
Secured Senior Bonds with a principal of US$4,000 million at the rate of 6% maturing on May 15, 2022 (the “2022
Dollar Bonds,” and together with the 2022 Euro Bonds, the “2022 Bonds”);
Secured Senior Bonds with a principal of €1,250 million at the rate of 55/8% maturing on May 15, 2024 (the “2024
Euro Bonds” and together with the 2022 Euro Bonds, the “Euro Secured Senior Bonds”); and
-
Secured Senior Bonds with a principal of US$1,375 million at the rate of 61/4% maturing on May 15, 2024 (the
“2024 Dollar Bonds” and together with the 2019 Bonds and the 2022 Dollar Bonds, the “Dollar Secured Senior
Bonds,” and the Dollar Secured Senior Bonds together with the Euro Secured Senior Bonds, the “Secured Senior
Bonds”).
 On May 8, 2014, the Company, Ypso France S.A.S. and Numericable U.S. LLC entered into a Term Loan (as defined
below) with a principal of nearly €3,780 million. On May 21, 2014, the following amounts were drawn under this Term
Loan: the Company borrowed €635 million, Numericable U.S. LLC borrowed US$2,600 million, and Ypso France
S.A.S. borrowed €1,265 million.
 On May 8, 2014, the Company and some of its subsidiaries took out a revolving line of credit for €750 million (the
“Revolving Line of Credit Agreement,” designating the lines of credit provided under this contract as the “Revolving
Lines of Credit”). A total of €300 million in Revolving Lines of Credit was available as of May 21, 2014. The balance of
€450 million was available as of November 27, 2014 (the date of completion of the SFR Acquisition).
 The Company entered into swap agreements that were intended to hedge its exposure to US dollar/euro exchange
rate fluctuations, and to the LIBOR concerning the payment of interest and principal denominated in US dollars of the
Dollar Secured Senior Bonds and interest, and the principal of the drawdowns denominated in US dollars under the
Term Loan. See “Hedging Obligations” below.
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5
5.2
The income from certain drawdowns under the Term Loan Agreement was used to refinance the Group’s debt (as
indicated below). The balance of these drawdowns, as well as the proceeds from the issuance of the Secured Senior
Bonds, were placed in escrow while awaiting the completion of the SFR Acquisition, and was then used to pay a portion
of the price to acquire SFR. The table below itemizes the sources and uses of funds relating to the bond issues and
Term Loan. Therefore, in all, for the funds raised, €8.9 billion was placed in escrow, €2.7 billion was used to repay the
debt, and approximately €72 million was used to pay fees and commissions:
(in € millions)
Amount
Funds placed in escrow and used to finance the Acquisition of SFR
Funds from the Issuance of Secured Senior Bonds
7,873
Funds from the Term Loan
1,030
Total amount placed in escrow to finance the Acquisition of SFR
8,903
Funds used to Refinance the Existing Debt
Repayment of all Lines of Credit Due under the Ypso France SFA(1)
Including the Principal of the Former Secured Senior Bonds(2)
Premium for Former Secured Senior Bonds
Interest accrued from the Former Secured Senior Bonds
Total Debt Repaid
Other commissions
TOTAL
(1)
2,638
380
89
17
2,744
72
11,720
In lieu of a cash repayment, the loans from Numericable U.S. LLC and Ypso France S.A.S. under the Ypso France SFA were considered as
traded for new borrowing under the Term Loan.
The issuer of the Former Secured Senior Bonds used the proceeds received from the repayment of the amounts owed under the SFA to
repurchase all of the Former Secured Senior Bonds due.
(2)
For the purposes of financing the Acquisition of SFR, in addition to the amount of debt already incurred and placed in
escrow under the Secured Senior Bonds and May 2014 Refinancing Transactions, the Company proceeded with a
capital increase, which consisted of issuing ordinary shares with preemption rights in the amount of €4,732 million (the
“Capital Increase”).
In 2015, the Group completed two major financing transactions:
 On July 31, 2015, the Company arranged two new tranches under its Term Loan Agreement:
- a B5 tranche denominated in US dollars for US$550 million, equivalent to €498 million. This tranche bears interest
at an annual rate equal to (i) the higher rate as between (a) a LIBOR rate for the interest period corresponding to
the borrowing in question, adjusted for certain additional costs, and (b) 0.75% and (ii) a 3.8125% margin;
- a B5 tranche denominated in euros for €300 million. This tranche bears interest at an annual rate equal to (i) the
higher rate as between (a) a EURIBOR rate for the interest period corresponding to the borrowing in question,
adjusted for certain additional costs, and (b) 0.75% and (ii) a 3.8125% margin.
All funds raised were used to refinance the amounts drawn under the Revolving Credit Facility. Both tranches mature
on July 31, 2022.
 On November 10, 2015, the Company arranged two new tranches under its Term Loan Agreement:
-
a B6 facility denominated in US dollars for US$1,340 million, equivalent to €1,184 million. This tranche bears
interest at an annual rate equal to (i) the higher rate as between (a) a LIBOR rate for the interest period
corresponding to the borrowing in question, adjusted for certain additional costs, and (b) 0.75% and (ii) a 4.00%
margin;
-
a B6 facility denominated in euros for €500 million. This tranche bears interest at an annual rate equal to (i) the
higher rate as between (a) a EURIBOR rate for the interest period corresponding to the borrowing in question,
adjusted for certain additional costs, and (b) 0.75% and (ii) a 4.00% margin.
The funds raised were used to finance a portion of the distribution paid to shareholders in December 2015. Both
tranches mature on January 31, 2023.
In 2015, the Group completed three major hedging transactions, two in connection with the new tranches issued in July
and November 2015:
 In July 2015, in exchange for a US$111 million cash payment for the balance, received by the Company in January
2016, the Company received Floating Rate USD and paid Fixed Rate USD for the periods 2019 to 2022 on the
notional of the 2022 and 2024 Dollar Bonds. There is an early termination clause for 2019. The entire interest rate
swap is in US dollars.
 In July 2015, the Company hedged the interest and principal of the new US$550 million Term Loan at an exchange
rate of US$1.1041 to €1.
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5
5.2
 In October 2015, the Company hedged the interest and principal of the new US$1.340 million Term Loan at the
exchange rate of US$1.1318 to €1.
The Secured Senior Bonds, the Term Loan, and the Revolving Lines of Credit are described below. As this financing was
related to the Acquisition of SFR, some of the applicable provisions varied according to whether or not the Acquisition of
SFR was completed.
The respective rights of these creditors (under the Secured Senior Bonds, the Revolving Lines of Credit Agreement, the
Term Loans and certain counterparts to the hedging obligations mentioned above) and the creditors of the future debts
are governed by an agreement between creditors (“the Agreement Between Creditors”) which was signed on May 8,
2014.
SECURED SENIOR BONDS
Each series of Secured Senior Bonds was issued by the Company on May 8, 2014, under an issuance agreement (each
an “Issuance Agreement,” and together, the “Issuance Agreements”) between the Company and Deutsche Bank AG,
London Branch, as trustee (“Trustee”) for each series of Secured Senior Bonds. The Senior Secured Bonds are
“covenant-light,” that is, these obligations do not have periodically tested financial clauses but merely financial clauses
tested upon the occasion of particular events (a disposal of assets, assumption of new debt, payment of dividends, etc.).
The 2019 Bonds will mature on May 15, 2019. The 2022 Bonds will mature on May 15, 2022. The 2024 Bonds will
mature on May 15, 2024.
Excluding the impact of hedge instruments in place and modifying the interest rate effectively paid by the Group, the
Bonds bear interest at the following rates:
(a) The 2019 Bonds bear interest at an annual rate of 4.875%;
(b) The 2022 Dollar Bonds bear interest at an annual rate of 6.000%;
(c) The 2024 Dollar Bonds bear interest at an annual rate of 6.250%;
(d) The 2022 Euro Bonds bear interest at an annual rate of 5.375%; and
(e) The 2024 Euro Bonds bear interest at an annual rate of 5.625%.
The Secured Senior Bonds bear interest as of the initial issuance date (i.e., May 8, 2014) or, after the first interest
payment date, following the most recent interest payment date. Interest is due in cash semiannually on February 15 and
August 15 of each year, as of August 15, 2014, noting that at the first interest payment date, the interest accrued
corresponded to a period of less than six months. A 1% interest rate is applicable in the event of a delay in the payment
of principal, interest, or any additional amount for the Secured Senior Bonds.
Certain stipulations of the Secured Senior Bonds apply exclusively to the Company and to some of its subsidiaries
(“restricted subsidiaries”). As of the date of issue of the Secured Senior Bonds, all of the Company’s subsidiaries were
designated as “restricted subsidiaries”; however, the Issuance Agreements provide for a mechanism that allows
subsidiaries to be designated as not being subject to restrictions, without prejudice to compliance with certain conditions.
Guarantees and Security for the Secured Senior Bonds
The Secured Senior Bonds are the Company’s senior bonds.
The Secured Senior Bonds are guaranteed by Ypso Holding S.à r.l., Ypso France S.A.S., Ypso Finance S.à r.l., NC
Numericable S.A.S., Altice B2B France S.A.S., Completel S.A.S., Numericable US S.A.S., and Numericable U.S. LLC.
These guarantors are jointly referred to as the “Guarantors at the Completion Date”); and the Secured Senior Bonds
benefit from senior pledges for the full amount of capital of the Guarantors at the Completion Date, the goodwill of NC
Numericable SAS; certain bank accounts, intragroup receivables and intellectual property rights of the Guarantors at the
Completion Date.
The 2019 Bonds and the 2022 Dollar Bonds have also been guaranteed by SFR SA since February 2015 (the
“Guarantors after the Completion Date”).
The 2019 Bonds and 2022 Dollar Bonds benefit from a senior guarantee on the shares of SFR held by the Company, a
senior pledge on certain bank accounts of SFR and on the intragroup loan between the Company and SFR which
replaced, within the context of the Acquisition of SFR, the intragroup loan SFR owed to Vivendi, in addition to benefiting
from a senior guarantee on SFR’s goodwill (including the intellectual property rights), a senior guarantee on the credits
due to SFR by some of its subsidiaries, and a pledge on the shares of SFR’s principal subsidiaries.
The same guarantees or securities also guarantee the debt owed under the Revolving Lines of Credit, Senior Lines of
Credit, and certain associated hedging obligations.
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Redemption option
2019 Bonds
Before May 15, 2016, the Company can redeem, in one or more transactions, up to 40% of the principal of the 2019
Bonds at the purchase price of 104.875% of the principal of the 2019 Bonds, plus interest accrued but not yet paid and
any additional amounts, using the funds from the net proceeds of one or more equity offerings (with the exception of the
Capital Increase) specified under the terms and conditions of the 2019 Bonds; provided that at least 60% of the principal
of the 2019 Bonds is still outstanding after said redemption, and that the purchase takes place within 180 days of the
aforementioned equity offering.
Furthermore, prior to May 15, 2016, the Company may redeem all or some of the 2019 Bonds at any time, provided it
gives prior notice within 30 to 60 days, at a redemption price that is 100% of the principal, plus a price supplement
(“make-whole provision”) stipulated in the issue agreement and the interest accrued but not yet paid, and any other
amounts due.
As of May 15, 2016, the Company may redeem all or some of the 2019 Bonds at the respective redemption prices of
103.656%, 101.828%, and 100.000% plus, in all cases, interest accrued but not yet paid, and any additional amounts
due, if the redemption occurs within twelve months after May 15, 2016, 2017, and 2018 respectively.
2022 Bonds
Prior to May 15, 2017, the Company may redeem, in one or more transactions, up to 40% of the principal of the 2022
Dollar Bonds and up to 40% of the principal of the 2022 Euro Bonds at the redemption price of 106.000% of the principal
of the 2022 Dollar Bonds, and 105.375% of the principal of the 2022 Euro Bonds, plus interest accrued but not yet paid,
and any additional amounts, using the funds from the net proceeds of one or more equity offerings (with the exception of
the Capital Increase) specified under the terms and conditions of the 2022 Bonds; provided that at least 60% of the
principal of the 2022 Dollar Bonds is still outstanding after said redemption, and that the redemption takes place within
180 days after the aforementioned securities offering.
Furthermore, prior to May 15, 2017, the Company may redeem at any time all or some of the 2022 Dollar Bonds and/or
2022 Euro Bonds at a redemption price equal to 100% of the principal, plus a price supplement (“make-whole provision”)
stipulated in the issue agreement, and the interest accrued but not yet paid, along with any additional amounts due.
As of May 15, 2017, the Company may redeem all or some of the 2022 Bonds at the following redemption price
(expressed as a percentage of the principal), plus interest accrued but not yet paid, and any additional amounts due, if
the redemption occurs within twelve months after May 15 of each of the years indicated below:
Purchase price
Year
2022 Dollar Bonds
2022 Euro Bonds
2017
104.500%
104.031%
2018
103.000%
102.688%
2019
101.500%
101.344%
2020 and following
100.000%
100.000%
2024 Bonds
Prior to May 15, 2017, the Company may redeem, in one or more transactions, up to 40% of the principal of the 2024
Dollar Bonds and up to 40% of the principal of the 2024 Euro Bonds at the redemption price of 106.250% of the principal
of the 2024 Dollar Bonds, and 105.625% of the principal of the 2024 Euro Bonds, plus interest accrued but not yet paid,
and any additional amounts, using funds from the net proceeds of one or more equity offerings (with the exception of the
Capital Increase) specified under the terms and conditions of the 2024 Bonds, provided that at least 60% of the principal
of the 2024 Dollar Bonds is still outstanding after said redemption, and that the redemption occurs within 180 days of the
aforementioned securities offering.
Furthermore, prior to May 15, 2019, the Company may redeem at any time all or some of the 2024 Dollar Bonds and/or
2024 Euro Bonds at a redemption price equal to 100% of the principal, plus a price supplement (“make-whole provision”)
stipulated in the issue agreement, and the interest accrued but not yet paid, along with any additional amounts due.
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5.2
As of May 15, 2019, the Company may redeem all or some of the 2024 Bonds at the following redemption price
(expressed as a percentage of the principal), plus interest accrued but not yet paid, and any additional amounts due, if
the redemption occurs within twelve months after May 15 of each of the years indicated below:
Purchase price
Year
2024 Dollar Bonds
2024 Euro Bonds
2019
103.125%
102.813%
2020
102.083%
101.875%
2021
101.042%
100.938%
2022 and following
100.000%
100.000%
Redemption due to changes in the tax legislation
The Company may redeem all, but not just a portion, of a series of Secured Senior Bonds at any time, as long as it
provides reasonable notice, if changes in tax laws impose certain withholding, or other deductions from the amounts due
for the Secured Senior Bonds or guarantees of these bonds, at the redemption price of 100% of their principal, plus any
interest accrued but not yet paid, and any additional amounts owed on the redemption date.
Change in control; Disposal of assets
Under the terms of the Secured Senior Bonds, at any time after a Change in Control Event, as defined in each Issue
Agreement, the Company must offer to redeem each series of Secured Senior Bonds at 101% of the principal, plus
interest accrued but not yet paid, and any additional amounts (an “Offer due to Change of Control”). Bondholders are not
required to tender their securities in the redemption offer.
For the purposes of this condition, a “Change in Control” means: (1) the effective completion of any transaction (including
a merger or consolidation) following which any party other than one or more authorized bearers become direct or indirect
beneficiaries of more than 50% of the voting rights attached to the Company shares issued and outstanding; (2) during
any period of two consecutive years, a change in the majority of the members of the Company’s Board of Directors
(including new directors elected on the recommendation of a majority of the Board of Directors); (3) the sale, loan,
transfer or other direct or indirect disposal (other than through a merger, consolidation, or other combination), within the
context of one or a series of related transactions, of all or almost all of the assets of the Company and its restricted
subsidiaries, considered as a whole, to any party (other than a specific authorized bearer (i.e. the ultimate controlling
shareholder of Altice NV. and close family members, their respective affiliates and subsidiaries, direct and indirect
investors, and other entities or funds that are managed or controlled by these parties, or other affiliates)), subject to
certain exceptions relating to any disposals that could be made within the context of the Acquisition of SFR in order or
due to the obtaining of an authorization for the operation for control of concentrations, on the condition of compliance
with the following terms if the fair value of the assets sold exceeds 2% of the total pro forma amount of the assets of the
Company and its restricted subsidiaries: (i) the Consolidated Net Leverage Ratio of the Company and its restricted
subsidiaries does not increase; and (ii) the Company rapidly offers to all the lenders for the Term Loan and, to the extent
required, for any debt pari passu (other than a registered offering or a private placement), prorated, the redemption at the
price of 100% of the principal plus interest accrued and not paid on the redemption date, of an amount equal to the net
proceeds from said sale, loan, transfer, or other disposal, and if the principal presented in the offer under the Term Loans
is less than the amount of said net proceeds, the Company shall allocate the balance of the early redemption of the
principal of the Term Loans at par, on a prorated basis.
A “Change in Control Event” occurs when there is a Change in Control (as defined above) and, as long as Vivendi
directly or indirectly owns at least 20% of the Company’s common shares outstanding, a downgrade of the rating on the
Secured Senior Bonds (if Vivendi no longer owns at least 20% of the Company’s float, only one Change in Control has to
occur for there to be a “Change in Control Event”). A rating downgrade means:
 a downgrade of the rating of a series of Secured Senior Bonds by at least one ratings agency (S&P or Moody’s or, if
one of these agencies does not rate the Secured Senior Bonds, another ratings agency that rates these bonds in
their place) of one or more grades (including the intermediate ratings and the ratings between categories) compared
to the rating given 90 days prior to the first occurrence of one of the following events: the Change in Control, the
public disclosure of the occurrence of the Change in Control, or the Company’s intention to make a Change in
Control; or
 the withdrawal of a rating for such a series of Secured Senior Bonds by any one of the ratings agencies, within 60
days following the date of the public notice of the first occurrence of a Change in Control or of the Company’s
intention to proceed with a Change in Control (this period may be extended if the rating of the Secured Senior Bonds
in such a series is reevaluated and publicly announced by one of the ratings agencies).
If no ratings agency announces any action on the rating of the Secured Senior Bonds of a series after a Change in
Control occurs, the Company must demand that each ratings agency confirm its rating of the Secured Senior Bonds of
the series in question before the end of said 60-day period.
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Furthermore, if the proceeds collected by the Company following asset disposals are not allocated or invested, or if no
commitment is made for such an allocation or investment in order to (i) prepay, repay, purchase, or redeem debt, (ii)
invest in or purchase additional assets, or (iii) make capital expenditures, and if the proceeds of such disposal exceed
US$25 million, at the end of a certain period (366 days or, in some cases, 546 days), the Company shall be required to
make an asset disposal offer (“Asset Disposal Offer”) to all bearers of Secured Senior Bonds and, to the extent the
Company so desires, or when the Company or a Guarantor is required to do so by the terms of another pari passu debt
outstanding, to all bearers of said pari passu debt outstanding, allowing them to purchase the maximum principal of
Secured Senior Bonds and all pari passu debt in question to which the Asset Disposal Offer applies, and which may be
purchased by using the proceeds from the disposal, at a purchase price that is equal, for the Secured Senior Bonds, to
100% of the principal of the Secured Senior Bonds, and for the pari passu debt, less than 100% of the principal of the
pari passu debt, in all cases plus interest accrued but not yet paid.
Cases of default
The Issue Agreements relating to the Secured Senior Bonds contain usual cases of default, such as cases of payment
default, nonperformance of commitments, certain cross-defaults and cross-acceleration relating to mortgage loans, issue
agreements or other instruments (subject to a limit of US$25 million), certain cases of bankruptcy, insolvency, or failure
to execute judgments (subject to a limit of US$25 million), conditions related to the validity and enforceability of the
securities on the Secured Senior Bonds (subject to a limit of US$10 million) and conditions linked to the validity and
enforceability of the securities of the Secured Senior Bonds.
Commitments
The Issue Agreements for the Secured Senior Bonds stipulate certain restrictions that benefit the Secured Senior Bond
holders. These provisions limit the ability of the Company and its restricted subsidiaries to:
 contract or secure any additional debt, subject to a test of Consolidated Net Leverage Ratio (the ratio is 4.0: 1.0 for
the total debt and 3.25: 1.0 for the secured senior debt) (see the definition in the Section “- Revolving Lines of Credit
Agreement - Mandatory Accelerated Repayment”);
 make investments (including participation in joint ventures) or other payments subject to restrictions;
 dispose of assets other than through the normal course of its operations, and subsidiaries’ equity instruments;
 conclude certain transactions with its affiliates;
 carry out mergers or consolidations;
 carry out an early repurchase or redemption of equity securities or of subordinated debt, or issue shares in
subsidiaries;
 enter into agreements limiting the ability of its subsidiaries to pay it dividends or repay intragroup loans and
advances; and
 create additional pledges or security interests.
These restrictions are nevertheless subject to a number of significant limitations and exceptions which are customary for
these types of financing, including new debt, as long as the Consolidated Net Leverage Ratio (after taking into account
these operations, and as defined below) is not greater than 4.0:1.0; furthermore, these new debts may carry security
interests if the Consolidated Net Leverage Ratio of Secured Senior Bonds (after taking these operations into account) is
not higher than 3.25:1.0. In particular, if the Consolidated Net Leverage Ratio is not greater than 4.0:1.0, the Group may
contract new debt up to the limit of the aforementioned ceiling.
The “Consolidated Net Leverage Ratio” refers, on any determination date, to the ratio between:
 the Consolidated Net Leverage (A) the sum of the Company’s total debt and that of its restricted subsidiaries on a
consolidated basis (excluding hedging obligations and debts that arose from a line of credit of up to the higher
amount as between €750 million and 4.0% of the total assets) less (B) the total amount of the Company’s cash and
cash equivalents and that of its restricted subsidiaries on a consolidated basis), after eliminating duplicate items from
the calculation; and
 the total amount of pro forma consolidated EBITDA for the last two consecutive quarters ending prior to the
determination date in question for which the interim financial information in terms of EBITDA is available, multiplied by
2.0.
The “Consolidated Net Leverage Ratio for Secured Senior Bonds” is calculated in the same manner as the “Consolidated
Net Leverage Ratio,” except that this is only calculated in relation to the “secured senior debt” and not to “indebtedness.”
Under the Issue Agreements, the secured senior debt includes the debt guaranteed by security interests as well as the
debt in existence as of May 8, 2014, the debt for the Term Loan and the Revolving Line of Credit, the debt of restricted
subsidiaries at the date these entities become restricted subsidiaries, and the debt authorized under the Issue
Agreements within the framework of certain thresholds or on the basis of the net proceeds from certain issues of equity
securities or the issue of subordinated shareholder loans.
The definitions of “debt” and “EBITDA” are as indicated in the Issue Agreements, and are different from those used in the
Group’s financial statements.
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5.2
TERM LOAN
General Information
On May 8, 2014, the Company, Ypso France S.A.S and Numericable U.S. LLC (the “Term Loan Borrowers”) entered into
an agreement for a secured senior line of credit for term loans in euros and US dollars with principal equivalent to €3,780
million, with the Bond Issuer, Ypso France S.A.S, and Numericable U.S. LLC as borrowers, certain lenders that were
parties to the agreement, and Deutsche Bank AG, London Branch as Administrative Agent and Security Agent (the
“Term Loan Agreement” or the “Senior Credit Facility,” the loans granted under this agreement being referred to as the
“Term Loans”). The purpose of the Term Loan Agreement was to allow the Term Loan Borrowers to draw on term loans
through April 30, 2015, up to a maximum of the lenders’ commitment. As indicated above, the income from the Term
Loans was used to finance the Refinancing Operations of May 2014, and certain associated costs and fees, and the
balance was put into escrow until the completion of the Acquisition of SFR, and then used to pay a portion of the SFR
Acquisition price.
On July 20, 2015, the Company and Group subsidiaries signed an incremental term loan agreement with different
additional lenders in which these lenders agreed to loan to these different entities, through two new tranches - one in US
dollars for US$550 million (“USD Term Loan 5”), and the other in euros for €300 million euros (“EUR Term Loan 5”) as
part of the Term Loan Agreement signed May 8, 2014. This incremental term loan agreement also amended the Term
Loan Agreement to add these two new tranches.
On October 14, 2015, using the same mechanism as in July 2015, the Company and subsidiaries of the Group received
a commitment from the additional lenders to loan two new tranches, one in US dollars for US$1,340 million (“USD Term
Loan 6”) and the other in euros for €500 million (“EUR Term Loan 6”) as part of the Term Loan Agreement signed May 8,
2014. This incremental term loan agreement also amended the Term Loan Agreement to add these two new tranches.
On May 21, 2014, the following amounts were drawn under the Term Loan Agreement: the Company borrowed €635
million, Numericable U.S. LLC borrowed US$2,600 million and Ypso France S.A.S. borrowed €1,265 million.
On July 31, 2015, the following amounts were drawn under the Term Loan Agreement: the Company borrowed €300
million under Term Loan 5, and US$550 million under the USD Term Loan 5.
On November 10, 2015, the following amounts were drawn under the Term Loan Agreement: the Company borrowed
€500 million on the EUR Term Loan 6 and US$1,340 million on the USD Term Loan 6.
The following table shows all tranches under the Term Loan Agreement:
Borrower
Maturity
Amount
outstanding
in draw
EUR Term Loan B1
Numericable-SFR
May 21, 2020
475
EUR Term Loan B2
Numericable-SFR
May 21, 2020
160
158.4
Ypso France
May 21, 2020
1,265
1,252.35
EUR Term Loan B5
Numericable-SFR
July 31, 2022
300
300
EUR Term Loan B6
Numericable-SFR
January 31, 2023
500
500
USD Term Loan B1
Numericable US
May 21, 2020
1,394
1,380.6
(in € millions)
EUR *Term Loan B4
Amount outstanding at
December 31, 2015
470.25
USD Term Loan B2
Numericable US
May 21, 2020
1,206
1,193.94
USD Term Loan B5
Numericable-SFR
July 31, 2022
550
550
USD Term Loan B6
Numericable-SFR
January 31, 2023
1,340
1,340
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Interest rates and fees (excluding effect of hedging instruments)
The amounts in US dollars for USD Term Loans B1 and B2 bear interest at an annual rate equal to (i) the higher of the
following: (a) a LIBOR rate for the interest period on the loans in question adjusted for certain additional costs and (b)
0.75% and (ii) a margin of 3.75%. The amounts in US dollars for USD Term Loan B5 bear interest at an annual rate
equal to (i) the higher of the following: (a) a LIBOR rate for the interest period on the loans in question adjusted for
certain additional costs and (b) 0.75% and (ii) a margin of 3.8125%. It should be noted that the margin on the USD Term
Loan B5 was initially 3.25%, but following the establishment of USD Term Loan B6, which had a margin materially better
for the Lenders, which activated the most favored nation clause, the margin on USD Term Loan B5 was raised to
3.8125%. The amounts in US dollars for USD Term Loan B6 bear interest at an annual rate equal to (i) the higher of the
following: (a) a LIBOR rate for the interest period on the loans in question adjusted for certain additional costs and (b)
0.75% and (ii) a margin of 4.0%.
The amounts in euros for Term Loans B1, B2, and B4 bear interest at an annual rate equal to (i) the higher of the
following: (a) a EURIBOR rate for the interest period on the loans in question adjusted for certain additional costs and (b)
0.75% and (ii) a margin of 3.75%. The amounts in euros for Term Loan B5 bear interest at an annual rate equal to (i) the
higher of the following: (a) a EURIBOR rate for the interest period on the loans in question adjusted for certain additional
costs and (b) 0.75% and (ii) a margin of 3.8125%. It should be noted that the margin on the EUR Term Loan B5 was
initially 3.25%, but following the establishment of EUR Term Loan B6 with a margin materially better for the Lenders,
which activated the most favored nation clause, the margin on EUR Term Loan B5 was raised to 3.8125%. The amounts
in euros for Term Loan B6 bear interest at an annual rate equal to (i) the higher of the following: (a) a EURIBOR rate for
the interest period on the loans in question adjusted for certain additional costs and (b) 0.75% and (ii) a margin of 4.0%.
Principal and interest that have not been paid on the proper date accrue interest at 2% more than the interest rate than
normally applies.
Amortization and final maturity
The Company must make quarterly repayments of principal according to an agreed schedule; each payment is equal to
0.25% of the initial principal of the Term Loans, and the payment of the balance is scheduled for May 21, 2020 for the
Term Loans established at the Acquisition, July 31, 2022 for the Term Loans B5 denominated in euros or US dollars, and
January 31, 2023 for Term Loans B6 denominated in euros or US dollars. The first repayment of the Term Loans
established at the Acquisition was made on March 31, 2015. The first repayments of the B5 Term Loans denominated in
euros or US Dollars were made on January 31, 2016 (six months after the draw). The first repayments of the B6 Term
Loans denominated in euros or US Dollars were made on April 30, 2016.
Mandatory Accelerated Repayments
If the Company or one of its subsidiaries sells, loans, transfers, or assigns assets with a fair value that exceeds 2% of the
total pro forma amount of the assets of the Company and its restricted subsidiaries, but this does not generate a
“Change in Control” under the Secured Senior Bonds, by virtue of contractually stipulated exceptions (see the Section
“Secured Senior Bonds - Change in Control; Disposal of assets”), and if the disposal does not result in an increase of the
Consolidated Net Leverage Ratio, the Term Loan Borrowers must quickly offer to all lenders under the Term Loan, and
to the extent required, for any pari passu debt (other than a registered offering or private placement), prorated among
them, redemption at the price of 100% of the principal plus interest accrued but not yet paid on the redemption date, for
an amount equal to the net proceeds of said sale, loan, transfer, or other disposal in question, and if the principal
presented in the offer under the Term Loans is less than the amount of said net proceeds, the Company shall allocate
the balance to early repayment of the principal of the Term Loans, up to par value, on a prorated basis.
Furthermore, if the proceeds collected by the Company from the disposal of the assets is not allocated or invested, or if
no commitment is made to such an allocation or investment in order to (i) prepay, repay, purchase, or redeem debts, (ii)
invest in or purchase additional assets, or (iii) make capital expenditures, and if these proceeds from the disposal exceed
a certain threshold, the Company shall have an obligation to propose an Asset Disposal Offer.
As of the year ended December 31, 2014, the Term Loan Agreement also requires the Company to prepay the Term
Loans outstanding, subject to certain exceptions, for up to 50% of the Company’s annual excess cash flow; this
percentage is reduced to 0% if the Group’s Consolidated Net Leverage Ratio is less than 4.0:1.0.
Voluntary Prepayments or Amendments to Reduce the Return on the Loan
The Borrowers of the Term Loan have the option to prepay the loan at any time, in part or in full, provided, however, that
the Term Loan Borrowers agreed to indemnify each Lender for any loss or expense incurred due to a payment made
before the end of an interest period.
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5.2
The Senior Line of Credit benefits from a senior guarantee from the Guarantors and SFR, senior pledges on the entire
capital of the Guarantors at the Completion Date, certain intragroup loans entered into within the framework of these
operations, the goodwill of NC Numericable SAS, certain bank accounts, the intellectual property rights of the Guarantors
at the Completion Date, a senior pledge on the SFR shares held by the Company and the shares of any subsidiary that
has become a Guarantor after the Completion Date, a senior pledge on certain bank accounts of SFR, a senior pledge
on goodwill (including intellectual property) of SFR, and a senior pledge on the credits owed to SFR by some of its
subsidiaries, as well as on the shares of the main subsidiaries.
Restrictions
The Term Loan includes restrictions that essentially reflect the commitments stipulated in the Issue Agreements for the
Secured Senior Bonds, particularly and subject to significant exceptions and reservations, which limit the ability of the
Company and its subsidiaries to: (i) enter into or guarantee any additional debt, subject to a Consolidated Net Leverage
Ratio test; (ii) make investments or other payments subject to restrictions (including dividends); (iii) grant securities; (iv)
dispose of assets and equity securities of subsidiaries; (v) pay dividends or make other distributions, or purchase shares
composing capital stock or subordinated debt; (vi) execute certain transactions with affiliates; (vii) enter into agreements
that limit the ability of subsidiaries to pay dividends or repay intragroup loans and advances; and (viii) carry out merger or
consolidation operations. The Term Loan contains a list of riders that were to be added to the Term Loan Agreement if
the Completion Date was not prior to April 30, 2015.
The Term Loan Agreement also contains the standard representations and warranties, as well as the standard
commitments.
Cases of default
The Term Loan Agreement contains the usual cases of default, in particular cases of default on payment, nonperformance of commitments, certain cross-defaults (subject to a threshold €20 million), certain cases of bankruptcy,
insolvency or failure to execute judgments (subject to a threshold of €20 million), conditions linked to the validity and
enforceability of loan documents (including security (subject to a threshold of €10 million)) and guarantees, and the
occurrence of a Change in Control Event. If a case of default occurs, the lenders under the Term Loan shall have the
right to take various actions, including requiring immediate payment of the amounts due under the Term Loan, and taking
all actions that a secured creditor is authorized to take, within the framework of the Agreement Between Creditors.
REVOLVING LINES OF CREDIT AGREEMENT
The Company and some of its subsidiaries signed a Revolving Lines of Credit Agreement under which some lenders (the
“Numericable RLC Lenders”) granted the Company, Completel SAS, Ypso France SAS, and NC Numericable SAS
secured senior revolving lines of credit for a total of €750 million (the “Company’s Revolving Lines of Credit”), which were
distributed as follows: (i) a revolving line of credit for €300 million (“Company’s Line of Credit A”), available as of May 21,
2014; and (ii) a revolving line of credit of €450 million (“Company’s Line of Credit B”), available as of the Completion
Date. In 2015, the maximum amount of this €750 million line of credit was first raised to €1 billion; the maximum amount
was then subsequently raised to €1.125 billion. At December 31, 2015, €450 million of these Lines had been drawn.
Limits on the Use of Funds
The Company’s Revolving Lines of Credit may be used by the Company and some of its subsidiaries for the purposes of
financing operations, the working capital of the Company and its subsidiaries (the “Borrower Group”), and before the
Completion Date, for the payment of interest due on income from the Secured Senior Bonds placed in escrow.
Drawdown Conditions
No drawdown under the Revolving Lines of Credit Agreement may be made insofar as (among other things) the credit
agent has not received (or waived) certain standard conditions precedent, documents and reasonably satisfactory
evidence based on the merits and on form. The drawdowns are subject to standard additional conditions, including the
fact that at the date of requesting the drawdown and at the drawdown date (i) no default is underway or would arise as a
result of this drawdown, (ii) certain representations and warranties indicated are precise in all of their essential aspects,
and (iii) the Consolidated Net Leverage Ratio of the Secured Senior Bonds is not greater than the ratio agreed to, after
consideration of such drawdown (see the Section “Financial Commitments” below).
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5.2
Interest Periods, Interest Rate and Fees
The Company and some of its subsidiaries are authorized to perform a number of drawdowns for each Revolving Line of
Credit for terms of one, two, three, or six months (or any other period agreed to between the Company and the agent),
but the period in question must not exceed the final deadline of the Revolving Lines of Credit Agreement. The
drawdowns under the Revolving Lines of Credit must be repaid at the end of the interest period of the corresponding
loan, and the amounts repaid may be borrowed again up to one month before the final expiration date.
The interest rate on each loan under the Renewable Lines of Credit Agreement for each interest period is equal to the
sum of: (x) the applicable margin and (y) EURIBOR. The margin under the Revolving Lines of Credit Agreement is 3.25%
before any cancellation of Line of Credit B of the Company pursuant to a case for cancellation of the Company’s Line of
Credit B, and 3.50% per year following such cancellation. Interest accrues daily as of the first day of the interest period
(inclusive) and is due on the last day of each interest period.
As concerns the amounts under the Revolving Lines of Credit Agreement, the Company is obligated to pay a
commitment commission on the available amount not drawn at a rate equal to 40% of the margin that is calculated on the
commitments not drawn and not cancelled as of June 8, 2014, up to one month before the final deadline of the Revolving
Lines of Credit.
Repayment
The final maturity date of the Revolving Lines of Credit Agreement is set for May 21, 2019.
Automatic cancellation
The standard cases for full or partial cancellation apply to the Revolving Lines of Credit, including in the event that it
becomes illegal for any RLC lender of Numericable to finance, invest or maintain its stake in these lines.
In addition, the Company’s B Credit Line will be automatically and definitively cancelled: (i) if the Secured Senior Bonds
are repaid in conformity with a Special Mandatory Redemption or (ii) if Vivendi enters into a purchase and sale
agreement relating to SFR with a third party other than the Company or one of its subsidiaries, or if the Company or one
of its subsidiaries withdraws its offer to acquire SFR (each situation represents a “Case for Cancellation of Numericable’s
B Line of Credit”).
The Company’s Line of Credit A may be partially and permanently cancelled, at the lenders’ discretion, if a Case for
Cancellation of Numericable’s Line of Credit B occurs, insofar as after any cancellation, the amount of the Company’s
Line of Credit does not fall below €150 million.
Mandatory Accelerated Repayment
At the occurrence of a Change in Control Event, the Company and the other borrowers must repay the Revolving Lines
of Credit in full, along with accrued interest and any other amounts due under the corresponding financing documents;
the Revolving Lines of Credit shall then be cancelled.
Some proceeds received by the Company due to the disposal of assets, for amounts that were not allocated, invested, or
the subject of a commitment to allocate or invest in view of (i) prepaying, repaying, purchasing, or repaying debts, (ii)
investing in or acquiring additional assets, or (iii) making capital expenditures, shall be allocated to the early repayment
of the Company’s Revolving Lines of Credit.
Guarantees
All guarantors of the Secured Senior Bonds and the Company have also guaranteed the bonds of each debtor under the
Revolving Lines of Credit Agreement and the corresponding financing documents, subject to the applicable limitations on
guarantees specified therein.
The Revolving Lines of Credit are guaranteed and benefit from security granted by the same entities as for the Term
Loans.
Representations and warranties
The Revolving Lines of Credit Agreement contains the standard representations and warranties for this type of contract,
subject to the standard exceptions and limits.
Commitments
The Revolving Lines of Credit Agreement contains restrictions that markedly reflect the commitments of each Issue
Agreement.
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5.2
The Revolving Lines of Credit Agreement also require the Company and Borrower Company to comply with certain
general commitments which are subject to conditions of materiality and other standard exceptions that have been agreed
upon.
Financial Commitments
Until September 30, 2015, the Revolving Lines of Credit Agreement requires the Company and the Borrower Group to
maintain a Consolidated Net Leverage Ratio of Secured Senior Bonds (see below) that is less than or equal to 4.00:1.00,
compliance with which must be tested only at each draw, or if there are current loans or bank guarantees under the
Revolving Lines of Credit Agreement at the end of each quarter. When the B6 Term Loans were established in October
2015, the Group obtained agreement from its Lenders for the Renewable Lines of Credit to raise the test level of the
Consolidated Net Leverage Ratio from 4.00:1.00 to 4.50:1.00 from October 1, 2015 through December 31, 2016. The
limit returns to the initial level of 4.00:1.00 as of January 1, 2017.
Cases of default
The Renewable Lines of Credit Agreement stipulates default events (similar in substance to those in the Issue
Agreements), the occurrence of which, subject to certain exceptions and thresholds, will allow the lenders in question to:
(i) cancel all the commitments; (ii) declare expiration of the term and the payability of the current loans, as well as all
other amounts due; and/or (iii) declare that all or some of the loans be repayable on demand. The proceeds from the
liquidation of any security interest shall be allocated in accordance with the Inter-Creditor Agreement.
HEDGING OBLIGATIONS
See the Section “Market risks” for a description of the Group’s exposure to currency and interest rate risks under these
contracts.
Hedge on the 5-year and 8-year interest and principal payments in US dollars:
The Company has signed swap agreements to hedge the euro/US dollar exchange risk associated with the interest
payments to be made in US dollars for the Dollar Secured Senior Bonds and the draws in US dollars under all its Term
Loans denominated in US dollars. Pursuant to these swap agreements, the Company will exchange amounts in euros for
amounts in US dollars to be paid on each semi-annual or quarterly interest payment date:
 on the basis of an exchange rate of €1.00 = US$1.3827 for the Dollar Security Senior Bonds and the B1 and B2 USD
Term Loans;
 on the basis of an exchange rate of €1.00 = US$1.1041 for the USD B5 Term Loan; and
 on the basis of an exchange rate of €1.00 = US$1.1318 for the USD B6 Term Loan
The swap agreements for the Secured Senior Bonds hedge the interest payments between the first semi-annual
payments on August 15, 2014 and the final payment on May 15, 2019 for the 2019 Dollar Bonds, May 15, 2022 for the
2022 Dollar Bonds, and the 2024 Dollar Bonds. The swap agreements for US dollar draws under the B1 and B2 Term
Loans hedge the interest payments between the first quarterly payments to be made on July 30, 2014 and the last
payment on May 21, 2019.
The swap agreements for US dollar draws under the B5 Term Loan hedge the interest payments between the first
quarterly interest payments to be made on October 30, 2015 and the last payment on July 30, 2022. However, these
hedge agreements were established in August 2015 and covered a margin that was 3.25% on the USD Term Loan 5.
After the establishment of USD Term Loan 6 in October 2015, because of the most favored nation clause, the margin of
USD Term Loan 5 was raised to 3.8125%. Thus, the US dollar leg of the hedge agreement does not entirely cover the
interest payments at 0.5625%.
The swap agreements for US dollar draws under the B6 Term Loan hedge the interest payments between the first
quarterly interest payments to be made on January 30, 2016 and the last payment on January 30, 2023.
The Company also used these swap agreements to hedge the principal of these bonds and bank borrowings in dollars:
On May 15, 2019, the Company will pay €1,736 million and receive US$2,400 million corresponding to the principal on
the 2019 bonds, will pay €1,880 million and receive US$2,600 million corresponding to the principal on USD Term Loans
B1 and B2, even though they mature in May 2020. On May 15, 2022, the Company will pay €2,893 million and receive
US$4,000 million corresponding to the principal of the 2022 bonds and will pay €994 million and receive US$1,375
million corresponding to the principal of the 2024 bonds, although the bond does not mature until May 2024. On July 30,
2022, the Company will pay €498 million and receive US$550 million representing the principal on USD Term Loan B5.
On January 30, 2023, the Company will pay €1,184 million and receive US$1,340 million representing the principal of
USD Term Loan B6.
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5.2
It should be noted that the counterparties of Numericable-SFR to the hedge contracts benefit from an early termination
clause at the end of five years for the 7-year hedge contracts, i.e. for the interest and principal of Term Loans B5 and B6
and also for the 8-year hedge agreements, i.e. for the interest and principal of the USD 2022 and USD 2024 Bonds.
Those counterparties may unilaterally terminate the hedging agreement two or three years before maturity and have the
Company pay or pay to the Company (depending on the market conditions on that date) the balance under the
agreement.
Hedging of LIBOR-based interest payments:
In addition to the objectives to hedge the euro/US dollar exchange risk associated with the interest payments to be made
in US dollars under the Term Loan, the swap agreements that cover all draws for all of its USD Term Loans allow it to
convert its LIBOR exposure for the draws in US dollars under the Term Loans into EURIBOR exposure.
For the USD B1 and B2 Term Loans, the Group’s risk is not, however, entirely hedged, since the draws in US dollars on
Term Loans B1 and B2 bear interest at the LIBOR rate plus a margin, subject to a floor of 0.75% on the LIBOR, while the
swap agreements do not include this floor. The swap agreements for US dollar draws under the B1 and B2 Term Loans
hedge the interest payments between the first quarterly payments made on July 30, 2014 and the last payment to be
made on May 21, 2019.
On the other hand, for USD Term Loan B5, the Group has hedged the 0.75% floor on the LIBOR against the EURIBOR
with a 0.75% floor on the EURIBOR. The swap agreements for US dollar draws under the B5 Term Loan hedge the
interest payments between the first quarterly interest payments made on October 30, 2015 and the last payment to be
made on July 30, 2022.
Likewise, the Group has hedged the 0.75% on the LIBOR for the USD Term Loan B6, but against the EURIBOR without
floor. The swap agreements for US dollar draws under the B6 Term Loan hedge the interest payments between the first
quarterly interest payments made on January 30, 2016 and the last payment to be made on January 30, 2023.
Hedging of interest payments or EURIBOR-based hedging
On February 18, 2016, the Company established a hedge agreement with JP Morgan on a nominal of €4.0 billion to
hedge the 3-month variable EURIBOR rate against a 7-year fixed rate. The Company received the 3-month EURIBOR
each quarter against a negative fixed rate of 0.121%. These swaps occur quarterly on April 30, July 30, October 30 and
January 30. As for the Group’s other hedging agreements with a maturity of over 5 years, JP Morgan has the option to
terminate the hedge agreement at the end of 5 years and to have the Company pay, or pay to the Company (depending
on market conditions on that date) the balance under the agreement.
The swap agreements described above are guaranteed and benefit from security granted by the same entities as for the
Term Loan.
PERPETUAL SUBORDINATED NOTES (“TSDI”)
In 2006, one of the Group’s subsidiaries, NC Numericable S.A.S., issued principal of €23.65 million in perpetual
subordinated notes (“TSDI”) to Vilorex, a subsidiary of GDF Suez (excluding capitalized interest). The proceeds from the
TSDI were allocated to finance the construction of connectors in towns of the southern part of the SIPPEREC (Syndicat
Intercommunal de la Périphérie de Paris pour l’Electricité et les Réseaux de Communication). The TSDI bear interest at
an annual rate of 7%. Interest is capitalized. The TSDI were issued for an indefinite period and are redeemable either in
the event of the liquidation of NC Numericable S.A.S., or when NC Numericable S.A.S. reaches a certain level of
revenues generated by the customers covered by the connectors. These triggers have not been attained since the issue
date of the TSDI. NC Numericable S.A.S. may choose to pay all or part of the TSDI in advance by giving ten days’ prior
notice.
FINANCE AND OTHER LEASING
Several companies of the Group have signed finance leases on properties (generally for terms of 20 to 30 years), office
equipment (primarily for four-year terms), and technical equipment.
All of these leases are denominated in euros. Certain real property leases provide that annual rent be set at the
beginning of the lease, but will be subsequently indexed according to the rate of inflation (which corresponds to a specific
percentage of increase).
As of December 31, 2015, the Group’s commitments (current value of minimum rents) under the leases totaled €66
million. The decrease in the amount outstanding represents constant repayments on this type of financing.
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5.2
DEPOSITS FROM CUSTOMERS
Deposits from customers totaled €86 million and €135 million as of December 31, 2014 and 2015, respectively. These
deposits were made by customers upon receiving the Group’s equipment. The increase comes primarily from the
expansion of the Group’s very high speed customer base through the migration of SFR’s DSL customers to very high
speed offers. These very high speed offers require more expensive boxes, which results in a large security deposit from
customers. Thus, at December 31, 2014, security deposits made by SFR customers amounted to 29 million euros, while
one year later, deposits totaled €66 million. Security deposits made by Numericable customers also rose, from €59
million at December 31, 2014 to €68 million at December 31, 2015 thanks to the increase in the very high speed
customer base. Customer’s deposits are returned when they terminate their subscription, provided they have paid their
outstanding invoices and returned the equipment. Deposits are recorded in the balance sheet as debts maturing in more
than one year.
OTHER FINANCIAL LIABILITIES
As of December 31, 2014, other financial liabilities mainly included the €750 million earn-out that Vivendi may receive
following the sale of SFR to Numericable-SFR based on the new Group’s future financial performance. It is recorded in
the financial statements as €644 million, which corresponds to a payment in 2018, discounted at the average rate of debt
for a 4-year horizon, i.e. approximately 4.4%.
The final agreements relating to the buyout of Vivendi’s 20% stake in Numericable-SFR stipulates that Vivendi
definitively waive this potential earn-out payment.
Other financial liabilities fell from €677 million at December 31, 2014 to €434 million at December 31, 2015. At December
31, 2015, the two main components of Other financial liabilities are the SFR securitization of SFR corporate receivables
for €171 million and the Reverse Factoring of SFR for €241 million.
In late March 2015, SFR SA sold without recourse its portfolio of company receivables established March 22, 2015, net
of assets and excluding certain customers not eligible for this type of transaction for a price of €210 million, to Ester
Finance Titrisation, a 100% owned subsidiary of the Crédit Agricole Corporate and Investment Banking group. Each
month, SFR SA sells without recourse the new receivables that have arisen during the month and returns the payments
received on the receivables sold during the preceding sales to Ester. Ester Finance Titrisation has committed to
purchasing the receivables of the Business segment of SFR SA for a 5-year period, for a maximum of €220 million, on a
monthly basis and via a revolving structure. This commitment could end as is standard for this type of transaction with
the occurrence of certain events (bankruptcy of seller or its shareholder, noncompliance with certain obligations or
commitments, default of payment connected to the securitization transaction, and noncompliance with certain
performance covenants solely related to the portfolio sold). SFR SA continues to handle the relationship with the
Business customer, billing, collection, and recovery of receivables. Ester Finance Titrisation pays SFR SA for these
services. As the sale is without recourse, Ester Finance Titrisation assumes the risk of dilution, non-payment, or nonrecoverability. In order to protect itself from this risk, the sale price is not the face value of the receivables, but the face
value with a discount. SFR SA pays Ester Finance Titrisation for its irrevocable commitment to purchase eligible
receivables from SFR SA with a commission of 0.70% per year. SFR SA also pays, at the reference rate, which is the
average of the 1-month EURIBOR and 2-month EURIBOR, plus a 1.40% margin per year, for the mobilization of the
Ester Finance Titrisation fund between the sale date and date of effective payment of the bill by SFR SA’s business
customer.
In August 2015, SFR SA, a subsidiary of the BNP Paribas Group, and around ten of the main service or equipment
providers of SFR SA set up new agreements for payment of SFR SA’s supplier bills. By amending the contract between
the supplier and SFR SA, it was determined that the BNP Paribas subsidiary would take over the invoices of this supplier
in exchange for payment at the initial bill deadline. In a separate agreement, SFR SA committed to paying subsidiary
BNP Paribas for a bill with an extended deadline, which extension could not exceed 360 days after the supplier issued it.
SFR SA pays the subsidiary of the BNP Paribas Group to extend the maturity date of the invoice to EURIBOR 1, plus a
margin. As of December 31, 2015, the invoices of 8 suppliers for around €206 million were incorporated into this maturity
extension program. These invoices mature in the third or fourth quarter of 2016.
In November 2015, SFR SA, a subsidiary of the Société Générale Group, and other group providers established
agreements that were similar to those described above to extend the maturity of some invoices of these providers. As of
December 31, 2015, the invoices of 4 providers at around €33 million were incorporated into this maturity extension
program. These invoices mature in the third or fourth quarter of 2016.
SHAREHOLDERS’ EQUITY
As of December 31, 2015, the Company’s equity totaled €4,256 million, compared with equity of €7,952 million at
December 31, 2014. This change primarily reflects:
The buyback of 48,693,922 treasury shares from Vivendi early in May 2015 for the amount of €1,948 million. These
shares were then cancelled on May 28, 2015.
The “issue premium” distribution of €2,509 million. The Shareholders’ Meeting of December 15, 2015 approved an
exceptional dividend distribution of €5.70 per share, and the 2015 total consolidated comprehensive income of €701
million.
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5.2
5.2.2.3 Presentation and analysis of the main categories of use of the Group’s cash
5.2.2.3.1
Capital expenditures
The Group’s capital expenditures are divided into the following categories:
 Network: Investments to improve, renovate, extend capacity, expand, and maintain the Group’s networks (fiber, main
network, DSL, and mobile), carried out directly or, for certain network extensions, through public-private partnerships;
 Customers: Capital expenditures related to the purchase of mobile terminals, equipment installed at B2B and B2C
customers (mobile equipment, high speed routers, and set-top boxes), as well as connection of homes for new B2C
customers and the creation of fiber connections between business sites on the B2B segment; Service platforms:
investments in the telephone and fixed telephony platforms; and
 Other: capital expenditures for projects in the wholesale market and other investments.
In 2014 and 2015, the Group’s capital expenditures totaled €583 million and €1,856 million respectively.
5.2.2.3.2
Interest payments and loan repayments
The Group paid interest in the amount of €263 million and €605 million in 2014 and 2015 respectively. It also made loan
payments of €2,638 million and €838 million in 2014 and 2015 respectively. The repayments reflect the refinancing
completed in 2014 and 2015 and the mandatory repayments on the different Term Loans for 2015, while the increase in
the interest paid in 2015 is the result of the increase in the Group’s debit in order to finance the SFR acquisition, the
amounts of which were in escrow accounts between May 2014 and the end of November 2014. The increase in the
interest paid also reflects the schedule of Bond coupon payments in August and February.
5.2.2.3.3
Financing of working capital requirements
The working capital requirements primarily corresponds to the value of inventories plus trade receivables and other
operating receivables, and minus trade payables and other operating payables. Structurally, the Group’s working capital
requirements reflects the differences between its operations. In the B2C segment, the Group generates working capital
because its B2C customers have shorter payment terms (generally 5 days), while on the B2B segment, the Group
consumes working capital because its B2B customers have longer payment terms. Thanks to the securitization operation
signed with Ester Finance Titrisation, the Group reduces its collection times by around 40 days for its main subsidiary
operating in the SFR SA enterprise segment. Through the implementation of the Reverse Factoring for its main
subsidiary SFR SA, the Group extended these payment dates of these suppliers. In addition to these two financing
instruments, the Group generally finances its working capital requirements by using its operating cash flows.
In 2014, the Group generated €517 million in working capital (change in working capital requirements and change in
working capital requirements related to intangible assets and property, plant, and equipment). In 2015, the Group
generated €58 million in working capital, including the Securitization and Reverse Factoring operations. Excluding these
two operations, the Group would have used €354 million.
5.2.2.4 Cash flow
The table below provides a summary of the Group’s consolidated cash flows for the years ended December 31, 2014
and 2015.
2014
restated
2015
893
3,135
Net cash used by investing activities
(13,632)
(1,732)
Net cash used by financing activities
13,147
(1,758)
74
-
482
(355)
(in € millions)
Net cash provided by operating activities
Adjustments in presentation without impact on cash flows
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
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5.2
NET CASH FLOWS FROM OPERATING ACTIVITIES
The table below summarizes the net cash flows provided by the Group’s consolidated operating activities for the years
ended December 31, 2014 and 2015.
2014
restated
2015
Net cash flows from operating activities before changes in working capital
requirements, finance costs and
income tax
608
3,698
Change in working capital requirement (excluding asset suppliers, and
excluding Securitization and Reverse Factoring)
358
(322)
Corporate income tax paid
(74)
(240)
893
3,135
(in € millions)
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net cash flows from operating activities before changes in working capital requirements, finance
costs and income tax
Cash flows generated by operating activities before changes in working capital requirements, taxes, dividends, and
interest rose by €3,089.4 million, from a cash entry of €608.3 million for the year ended December 31, 2014 to a cash
entry of €3,697.7 million for the year ended December 31, 2015. The increase of €3,153.9 million in adjusted EBITDA
between the year ended December 31, 2015 and December 31, 2014 is the primary explanation for the increase in cash
flows from operating activities before changes in working capital requirements, interest paid, and income tax. This
increase in adjusted EBITDA is the result of the full consolidation of the results of SFR, Virgin Mobile and SFR Business
Solutions (formerly Telindus) whereas, in 2014, only the month of December was consolidated.
Change in working capital requirements
The table below shows the main changes in working capital requirements. The change in operating working capital
requirements impacts the net cash flows from operating activities. The change in working capital requirements for asset
suppliers and the remaining amount to be disbursed for the acquisition of 2*5 MHz in the 700 MHz band impacts net
cash flows allocated to investing activities. The Securitization and Reverse Factoring impact net cash flows allocated to
financing activities.
2014
restated
2015
Change in working capital requirements
358
(322)
Change in working capital requirements for asset suppliers
160
445
Price for the frequency block of the 700 MHz license
-
(477)
Securitization and Reverse Factoring
-
412
518
58
(in € millions)
NET CASH FLOWS GENERATED BY CHANGES IN THE WORKING CAPITAL
REQUIREMENTS
The change in working capital requirements represents a cash input of €58.3 million for the year ended December 31,
2015, compared with a cash input of €517.6 million for the year ended December 31, 2014. This sharp decline was
primarily driven by the improvement in SFR’s working capital requirement after the purchase of SFR for around €400
million, which was not repeated over 2015. However, the establishment of the Reverse Factoring and the Securitization
nuanced the decrease in the positive change in the Group’s working capital requirements.
Corporate income tax paid
The corporate income tax paid represented a cash outlay of €73.5 million during the year ended December 31, 2014,
compared with a cash outlay of €240.0 million during the year ended December 31, 2015. This increase in corporate tax
payments represents the taxes paid by SFR, whereas in 2014, SFR paid no taxes for the month of December.
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5.2
NET CASH USED IN INVESTING ACTIVITIES
The table below summarizes the net cash used by the Group’s consolidated investing activities for the years ended
December 31, 2014 and 2015.
(in € millions)
Net capital expenditures (excluding frequency block)
Acquisition of companies
Price adjustment on SFR-Virgin securities
Disposals of companies
Financial investments (net)
Change in working capital requirements for asset suppliers
Price for the frequency block of the 700 MHz license
NET CASH USED BY INVESTING ACTIVITIES
2014
restated
2015
(583)
(1,856)
(13,206)
(2)
-
123
-
18
(3)
16
160
445
-
(477)
(13,632)
(1,732)
Net capital expenditures
Net capital expenditures are capital expenditures net of proceeds from the disposal of property, plant, and equipment,
and intangible assets and investment subsidies received.
The cash used for net investing activities rose by €1,273.6 million, from a cash outlay of €582.6 million for the year ended
in December 2014 to a cash outlay of €1,856.2 million for the year ended December 31, 2015. This increase results
primarily from the addition of the investing expenditures of SFR and Virgin Mobile for 2015, while the year ended in 2014
includes only the month of December for the SFR and Virgin Mobile investment expenditures.
Company acquisition
In 2014, the Group acquired the SFR and Virgin Mobile groups for respectively €13,366.3 million and €294.5 million,
€200 million of which was financed by a contribution from Vivendi. SFR and Virgin Mobile had €254.7 million in cash in
the opening balance sheet after the acquisition.
(in thousands of euros)
Price of SFR acquisition
Price of Virgin Mobile acquisition
Acquisition expense
(13,366,346)
(294,507)
Vivendi contribution to Virgin Mobile
200,000
Cash for acquired company
254,647
Other
65
ACQUISITION EXPENSES
(13,206,141)
In 2015, the Group participated in the Synerail stock issued for €3.0 million, which was partially offset by the cancellation
of the Synerail debt in connection with this capital increase for €1.3 million.
Price adjustment on SFR-Virgin securities
In December 2014, the Company objected with Vivendi SA to the calculation of the net debt at the closing of the SFR SA
acquisition in November 2014. Concurrently with the transaction to purchase Numericable-SFR shares from Vivendi SA,
the Company and Vivendi SA reached an agreement to adjust the net debt at the closing of the acquisition and,
therefore, to reduce the price by €122.9 million.
Company disposal
In 2015, the companies Rimbaud 3 and 4, 50% subsidiaries of SFR SA, reduced their capital by 37.8 million[sic: currency
missing]. Half of the proceeds were paid to SFR SA. This capital reduction took place after the final delivery of the
Group’s operating headquarters in St Denis.
Net financial investments
The cash used by the net financial investments increased €19.0 million, going from a cash outflow of €2.9 million for the
year ended December 31, 2014, to a cash outflow of €16.1 million for the year ended December 31, 2015. The cash
entries in 2015 essentially represent different shareholder loan repayments from unconsolidated subsidiaries or equity
associates.
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5.2
Change in working capital requirements for asset suppliers and price for the frequency block of the
700 MHz license
On November 24, 2015, ARCEP issued to the Group an authorization to use frequencies in a band of 2*5 MHz around
frequencies of 700 MHz. In consideration for this authorization, the Group agreed with ARCEP to pay a fixed user royalty
of €466 million. This payment is payable in four installments between January 2016 and December 2018. The first fourth
(€116.5 million) was paid at the beginning of 2016. The Group also agreed to pay a variable royalty equal to 1% of the
revenues earned on the frequencies in question.
NET CASH USED BY FINANCING ACTIVITIES
The table below summarizes the net cash used by the Group’s consolidated investing activities for the years ended
December 31, 2014 and 2015.
(in € millions)
Stock issue
2014
restated
2015
4,721
26
Share buybacks
-
(1,949)
Dividends paid
-
(2,516)
Dividends received
-
8
Bond issues
11,403
3,677
Loan repayments
(2,638)
(838)
(263)
(605)
Securitization
-
171
Reverse factoring
-
241
Interest paid
Other
NET CASH USED BY FINANCING ACTIVITIES
(76)
26
13,147
(1,758)
Stock issue
In the fourth quarter of 2014, the Group carried out a capital increase with preemptive subscription rights of €4,732.8
million. Net of commissions, the Group received €4,720.1 million, which was used to finance the acquisition of the SFR
group.
In the fourth quarter of 2015, the exercise of stock options by certain Group managers resulted in the issue of 1.9 million
new shares at an average price of €13.87 euros in accordance with the stock option plan currently in effect.
Stock buybacks
Early in May 2015, the Company bought back 48,693,922 treasury shares from Vivendi for €1,948.5 million. These
shares were then cancelled on May 28, 2015.
Dividends paid
The Shareholders’ Meeting of December 15, 2015 approved an exceptional distribution of dividends in the amount of
€5.70 per share, representing a total of €2,508.7 million, which was charged to the “issue premiums” item. In addition, in
2015, the Group paid dividends to certain minority shareholders of the Group’s non-wholly owned subsidiaries in the
amount of €7.1 million
Dividends received
In 2015, the Group received dividends in the amount of €8.1 million from certain subsidiaries in which it holds minority
interests.
Bond issues
In the first half of 2014, the Group established the Secured Senior Bonds and the Term Loan for a total gross amount of
€11,653.4 million. The amount of €250.2 million in origination fees and commissions (essentially fees for guarantor
banks) was spent, a first portion in May 2014 and another portion in November 2014.
In 2015, the Group drew €3,677 million in debt:
 In May 2015, €800 million on the Revolving Lines of Credit to finance a portion of the share buyback from Vivendi
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Recent acquisitions and disposals
5.3
 In July 2015, €798 million equivalent through the establishment of the EUR Term Loan B5 and the USD Term Loan
B5 in order to repay the May draw on the Revolving Lines of Credit
 In November 2015, €1,684 million equivalent through the establishment of the EUR Term Loan B6 and USD Term
Loan B6 to finance a portion of the distribution approved by the Shareholders’ Meeting of December 15, 2015
 In December 2015, €450 million on the Revolving Lines of Credit to finance a portion of the distribution approved by
the Shareholders’ Meeting of December 15, 2015
 Minus the different fees related to the different draws described above for the amount of €55.1 million
Repayment of debt
During the first half of 2014, the Group repaid all of the Group’s historic debt in the amount of €2,638.1 million. The
€30.2 million in other repayments in 2014 represents repayments of finance leases reaching maturity for €28.9 million
and €1.3 million in other debts.
In July 2015, the Group refinanced €800 million on the Revolving Lines of Credit that had been drawn in May 2015 by
drawing from the EUR Term Loan B5 and USD Term Loan B5. The Group also repaid €37.8 million on the Term Loans
established in 2014. In accordance with the financial documentation, 0.25% of the initial principal is due each quarter.
Interest paid
The Group paid interest in the amount of €604.7 million during the year ended December 31, 2015, which represented
an increase compared to the year ended December 31, 2014. This increase is the result of a full year of interest in 2015
whereas, in 2014, only the August 2014 coupons for the Secured Senior Bonds and the Interest on the Term Loans paid
in July and October 2014 were paid, because the acquisition debts were set up in May 2014.
5.2.2.5 Off-balance sheet commitments
The table below shows the Group’s contractual commitments as of December 31, 2015, excluding future interest and
commitments related to employee benefits and similar commitments, and the commitments related to assets (coverage,
deployment, sharing, licenses, etc.) (refer to Note 33 of the Group 2015 consolidated financial statements).
(in € millions)
< 1 year
Maturity
1 to 5 years
> 5 years
Total as of
December 31, 2015
842
7,037
9,620
17,500
Loans and financial liabilities*
Operating leases
TOTAL
*
272
793
611
1,676
1,114
7,830
10,231
19,176
including amortized cost, USD/EUR adjustments and earn-out payments at fair value
5.3
Recent acquisitions and disposals
On February 18, 2015, Numericable-SFR and its majority shareholder Altice filed a firm offer to buy the 20% interest held
by Vivendi in Numericable-SFR, at €40 per share, representing a total of approximately €3.9 billion.
On February 27, 2015, Vivendi’s Supervisory Board accepted Numericable-SFR’s offer, signing final agreements to buy
the 20% interest held by Vivendi.
The acquisition was completed on May 6, 2015, half of it paid by Numericable-SFR as part of a share repurchase plan
authorized by the Shareholders’ Meeting of April 28, 2015, combined with a cash payment, and the other half paid by
Altice.
5.4
Recent events
5.4.1 Change in governance
On January 7, 2016, the Board of Directors recorded the resignation of Eric Denoyer as Chief Executive Officer of
Numericable-SFR. He joins the Company’s Board of Directors and Nominating and Compensation Committee. On March
11, 2016, the Board of Directors appointed Michel Paulin as Chief Executive Officer of Numericable-SFR.
208
5
5.4
Recent events
Dexter Goei and Colette Neuville also resigned from the Board at the beginning of 2016. Eric Denoyer was elected to the
Board to replace Dexter Goei for the remainder of his term. Colette Neuville was replaced by Isabelle Giordano, who has
since resigned.
5.4.2 Takeover of Numergy
On January 22, 2016, the Group finalized the acquisitions of the interests held by Caisse des Dépôts (33%) (acting in its
own name and on behalf of the government under the Future Investments Program) and Atos (20%) in Numergy. In this
way, the Group is perpetuating a company in which SFR has invested since its beginning. 50% of the price of these
stakes was paid on January 22, 2016. The remaining 50% will be due on January 22, 2017. In this context, the Group
established a first-demand guarantee maturing in more than one year in order to cover the amount still due to Caisse des
Dépôts and Atos/Bull.
Formed in September 2012, Numergy is a company that specializes in building and operating French and European
Cloud computing infrastructures. Numergy was designed to become a true “digital energy power plant” serving the
economy and growth. Its mission is to provide businesses (very small, small, medium, and intermediate businesses and
major accounts) and public organizations with secure, high-performance and competitive IT resources. The SFR offer of
Cloud computing services for businesses, a major component of the Group’s strategy, is thereby strengthened. In effect,
the Numergy offer and technology, which complement the offer of SFR and the Altice Group, represent an opportunity to
accelerate the deployment of the Cloud in France and in Europe.
5.4.3 Approval of the Kosc consortium by the Competition Authority
to acquire the Completel DSL network
On December 22, 2015, the Competition Authority approved the KOSC consortium for the acquisition of the DSL network
of Completel, which is composed of the companies OVH, Cofip, Kapix, and Styx. On October 30, 2014, the Competition
Authority had in fact authorized the purchase of SFR by Numericable, a subsidiary of the Altice Group, subject to certain
commitments. In this context, Numericable had, among other things, agreed to sell the Completel DSL network in order
to eliminate any risk of hurting competition in the markets for business-specific fixed-line telecommunications services.
This sale will mean that Numericable-SFR can honor the last of its structural commitments required by the ADLC (after
the sale of the mobile telecommunications operations of Outremer Telecom in Réunion and Mayotte) and is expected to
materialize in the first half of 2016.
5.4.4 Swaps trading
On February 16, 2016, the Group signed an interest rate swap agreement with JP Morgan Chase with the following
features:
 Nominal: €4.0 billion
 Variable rate paid by the bank: EURIBOR (3 months)
 Rate paid by the Group: (0.121%)
 Maturity: 7 years, but with a clause from the bank to advance the remaining cash flows at the end of 5 years.
The Group is continuing its strategy to hedge financial risks by converting approximately two thirds of its variable rate
borrowings into fixed rates. As a result, around 80% of the Group’s long-term debt is fixed-rate.
5.4.5 The Group refinanced its debt for US$5.2 billion as “Senior Debt”
On April 7, 2016, the Group placed US$5.19 billion in senior debt with institutional investors. These amounts will be used
to refinance the US$2.4 billion in debt maturing in 2019, refinance a US$450 million draw on the revolving credit line and,
after approval of certain changes from the lenders, to refinance the loans of US$1.9 billion maturing in 2020.
On this basis, the average maturity of the financing is extended from 5.8 years to 7.9 years and strengthens the liquidity
profile of SFR. The Group now has no significant repayment before 2022. The average cost of the SFR debt will increase
marginally from 4.8% to 5.4%.
The debt schedule table would have changed as shown below if this refinancing had taken place at December 31, 2015:
209
5
5.4
Recent events
Maturity
Less than one
year
(in € millions)
Bonds
Bank loans
Finance lease debt
(1)
Between 1 and 5
years
More than 5
years
Total as of
December 31, 2015
173
-
11,763
11,936
52
205
4,562
4,818
-
87
-
87
-
-
-
-
31
34
1
66
-
-
43
43
418
16
-
434
14
121
-
135
Bank overdrafts
126
813
126
462
16,370
17,645
5.4.6 ADLC sanction against Numericable-SFR
On April 19, 2016, the Competition Authority (i) found non-performance of the 2.1.3.1 commitment related to the sale of
the mobile telecommunication activities of Outremer Telecom in Réunion and Mayotte under Decision 14-DCC-160 of
October 30, 2014 concerning the exclusive takeover of SFR by the Altice group, and (ii) levied a financial sanction of
€15 million jointly against Altice Luxembourg and Numericable-SFR. It is noted that Numericable-SFR is challenging the
analysis of the Competition Authority and, as a result, reserves the right to appeal this decision. However, as the risk is
borne by the Altice Group, no provision has been recognized in the financial statements of the Numericable-SFR Group.
5.4.7 Numericable-SFR acquired the minority stake held by Altice N.V.
in the NextRadioTV group and acquired Altice Media Group
France
5.4.7.1 On April 27, 2016, Numericable-SFR announced the acquisition of the
minority stake held by Altice N.V. in the NextRadioTV group and finalized the
acquisition on May 12, 2016
On May 12, 2016, the Group finalized the acquisition (announced on April 27, 2016) of the minority stake of 49% held by
Altice N.V. in the NextRadioTV group; this stake was acquired by Altice N.V. in December 2015 within the framework of
its strategic partnership with Alain Weill. NextRadioTV is a leading information group focused on general news, sports,
the economy, high-tech, and discovery. NextRadioTV is composed of very strong assets and powerful media brands,
including BFMTV and RMC, along with RMC Sport, RMC Découverte, BFM Business, 01net.com (6 million hits per
month) and BFMTV.com. NextRadioTV also holds a minority interest in the channel Numéro 23.
On the completion date of March 12, 2016, the price paid by the Group was €635 million representing (i) €334 million for
the Company’s purchase of the convertible bonds issued by Groupe News Participations and subscribed by Altice
Content; (ii) €123 million in shareholder loans; (iii) €166 million for the Company’s acquisition of 75% of the shares held
by Altice Content in Altice Content Luxembourg; and (iv) €11 million for interest accrued on the convertible bonds and the
shareholder loans. The transaction values NextRadioTV at an enterprise value of €741 million, which corresponds to the
enterprise value used by Altice in the public offer filed in December 2015, but adjusted for the purchase of N23 in the
meantime. The Altice public offering resulting in a price of €37 per NextRadioTV share, €23.28 per convertible bond. The
transaction thus values NextRadioTV at 7.9x EBITDA, adjusted for the synergies and deficits that could be carried
forward.
In the context of this transaction, SFR joined the shareholders’ agreement executed by the Altice group with the holding
company of Alain Weill (News Participations), which defines the relations of the parties within Altice Content
Luxembourg. SFR replaced the Altice group in the cross buy and sell commitments signed on December 3, 2015
concerning the 25% stake of News Participations in the capital of Altice Content Luxembourg (which may be exercised
as of 2018, except in the event that Alain Weill leaves office). It should be noted that the price applicable in the event of a
sale at the initiative of News Participations is calculated using a formula that is a function of the activity of Altice Content
210
5
5.5
Predictable changes and future outlook
Luxembourg, which contains no guaranteed minimum for News Participations, and which shows, by transparency, a
price similar to the price proposed in the public offer for NextRadioTV filed in December 2015.
The sell commitment granted by News Participations on its 51% stake in Groupe News Participations also remains in
effect, as well as the shareholders’ agreement that defines the relations of the parties with Groupe News Participations.
This sale commitment, which may be exercised as of March 31, 2019 (subject to the applicable regulatory authorizations)
would allow SFR to acquire 100% of Groupe News Participations and NextRadioTV.
5.4.7.2 On April 27, the Group announced that it had entered into exclusive
negotiations for the acquisition of Altice Media Group France, and then that
it had finalized its acquisition on May 25, 2016
After entering into exclusive negotiations for the acquisition of Altice Media Group France on April 27, 2016, the Group
announced the finalization of this acquisition on May 24, 2016. Altice Media Group France is a diversified media group
and leader in France, holding more than 20 major titles there, and is comprised of emblematic brands, such as
Libération, L’Express, L’Expansion, L’Étudiant, and Stratégies. Altice Media Group France also operates the international
news channel i24 News. Altice Media Group France is also a leading player in events in France, particularly with its
Salon de l’Étudiant, which has drawn 2 million visitors every year for more than thirty years. The transaction values Altice
Media Group France at an enterprise value of €241 million, which is 4.5x EBITDA, adjusted for synergies and the deficits
of Altice Media Group France that could be carried forward.
These projects are a unique opportunity to make the Numericable-SFR group a real cross-media content publisher
backed by a very diversified portfolio of premium brands. These acquisitions are in line with an industrial strategy to allow
SFR to accelerate deployment of the global convergence of Telecom-media/content and advertising. The two transaction
projects were approved by the Board of Directors of Numericable-SFR at its meeting on April 26, 2016.
The financing for these transactions will come from the existing resources of Numericable-SFR and a loan made by the
seller of Altice Media Group France in the amount of €100 million.
5.5
Predictable changes and future outlook
The Group will center 2016 on reconquest by focusing on convergence, not only between fixed Very High Speed and
mobile Very High Speed, but particularly between telecom and content. To do so, the Group will use the two levers that
form the core of its strategy:
 investments, by intensifying them in 2016
 innovation, by continuing to innovate in products and services in order to increase added value and offer its
customers, in both the Consumer and Business segments, the best experience in the market.
5.6
Forecasts or earnings estimates
As a result, the Group is confident about its ability to exceed the medium-term objectives for synergies sets at the time
the SFR acquisition was announced and reach €1.1 billion in gross annual synergies before the end of 2017. It is
specified that these objectives cannot be classified as earnings projections in the sense of EC Regulation 809/2004 of
April 29, 2014 and will not therefore be updated in the future.
211
5
Company results for the last five years
5.7
5.7
Company results for the last five years
The Company was incorporated on August 2, 2013. Thus, the year ended December 31, 2015 is its third fiscal year.
Year ended
December 31, 2015
(12 months)
Year ended
December 31, 2014
(12 months)
Year ended
December 31, 2013
(5 months)
Capital stock
440,129,753
486,939,225
123,942,012
Number of shares issued
440,129,753
486,939,225
123,942,012
-
-
-
(in €)
Financial position at year-end
Number of bonds convertible to shares
Revenues excluding taxes
35,687,151
8,438,143
1,656,963
(368,939,294)
(559,956,859)
(1,626,175)
316,242,986
10,769,009
-
(138,727,532)
(549,771,661)
(1,626,175)
-
-
-
Earnings after income tax and before amortization,
depreciation, and provisions
(0.12)
(1.13)
(0.01)
Earnings after income tax, depreciation, amortization, and
provisions
(0.32)
(1.13)
(0.01)
-
-
-
19
16
3
Total payroll
7,040,227
7,234,482
173,472
Amount paid for social benefits (social security, works, etc.)
2,629,135
6,551,733
2,978,986
Earnings before income tax, amortization, depreciation, and
provisions
Income tax
Earnings after income tax, depreciation, amortization, and
provisions
Distributed profits
Earnings per share
Dividend paid per share
Employees
Number of employees
5.8
Dividend distribution policy
The Company was incorporated on August 2, 2013. No dividend was distributed for 2013 and 2014. The Shareholders’
Meeting of December 15, 2015 approved an exceptional distribution of dividends in the amount of €5.70 per share, for
which the total amount of €2.50 billion was charged to “issue premiums.”
212
5.8
6
Financial information
Dividend distribution policy
6
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
Consolidated financial statements ................................................................................. 214
Consolidated Statement of Financial Performance
Erreur ! Signet non défini.
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Breakdown of changes in equity related to other comprehensive income Erreur ! Signet non
défini.
Consolidated Statement of Cash Flows
Notes to the consolidated financial statements ............................................................ 219
Statutory Auditors’ report on the Consolidated Financial Statements ........................ 220
Annual financial statements ........................................................................................... 302
Balance sheet - assets
302
Balance sheet - liabilities
303
Income statement
304
Income statement (continued)
305
Notes to the consolidated financial statements ............................................................ 306
Statutory Auditors’ report on the annual financial statements .................................... 328
Press release of first quarter 2016 .................................................................................. 330
Interim condensed consolidated statements as of March 31, 2016 ............................. 331
Consolidated Statement of Income
332
333
334
Consolidated Statement of changes in Equity
335
336
213
6
6.1
Consolidated financial statements
The Company’s consolidated financial statements, drafted according to IFRS, and the Company’s annual financial
statements for the fiscal year ended December 31, 2014, as well as the statutory auditors’ reports on the individual and
consolidated financial statements, appear in Appendix III and Appendix VII of Registration Document No. R.015-031,
which was registered with the AMF on April 30, 2015, and have been incorporated by reference within this Registration
Document.
The Company’s consolidated financial statements, drafted according to IFRS, for the fiscal year ended December 31,
2013, as well as the corresponding statutory auditors’ report, appear in Appendix III to Registration Document No. R.14063, which was registered with the AMF on October 10, 2014, and have been incorporated by reference within this
Registration Document.
6.1
Fiscal year ended December 31, 2015
Consolidated Statement of Income
December 31,
(in € millions)
Revenues
Note
December 31, 2015
2014 restated 1
8
11,039
2,170
(3,890)
(630)
10
(2,467)
(670)
9
(877)
(170)
(2,554)
(496)
(314)
(112)
937
91
Purchasing and subcontracting
Staff costs and employee benefit expenses
Depreciation, amortization and impairment
11
Operating income
Financial income
12
782
15
Cost of gross financial debt
12
(781)
(504)
Other financial expenses
12
(47)
(111)
(46)
(600)
6
4
898
(505)
(215)
317
682
(188)
-
-
682
(188)
675
(188)
7
0
Net financial income (expense)
Share in net income (loss) of associates
17
Income before taxes
Income tax income (expense)
Net income (loss) from continuing operations
Net income (loss) from discontinued operations
NET INCOME (LOS S )

Attributable to owners of the company

Attributable to non-controlling interests
13
Earnings per share attributable to owners of the company (in euros)

basic
1.47
(1.04)

diluted
1.47
(1.04)
1 See Note 38 – Restated information.
214
6.1
6
December 31,
December 31, 2015
2014 restated 1
682
(188)
(1)
-
40
(169)
(20)
64
2
-
28
8
(3)
13.3
(3)
-
708
(295)
Comprehensive income attributable to owners of the company
701
(295)
Comprehensive income attributable to non-controlling interests
7
-
(in € millions)
Note
Net income
Items that may be subsequently reclassified to profit or loss :
Foreign currency translation adjustments
Cash flow hedges
Related taxes
13.3
Other items related to associates
Items that will not be subsequently reclassified to profit or loss :
Actuarial gain (loss)
Related taxes
ITEMS OF OTHER COMP REHENS IVE INCOME
Of which :
215
6.1
6
December 31,
Assets
Note
December 31, 2015
2014 restated 1
Goodwill
14
10,554
10,554
Intangible assets
15
7,983
8,395
Property, plant and equipment
16
5,627
5,643
Investments in associates
17
110
126
Non-current financial assets
18
2,112
1,003
Deferred tax assets
13
2
501
Other non-current assets
18
57
50
26,445
26,270
(in € millions)
Non-current assets
Inventories
19
286
256
Trade and other receivables
20
2,723
2,732
Income tax receivable
13
271
252
Current financial assets
21
2
135
Cash and cash equivalents
22
355
620
3,637
3,995
30,081
30,265
Current assets
TOTAL AS S ETS
December 31,
Liabilities
(in € millions)
Note
December 31, 2015
restated 1
Share capital
23
440
487
Additional paid- in capital
23
5,360
9,748
Reserves
23
(1,545)
(2,283)
4,256
7,952
12
10
4,267
7,962
Equity attributable to owners of the company
Non-controlling interests
23
Total invested equity
Non-current long term borrowings and financial liabilities
24
16,443
12,539
Other non-current financial liabilities
24
215
810
Non-current provisions
26
727
635
Deferred tax liabilities
13
816
1,294
Other non-current liabilities
29
780
582
18,981
15,860
Non-current liabilities
Short-term borrowings and financial liabilities
24
254
179
24
588
99
Trade payables and other liabilities
30
4,878
5,011
Income tax liabilities
13
187
217
Current provisions
26
328
330
Other current liabilities
30
597
606
6,833
6,443
30, 081
30 ,265
Current liabilities
TOTAL EQUITY & LIABILITIES
216
6
6.1
Consolidated Statement of Changes in Equity
Equity attributable to owners of the company
Reserves
Other
comprehensive
income
Total
Noncontrolling
interests
124
2,108
(1,977)
(2)
253
0
254
Dividends paid
-
-
-
-
-
-
-
Comprehensive income restated
-
-
(188)
(108)
(295)
(0)
(295)
266
4,455
-
-
4,720
-
4,720
97
3,185
-
-
3,282
-
3,282
Share-based compensation
-
-
5
-
5
-
5
Treasury shares
-
-
(1)
-
(1)
-
(1)
Other movements
-
-
(12)
-
(12)
9
(3)
487
9,748
(2,173)
(109)
7,952
10
7,962
Dividends paid
-
(2,509)
-
-
(2,509)
(7)
(2,516)
Comprehensive income
-
-
675
26
701
7
708
Issuance of new shares
2
24
-
-
26
-
26
Share-based compensation
-
-
9
-
9
-
9
Treasury shares
-
-
(1,948)
-
(1,948)
-
(1,948)
(49)
(1,899)
1,948
-
-
-
-
-
(4)
28
-
24
1
26
440
5,360
(1,461)
(84)
4,256
12
4,267
(in € millions)
Position at December 31, 2013
Issuance of new shares
Contributions of SFR shares
Position at December 30, 2014 restated
Capital decrease by cancellation of own shares
Other movements
P OS ITION AT DECEMBER 31, 2015
Additio
-nal
paid in
Capital capital
Consolidated
equity
Breakdown of changes in equity related to other comprehensive income
Attributable to owners of the company
Items of other
comprehensive
income
Cash flow
hedges
Actuarial
gain (loss)
Other
items
-
(2)
-
-
(2)
Change
(169)
(3)
(0)
64
(108)
Balance at December 31, 2014 restated
(169)
(5)
(0)
64
(109)
42
8
(1)
(23)
26
(127)
3
(1)
41
(84)
(in € millions)
Balance at December 31, 2013
Change
BALANCE AT DECEMBER 31, 2015
Deferred
taxes
217
6
6.1
(in € millions)
Note
Net income attributable to owners of the company
December 31,
December 31,
2015
2014 restated 1
675
(188)
7
0
Adjustments:
Non-controlling interests
2,560
500
17
(6)
(4)
Net income from sale of property, plant and equipment and intangible assets
11
188
16
Depreciation, amortization and provisions
Net financial expense (income)
12
46
600
Income tax expense (income)
13
215
(317)
13
0
(240)
(74)
Change in working capital
(322)
358
Net cash flow provided (used) by operating activities
3,135
893
Other non-cash items
Income tax paid
Acquisitions of property, plant and equipment and intangible assets
15/16
(2,370)
(591)
(2)
(13,206)
123
-
Acquisitions of other financial assets
(5)
(3)
Disposals of property, plant and equipment and intangible assets
36
8
Disposal of consolidated entities, net of cash disposals
18
-
Disposal of other financial assets
21
-
446
160
(1,732)
(13,632)
Acquisition of consolidated entities, net of cash acquired
Price adjustment of SFR and Virgin Mobile securities
6
Change in working capital related to property, plant and equipment and intangible
assets
Net cash flow provided (used) by investing activities
Purchases of treasury shares
Capital increase
Dividends paid
4.1
(1,949)
-
5
26
4,721
4.3
(2,516)
-

to owners of the company
(2,509)

to non-controlling interests
(7)
-
8
-
Dividends received
Issuance of debt 2
3,677
11,403
Repayment of debt 3
(838)
(2,638)
(605)
(263)
Interest paid
Other flows from financing activities
4
Net cash flow provided (used) by financing activities
Adjustments with no impact on cash
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
438
(76)
(1,758)
13,147
-
74
(355)
482
Net cash and cash equivalents at beginning of period 5
583
101
Net cash and cash equivalents at end of period
229
583
of which cash and cash equivalents
of which bank overdrafts
1
2
3
4
5
355
620
(126)
(36)
See Note 38 - Restated information
As of December 31, 2015, this primarily corresponds to the RCF drawdown in the first half of 2015 and to the new tranches
of bank loans signed in July and November 2015. As of December 31, 2014, this corresponds mainly to debts raised as
part of the acquisition of SFR in the amount of €11,653 million net of €250 million in fees on loans disbursed.
As of December 31, 2015, this corresponds mainly to the repayment in July 2015 of €800 million RCF drawn in the first
half. As of December 31, 2014, this amount mainly reflects €2,638 million in debt extinguished during refinancing
transactions in May 2014.
As of December 2015, this mainly corresponds to the cash received under securitization contracts (€171 million), reverse
factoring (€240 million) and deposits from customers (€49 million). As of December 31, 2014, this corresponds to the cost
of extinguishing debt repaid in May 2014 in the amount of €89 million, and to the change in other financial liabilities,
excluding Senior Facilities.
This amount was restated upwards by €37 million on January 1, 2015 to take into account (i) a change in the presentation
of cash, which now includes bank overdrafts and (ii) a reclassification to cash of new receivables.
218
6.2
6.2
6
Notes to the consolidated financial statements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
Basis of preparation of the consolidated financial statements
Erreur !
Signet non défini.
Significant accounting policies
Use of estimates
Significant events for the fiscal year ended December 31, 2015
Erreur !
Signet non défini.
Erreur !
Signet non défini.
Changes in scope
Reconciliation of operating income to adjusted EBITDA Erreur ! Signet non
défini.
Segment information
Personnel expenses and average number of employees
Erreur ! Signet
non défini.
Income tax expense
Goodwill and impairment tests
Inventories
Other current financial assets
Equity
Financial liabilities
Provisions
Share-based payments
Post-employment benefits
Trade payables and other current liabilities
Financial instruments
Related party transactions
Commitments and contractual obligations
Litigation
List of consolidated entities
Entity consolidating the financial statements
Subsequent events
Restated information
219
6.2
39
40
6
Condensed consolidated pro forma financial information Erreur ! Signet
non défini.
Auditors’ fees
220
Numericable SFR – 2015 Consolidated Financial Statements
Accounting Policies and Methods
1
Basis of preparation of the consolidated financial statements
1.1
Numericable-SFR
Numericable-SFR (hereinafter “the Company” or “the Group”) is a limited liability corporation (société anonyme) formed
under French law in August 2013 with headquarters in France.
Created as a result of the merger of Numericable and SFR, Numericable-SFR Group aims to become, on the back of the
largest fiber optic network and a leading mobile network, the national leader in France in the convergence of very-highspeed fixed-line/mobile.
A global player, Numericable-SFR has major positions in all segments of the French telecommunications B2C, B2B, local
authorities and wholesale markets.
1.2 Basis of preparation of financial information
The consolidated financial statements were prepared and approved by the Company’s Board of Directors on March 11,
2016.
In accordance with French law, the consolidated financial statements will be considered final once they have been
approved by the Group’s shareholders at the Ordinary Shareholders’ Meeting, which will be held in the second quarter of
2016.
The consolidated financial statements for the year ended December 31, 2015, which comprise the consolidated statement
of financial position, the consolidated statement of income, the consolidated statement of comprehensive income, the
consolidated statement of cash flows, the consolidated statement of changes in equity and the accompanying notes, have
been prepared in accordance with International Financial Reporting Standards (“IFRS”) published by the IASB
(International Accounting Standard Board), as adopted by the European Union (EU) at December 31, 2015. These
international standards include the IAS (International Accounting Standards), IFRS (International Financial Reporting
Standards) and their interpretations (SIC and IFRIC).
The accounting and valuation principles defined in the IFRS as adopted by the European Union are available on the
following website:
http://ec.europa.eu/internal_market/accounting/ias/index_en.htm
The financial statements underwent a change in accounting method, harmonization of management rules, a change in
presentation as shown below, and the application of new standards, which are presented in Note 1.3 – New Standards
and Interpretations.
Change in accounting method
To improve its financial reporting and to ensure uniformity of treatment among Altice Group companies, the Group has
capitalized, in accordance with IAS 38 – Intangible Assets and future standards, its customer acquisition costs for
packages with commitments beginning on or after January 1, 2015. The charge is presented in the “Depreciation,
amortization and impairment ” caption of the consolidated statement of income. The Group believes that by doing so, the
financial information provided is more reliable and more relevant, particularly for the purposes of a market practice
analysis of the Telecom industry at the international level. The change in method had no material impact on the
comparative financial reporting presented for fiscal year 2014. However, the pro forma financial information presented in
Note 39 – Condensed consolidated pro forma financial Information was restated to reflect the change in method.
Furthermore, intangible assets with a net carrying amount of €98 million were recognized provisionally at
November 30, 2014 in capitalized acquisition costs, as part of the allocation of goodwill related to the acquisition of SFR
and Virgin Mobile. These impacts are disclosed in Note 6 – Changes in scope.
Harmonization of management rules
As part of the acquisition of SFR, the Group has also harmonized its rules for estimating and capitalizing internal costs
related to network development and information systems, costs for introducing Service Access Fees, and costs for the
refurbishment of set-top boxes returned by customers. Accordingly, intangible assets in the amount of €287 million were
recognized at November 30, 2014, as part of the allocation of goodwill related to the acquisition of SFR. These impacts
are disclosed in Note 6 - Changes in scope.
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Changes in the preparation of the consolidated financial statements
To improve its financial reporting and ensure uniformity in the presentation of financial statements among Altice Group
companies, Numericable-SFR Group has changed the presentation of its financial statements. The Group believes that
the new presentation of the financial information is more relevant and provides better comparability for the purposes of a
market practice analysis of the Telecom industry at the international level. The transition from the old to the new format for
comparative financial statements as of December 31, 2014 is described in detail in Note 38 - Restated Information.
1.3
New standards and interpretations
Mandatory standards and interpretations for the year ended December 31, 2015
In its 2015 consolidated financial statements, the Group applied new standards and amendments adopted by the
European Union, which became mandatory at January 1, 2015:
IFRIC Interpretation 21 – Levies Charged by Public Authorities is applicable retrospectively from January 1, 2015. This
interpretation clarifies IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, and specifically covers the
recognition of a liability for a levy imposed on corporations by public authorities in accordance with applicable laws and
regulations, with the exception of income taxes, among other things.
Applying this interpretation may therefore lead to modifying the analysis of the obligating event as the activity that triggers
the recognition of a liability. This interpretation had no material impact on the Group’s half-year consolidated financial
statements for fiscal year 2015 or on the comparative financial information.
The application from January 1, 2015 of the other mandatory standards and amendments (listed below) had no material
impact on the Group’s consolidated financial statements:
 Amendments to IAS 19: Employee contributions to defined benefit plans;
 Annual improvements to IFRSs published in December 2013 (2010-2012 and 2011-2013 Cycles).
Standards and interpretations mandatory after December 31, 2015 and not adopted early
The Group did not opt for the early application of any standards and interpretations mandatory after December 31, 2015.
Of the IFRS and IFRIC interpretations issued by the IASB and IFRS IC but not yet in force and not yet adopted by the EU,
which the Group has not opted to apply early, those likely to affect the Group are mainly:
 IFRS 15 - Revenue from Contracts with Customers: published in May 2014, it provides a new framework for
recognizing revenue. IFRS 15 will replace the current standards on revenue recognition, in particular IAS 18 Revenue, IAS 11 - Construction Contracts and the associated interpretations when it becomes applicable. The
standard is applicable to annual periods beginning on or after January 1, 2018. It is applicable retrospectively
according to two options: either limited to calculating the cumulative effect of the new method at the opening date of
exercising the change, or by restating the comparative periods presented.
The Group anticipates that application of IFRS 15 in the future will have a significant impact on the published figures
and notes to the financial statements. It is not possible at this time to provide a reasonable estimate of the effects of
IFRS 15 insofar as the Group has not completed a detailed review.
 IFRS 9 – Financial Instruments, applicable to annual periods beginning on or after January 1, 2018.
 IFRS 16 – Leases, with mandatory application as from January 1, 2019, applicable retrospectively either at the date of
first application or at the beginning of the comparative year presented.
Management is currently assessing the potential impact of the application of these standards, interpretations and
amendments on the Statement of Income, the Statement of Financial Position, the Statement of Cash Flows and the
Notes to the Financial Statements.
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2
Significant accounting policies
2.1
Consolidation methods
The list of entities included in the scope of consolidation is presented in Note 35 – List of Consolidated Entities.
Consolidated entities
The new model of control, defined by IFRS 10 – Consolidated Financial Statements, is based on the following three
criteria, which must be met simultaneously in order to determine the exercise of control by the parent company:
 The parent company has power over the subsidiary when it has effective rights that give it the ability to direct the
relevant activities - i.e., the activities that significantly affect the subsidiary’s returns. Power may arise from existing
and/or potential voting rights and/or contractual arrangements. Voting rights must be substantial - i.e., they must be
able to be exercised when decisions about the relevant activities are to be made without limitation and particularly in
decision-making on relevant activities. Assessing how much power is held depends on the subsidiary’s relevant
activities, its decision-making process and the way the rights of its other shareholders are distributed;
 The parent company is exposed or entitled to variable returns due to its connections to the subsidiary, which may vary
according to its performance. The concept of return is defined broadly, and includes dividends and other forms of
distributed financial benefits, the valuation of the investment, cost savings, synergies, etc.;
 The parent company has the ability to use its power to affect the subsidiary’s returns. Any power that does not entail
this kind of influence does not qualify as control.
These entities are consolidated using the full consolidation method.
Full consolidation method
This method involves consolidating in the financial statements the items in the statement of financial position, the
statement of comprehensive income and the statement of cash flows of the entities controlled within the meaning of IFRS
10, completing any restatements, eliminating intragroup transactions and accounts, as well as internal results, and
allocating the shareholders’ equity and income between the parent company interests and non-controlling interests.
Consolidated comprehensive income includes the income of subsidiaries acquired during the year, prorated from their
date of acquisition. The income of subsidiaries sold during the same period is included until the date of their sale.
Interests that do entail control over the subsidiaries’ net assets are presented in a separate caption in shareholders’ equity
called “Non-controlling interests.” They include non-controlling interests as of the takeover date and the non-controlling
interests’ share in the change in shareholders’ equity as from that date. Subject to arrangements that would indicate a
different allocation, negative results of subsidiaries are systematically allocated between equity attributable to owners of
the parent company and non-controlling interests based on their respective share of ownership interest, even if it becomes
negative.
Joint Arrangements
IFRS 11 – Joint Arrangements provides financial reporting guidelines for entities that hold interests in joint arrangements.
In a joint arrangement, the parties are bound by a contractual arrangement that gives them joint control of the company.
The entity that is party to a joint arrangement must therefore determine if the contractual arrangement gives all the parties,
or a group of some of them, joint control over the company. The existence of joint control is then assessed for decisions
about the relevant activities that require the unanimous consent of the parties that jointly control the company.
Joint arrangements are classified into two categories:
 Joint undertakings (or joint operations); these are arrangements in which the parties that have joint control over the
company have direct rights to its assets and obligations for its liabilities. The parties are called the “joint investors.” The
joint investor recognizes 100% of the joint operation’s assets/liabilities/expenses/income that it owns itself and the
share of the items that it owns jointly. These arrangements involve joint investment agreements signed by the Group.
 Joint ventures: these are partnerships in which the parties that have joint control over the company have rights to its
net assets. The parties are called the “co-owners.” Each co-owner recognizes its rights to the net assets of the entity
using the equity method (see paragraph below).
Associates
Associates in which the Group has significant influence are accounted for using the equity method. Significant influence is
presumed to exist when the Group directly or indirectly holds 20% or more of the voting rights of an entity, unless it can
clearly show that this is not the case. The existence of significant influence can be shown by other criteria such as
representation on the Board of Directors or the governing body of the jointly held entity, participation in policy-making
processes, the existence of material transactions with the entity, or the sharing of management personnel.
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Equity method
Under the equity method, investments in associates and joint ventures are stated at acquisition cost, including goodwill
and transaction costs. Earn-out initially measured at fair value are recognized in the cost of the investment, where their
payments can be measured with sufficient reliability.
The Group’s share in the net income of associates and joint ventures is recognized in the income statement while its share
in the movements of reserves after acquisition is recognized in reserves. Post-acquisition movements are adjusted against
the value of the investment. The Group’s share in the net losses of associates and joint ventures is recognized to the
extent of the investment made, unless the Group has a legal or constructive obligation of support for the undertaking.
Any surplus of the cost of acquisition over the Group’s share in the net fair value of the identifiable assets of the associate
recognized at the date of acquisition is recognized as goodwill. Goodwill is included in the carrying amount of the
investment and is taken into account in impairment testing on that asset.
2.2
Foreign currency translation
The Consolidated Financial Statements are presented in euros, the functional currency of vast majority of Group
companies and of the parent company. All financial data are rounded to the nearest million euros.
Foreign currency transactions are initially recorded in the functional currency at the exchange rate prevailing at the date of
the transaction. At the closing date, monetary assets and liabilities denominated in foreign currencies are translated into
the functional currency at the exchange rate prevailing on that date. All foreign currency differences are recognized in
profit or loss for the period.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates at the dates of initial transaction. All foreign currency differences are recognized in profit or loss.
2.3
Revenue
Revenue from the Group’s activities mainly consists of services (telephone packages, TV subscriptions, high-speed
Internet, telephony and installation services), equipment sales and telecommunications network leases.
Revenue corresponds to the fair value of the consideration received or receivable for the sale of goods and services in the
ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and
after eliminating intragroup sales between entities included in the scope of consolidation.
Income is recognized and presented as follows, in accordance with IAS 18 - Revenue:
Equipment sales
Proceeds from equipment sales are recognized as revenue upon transfer of the risks and rewards of ownership to the
purchaser.
Separable elements of a bundled offer
Revenue from telephone packages is recognized as a sale with multiple elements. Revenue from the sale of handsets
(mobile phones and other) is recognized upon activation of the line, net of discounts granted to the customer at the point
of sale and activation fees. Revenue recognized for the sale of equipment (handsets in particular) only includes the
contractual amount paid, independently of the service.
Other costs of acquisition and retention, including premiums not associated with equipment sales as part of telephone
packages and fees paid to distributors, are immediately expensed.
Where the elements of such transactions cannot be identified or analyzed as separable from a larger offer, they are
considered to be related and the associated revenue is recognized in its entirety over the term of the contract or the
expected duration of the customer relationship.
Services
Proceeds from subscriptions (Internet access, basic cable service, digital pay TV) and telephone payment plans (fixed or
mobile) are recognized on a straight-line basis over the duration of the relevant service.
The Group sells some telephone payment plans that allow the unused call minutes for a given month to be rolled over to
the following month. Roll-over minutes are recognized for the share of revenue they represent in the telephone
subscription at the time they are actually used or when they expire. Revenue on incoming and outgoing calls as well as on
calls made outside plans is recognized when the service is rendered.
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Revenue generated by the coupons sold to distributors and prepaid Mobile cards is recognized as and when the end
customer uses them, starting when such coupons and cards are activated. The unused balance is recorded in deferred
income at the closing date. The proceeds in any event are recognized on the date of the card’s expiration or when use of
the coupon is statistically improbable.
Sales of subscription services managed by the Group on behalf of content providers (mainly special numbers and SMS+)
are recognized gross, or net of payments made to content providers based on the analysis of each transaction.
Accordingly, revenue is recognized net when suppliers are responsible for the content delivered to end customers and for
setting the subscription rates.
Connection and installation fees billed mainly to operators and business customers during the implementation of services
such as ADSL connection, bandwidth capacity or IP connectivity are recognized over the estimated duration of the
customer relationship and of the main service supplied, based on statistical data.
Installation and set-up services (including connection) for residential customers are recognized as revenue when the
service is rendered.
Revenue related to switched services is recognized as and when traffic is routed.
Revenue from services for bandwidth capacity, IP connectivity, local high-speed access and telecommunications is
recognized as and when the services are rendered to customers.
Access to telecommunications infrastructure
The Group provides access to its telecommunication infrastructure to its wholesale customers through various types of
contracts: leases, hosting contracts or the granting of indefeasible rights of use (or “IRUs”). IRU agreements grant the use
of property (cables, fiber optics or bandwidth) over a defined, usually long duration, with the Group retaining ownership.
Revenue from lease agreements, hosting contracts in Netcenters and infrastructure IRUs is recognized over the term of
the contract, except when they qualify as finance leases; in this case, the equipment is accounted for as sales on credit. In
the case of IRUs and sometimes leases or service contracts, the service is paid in advance for the first year. These nonrefundable prepayments are recorded as deferred income and amortized over the expected life of the contract.
Infrastructure sales
The Group builds infrastructure for some of its customers. Revenue relating to infrastructure sales is recognized upon the
transfer of ownership. When it is estimated that a contract will be unprofitable, a provision for onerous contract is booked.
Loyalty programs
In application of IFRIC 13 - Customer Loyalty Programs, the Group measures the fair value of the incremental benefit
granted as part of its loyalty programs. For the periods presented, this value is not material, so no revenue has been
deferred under it.
2.4
Adjusted EBITDA
Adjusted EBITDA is the indicator Management uses to measure the Group’s financial performance. It excludes the main
items that have no effect on cash, such as depreciation, amortization and impairment.
Furthermore, Adjusted EBITDA is an indicator used internally by Management to measure the Company’s operational and
financial results, to make investment and resource-allocation decisions, and to assess the performance of management
personnel.
Adjusted EBITDA may not be comparable with similarly named measures used by other entities. The transition from
operating income to Adjusted EBITDA is presented in Note 7 – Transition from operating income to adjusted EBITDA.
2.5
Financial income and expenses
Financial income and expenses primarily comprise:
 Interest expenses and other expenses paid for financing transactions recognized at amortized cost and changes in the
fair value of interest rate derivative instruments that do not qualify as hedges within the meaning of IAS 39 –Financial
Instruments: Recognition and Measurement;
 Interest income relating to cash and cash equivalents.
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2.6
Segment information
IFRS 8 - Operating Segments requires segment information to be presented on the same basis as that used for internal
reporting purposes. The Group has identified the following three segments:
 B2C Operations
 B2B Operations
 Wholesale Services
B2C Operations
The Group provides residential customers with telephone subscriptions, TV subscription services, high-speed Internet,
and installation services.
B2B Operations
The Group provides business customers with a comprehensive service offering, including data transmission and veryhigh-speed Internet, telecommunications services, convergence and mobility solutions, through fiber and DSL networks.
Wholesale
The Group sells network infrastructure services, including IRUs and bandwidth capacity on its network, to other
telecommunications operators (including the Mobile Virtual Network Operations, “MVNOs”) as well as the related
maintenance services.
2.7
Corporate income tax
Income tax expense comprises current and deferred tax. Current tax is the tax payable on the taxable income for the year,
estimated using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is recognized in respect of temporary differences on the closing date between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized
for the following temporary differences: (i) the initial recognition of goodwill, (ii) the initial recognition of assets or liabilities
in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and (iii)
investments in subsidiaries, joint ventures and associates when the Group is able to control the timing of the reversal of
the temporary differences and when it is probable that these temporary differences will not be reversed in the foreseeable
future.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse,
in accordance with the rules in effect at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets,
and if they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities
when the taxable entity intends to settle current tax liabilities and assets on a net basis or when tax assets and liabilities
are to be realized simultaneously.
Deferred taxes are reviewed at each reporting date to take into account changes in tax legislation and the possibility of
recovering deductible temporary differences and tax losses. A deferred tax asset is recognized when it is probable that
future taxable profits against which the temporary difference can be utilized will be available.
2.8
Investment grants
Investment grants received are deducted from the gross carrying amount of property, plant and equipment to which they
relate. They are recognized in the income statement as a reduction in the depreciation charge over the useful life of the
related assets.
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2.9
Site remediation
The Group has a contractual obligation to restore the network sites (both mobile and fixed) at the end of the lease, should
the latter not be renewed. Due to this obligation, the capitalization of the costs of restoring the sites is calculated based on:
 an average unit cost of site remediation,
 assumptions about the life of the dismantling assets, and
 a discount rate.
2.10 Goodwill and business combinations
Business combinations are accounted for using the acquisition method. The assets and liabilities of the acquired business
are recognized at their fair value at the acquisition date.
The consideration transferred corresponds to the fair value, at the acquisition date, of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The goodwill arising from a
business combination is equal to the difference between:
 the sum of the consideration paid, the value of any non-controlling interest that remains outstanding after the business
combination and, where applicable, the acquisition-date fair value of the acquirer’s previously held equity interest in the
target, and
 the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed.
Goodwill is recognized in assets in the consolidated statement of financial position. When the difference is negative, it is
directly recognized through profit or loss.
The secondary costs directly attributable to an acquisition giving control are recorded in expenses in the period during
which the costs are incurred, except for the borrowing costs, which must be recorded in accordance with IAS 32 –
Financial Instruments: Presentation and IAS 39 – Financial Instruments: Recognition and Measurement
When goodwill is determined provisionally at the end of the period in which the combination is effected, any adjustments to
the provisional values within 12 months of the acquisition date are recognized in goodwill.
Changes in the Group’s share of ownership of equity securities in a subsidiary which do not lead to a loss of control over
the latter are recognized as shareholders’ equity transactions.
Goodwill resulting from the acquisition of associates and joint ventures is included in the carrying amount of the
investment.
Goodwill is not amortized, but is subject to impairment testing whenever there is any indication that an asset may be
impaired, and at least once a year in accordance with the methods and assumptions described in Note 14 – Goodwill and
Impairment Tests
After initial recognition, goodwill is recorded at cost less accumulated impairment losses.
2.11 Intangible assets
Intangible assets acquired
Intangible assets acquired separately are recognized at historical cost less accumulated amortization and any
accumulated impairment losses.
Cost comprises all directly attributable costs necessary to buy, create, produce and prepare the asset for use. Intangible
assets consist mainly of operating licenses, IRUs, patents, purchased software, and internally developed applications.
Licenses to operate telephone services in France are recognized for the fixed amount paid for the acquisition of the
license. The variable portion of license fees, which amounts to 1% of the revenue generated by these activities, cannot be
reliably determined and is therefore expensed in the period in which it is incurred.
 The UMTS license is recognized at historical cost and amortized on a straight-line basis from the service activation in
June 2004 to the end of the license period (August 2021), corresponding to its expected useful life;
 The GSM license, renewed in March 2006, is recognized at the present value of 4% of the fixed annual fee of €25
million, and amortized on a straight-line basis from that date until the end of the license period (March 2021),
corresponding to its expected useful life;
 The LTE license is recognized at historical cost and is amortized on a straight-line basis from the service activation
date until the end of the license period. The 2.6 GHz band license acquired in October 2011 is amortized as of the end
of November 2012 (end of license: October 2031). The 800 MHz band license acquired in January 2012 was activated
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on June 3, 2013 and is being amortized over a remaining duration of 18 years (end of license: January 2032). SFR
acquired a new license for the 700 MHz band in December 2015 (end of license: December 2035). This license has
not yet been activated.
IRUs correspond to the right to use a portion of the capacity of a terrestrial or submarine transmission cable granted for a
fixed period. IRUs are recognized as an asset when the Group has the specific indefeasible right to use an identified
portion of the underlying asset, generally optical fiber or dedicated wavelength bandwidth, and the duration of the right is
for the majority of the underlying asset’s useful life. They are amortized over the shorter of the expected period of use and
the life of the contract between 3 and 30 years.
Patents are amortized on a straight-line basis over the expected period of use (generally not exceeding 10 years).
Software is amortized on a straight-line basis over its expected useful life (which generally does not exceed 3 years).
Internally developed intangible assets
The acquisition cost of an intangible asset developed internally corresponds to the personnel costs incurred when the
intangible asset meets the criteria for IAS 38 - Intangible Assets. An intangible asset that results from the development of
an internal project is recorded if the Group can demonstrate that all of the following conditions have been met:
 The technical feasibility of completing the intangible asset so that it will be available for use or sale;
 Its intention of completing the intangible asset and using or sell it;
 Its ability to use or sell the intangible asset;
 The capacity of the intangible asset to generate probable future economic benefits.
 Among other things, the Group may demonstrate the existence of a market for the output of the intangible asset or the
intangible asset itself or, if it is to be used internally, its usefulness;
 The availability of adequate technical, financial and other resources to complete the development, and to use or sell
the intangible asset;
 Its ability to reliably measure the expenditures attributable to the intangible asset during its development.
Capitalization of costs ceases when the project is finalized and the asset is available for use.
The cost of an internally developed intangible asset arising from the development phase of an internal IT project is
amortized on a straight-line basis over its expected useful life (which is generally not greater than three years).
Investments made under public service concessions or delegations
Investments made as part of public service concessions or delegations and related to the roll-out of the
telecommunications network are recognized as intangible assets in accordance with IFRIC 12 - Service Concession
Arrangements.
The “intangible model” provided by this interpretation applies when the operator receives a right to charge users of the
public service and is substantially paid by the user. Intangible assets are amortized over the shorter of the estimated
useful life of the relevant asset categories and the duration of the concession.
2.12 Property, plant and equipment
Property, plant and equipment are measured at historical cost less cumulative depreciation and impairment losses.
Historical cost includes the acquisition cost or the production cost, the costs directly attributable to using the asset on the
site and to its conditions of operation, and the estimated costs of dismantling and removing the asset and remediating the
site where it is installed, in line with the obligation incurred. In addition, borrowing costs attributable to qualifying assets
whose construction period is longer than one year are capitalized as part of the cost of that asset. Conversely, subsequent
maintenance costs (repairs and maintenance) of the asset are recognized in profit or loss. Other subsequent expenditures
that increase productivity or the life of the asset are recorded as assets.
Material components of property, plant and equipment whose useful lives are different are recognized and depreciated
separately.
Property, plant and equipment mainly comprise network equipment.
The main useful lives are as follows:
Technical buildings and constructions
15 to 25 years
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Network equipment :
Optical cables
30 to 40 years
Engineering facilities, pylons
20 to 40 years
Other equipment
4 to 15 years
Set-top box and access fees
3 to 5 years
Furniture and fixtures
5 to 10 years
Miscellaneous equipment
2 to 5 years
Estimated useful lives are reviewed regularly and any changes in estimates are recorded prospectively.
Materials and telecommunications equipment are investments that are strongly subject to technological changes: writeoffs or impairments with prospective revision of the amortization period may be recognized if the group has to prematurely
write off certain technical equipment or if it is forced to revise the projected useful life of certain categories of equipment.
Gains or losses on disposal of property, plant and equipment are the difference between the profit from the disposal and
the carrying amount of the asset, and are recognized in the caption “Other operating income/expenses” of the
consolidated income statement.
FTTH deployment
Decision No. 2009-1106 of Autorité de Régulation des Communications électroniques et des Postes (Regulatory Authority
on Electronic Communications and Postal Services (ARCEP)) dated December 22, 2009 regulates the use of fiber optics
in very densely populated areas by establishing joint investment rules between phone operators.
The reference offers issued by the operators in accordance with this decision are dealt with in IFRS by the application of
IFRS 11 – Joint Arrangements. Thus, when the Group is an ab initio joint investor, only its share of the assets is recorded
in property, plant and equipment, and when the Group is an a posteriori investor, the IRU or the usage right is recognized
in property, plant and equipment. The same treatment applies for joint investment in moderately dense areas defined by
ARCEP.
2.13 Leases
Under IAS 17 – Leases, leases are classified as finance leases whenever the terms of the lease substantially transfer the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Amounts due from lessees under finance leases are recognized as receivables in the amount of the Group’s net
investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate
of return on the Group’s net investment in respect of the leases.
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct
costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and
recognized on a straight-line basis over the term of the lease.
The Group as lessee
Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the
lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included
in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and
reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance expenses are recognized immediately in profit or loss. Contingent rentals are expensed in the period in which
they are incurred.
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Operating lease payments are expensed on a straight-line basis over the term of the lease, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are
consumed. Contingent rentals arising under operating leases are expensed in the period in which they are incurred. In the
event that incentives are received to enter into operating leases, such incentives are recognized as a liability. The
aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are
consumed.
2.14 Impairment of assets
Whenever events or changes in the economic environment indicate a risk of impairment of goodwill, or other intangible
assets, property, plant and equipment, or assets in progress, the Group re-examines the value of these assets. In addition,
goodwill, other intangible assets with indefinite useful lives and intangible assets in progress undergo an annual
impairment test.
Impairment tests are performed in order to compare the recoverable amount of an asset or a Cash-Generating Unit
(“CGU”) with its carrying amount.
An asset’s or CGU’s net recoverable amount is the greater of its fair value less costs to sell or its value in use. The
recoverable amount is determined for each individual asset, unless the asset does not generate cash inflows that are
largely independent of those derived from other assets or groups of assets. In that case, the recoverable amount is
determined for the CGU to which the asset belongs.
A CGU is the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
Given the change in the Numericable-SFR Group and the significant pooling of assets and services within the Group, a
single CGU is defined at the Group level. For the purposes of goodwill impairment testing, in conformity with IAS 36,
goodwill is allocated as a value to each operating segment (see Note 14.1 – Change in Goodwill), and shared assets and
liabilities are allocated through distribution keys to each of the operating segments B2C, B2B and wholesale (see Note
14.3 – Main Assumptions Used). The principal allocation keys used to allocate shared assets and liabilities are based on
revenues, use of the network or the information systems.
The value in use of each asset or group of assets is determined as the present value of future cash flows (discounted cash
flow method or “DCF”) by using a discount rate after tax specific to each asset or group of assets concerned.
The fair value less costs to sell is the amount obtainable on the measurement date from the sale of the asset or group of
assets in an ordinary transaction between market participants, less costs to sell.
When the carrying amount of an asset exceeds its net recoverable amount, an impairment loss is recognized in the
“Depreciation, amortization and impairment” caption of the income statement. Only impairment losses recognized on
assets other than goodwill such as depreciable intangible assets, intangible assets with indefinite useful lives and
property, plant and equipment may be reversed.
2.15 Non-derivative financial assets
Pursuant to the provisions of IAS 39, financial assets are classified in one of the four categories:
 available-for-sale assets;
 loans and receivables;
 held-to-maturity securities;
 financial assets at fair value through profit or loss.
Purchases and sales of financial assets are recognized on the transaction date – the date on which the Group has
committed to purchase or sell the assets.
A financial asset is classified as current when the maturity of the instrument’s expected cash flows is less than one year.
Available-for-sale financial assets
Available-for-sale financial assets are recognized initially at fair value. Gains and losses on available-for-sale financial
assets are recorded in other comprehensive income until the investment is derecognized or until it is demonstrated that
the investment classified as equity instruments has permanently or significantly lost all or some of its value, when the
cumulative gain or loss previously recorded in income and expenses recognized directly in other comprehensive income is
transferred to the income statement.
This category consists mainly of non-consolidated equity interests.
These assets are included in the statement of financial position under non-current financial assets, unless Management
intends to dispose of the investment within twelve months of the statement’s date.
230
Loans and receivables
Loans and receivables are initially recognized at fair value plus transaction costs that are directly attributable to the
acquisition. After initial recognition, they are measured at amortized cost using the effective interest method.
This category consists mainly of trade receivables and other receivables and other assets such as deposits and advances
to associates.
If there is objective evidence that an impairment loss has been incurred, its amount is calculated as the difference
between the carrying amount of the financial assets and the value of future estimated cash flows, discounted at the
original effective interest rate, with the difference being recognized in profit or loss. Impairment losses may be reversed if
the recoverable amount of the asset subsequently increases.
Held-to-maturity financial assets
Held-to-maturity financial assets are financial assets with fixed or determinable payments and fixed maturities that the
Group intends and has the ability to hold to maturity. Financial assets that are designated as held-to-maturity are
measured at amortized cost, using the effective interest method.
They are reviewed for impairment on an individual basis if there is any indication that they may be impaired. In this case,
the impairment is recognized through profit or loss.
Financial assets measured at fair value through profit or loss
These financial assets are measured at fair value, with gains and losses recorded in the Consolidated statement of
income.
This category mainly includes:
 assets held for trading that the Group intends to sell in the near future (primarily marketable securities);
 assets voluntarily classified at inception in this category;
 derivative financial assets.
2.16 Inventories
Inventories primarily consist of mobile devices, set-top boxes and technical equipment. They are valued at their acquisition
cost or at their net recoverable amount, if it is lower. The acquisition cost is calculated according to the weighted average
cost. It includes the cost of acquiring the materials.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated selling expenses.
2.17 Cash and cash equivalents
The “Cash and Cash Equivalents” heading includes bank balances, money-market UCITS which meet the specifications of
AMF Position No. 2011-13, and very liquid short-term investments, which have an original maturity date that is less than or
equal to three months, which can be easily converted to a known cash amount, and are subject to a negligible risk of
change in value.
Investment securities are measured at their fair value through profit or loss.
2.18 Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the contractual
arrangement.
Equity instruments
An equity instrument is any contract resulting in a residual interest in the assets of an entity after deducting all of its
liabilities. The equity instruments issued by the Group are recorded for the proceeds received, net of direct issuance costs.
231
Financial liabilities other than derivatives mainly include bonds and term loans taken out in connection with the acquisition
of SFR, liabilities related to finance leases, the potential earn-out that Vivendi may receive following the sale of SFR based
on the Group’s financial performance, guarantee deposits received from customers, advances received and bank
overdrafts.
They are measured at amortized cost, using the effective interest method, in conformity with IAS 39. The effective interest
rate corresponds to the internal interest rate used to precisely update future cash flows throughout the term of the financial
liability. Fees, debt issuance and transaction costs are included in the calculation of the effective interest rate over the
expected life of the instrument. Accrued interest is included in the “Current liabilities” caption of the statement of financial
position.
2.19 Derivative instruments
The Group uses various derivative instruments to hedge its exposure to foreign exchange rate fluctuations.
Derivatives are initially recognized at fair value on the date of execution of a derivative contract, and are subsequently
revalued at their fair value on each closing date.
Hedge accounting is applicable if:
 The hedging relationship is clearly defined and documented at the date of establishment;
 The effectiveness of the hedging relationship is demonstrated at its inception and in subsequent periods: i.e., if at the
beginning of the hedge and throughout its duration, the Group expects that the changes in fair value of the hedged
item will be almost fully offset by changes in the fair value of the hedging instrument, and if actual results are within a
range between 80% and 125%.
There are three types of hedge accounting:
 The fair value hedge is a hedge against exposure to changes in the fair value of a recognized asset or liability, which
are attributable to a rate and/or currency risk and which would affect the result. The hedged portion of these items is
remeasured at fair value in the statement of financial position. The change in fair value is recognized in the income
statement where it is offset within the limits of the effectiveness of the hedge by symmetrical changes in the fair value
of hedging instruments;
 The cash flow hedge is a hedge of the exposure to cash flow fluctuations attributable to interest rate risk and/or
changes associated with a recognized asset or liability or a highly probable forecast transaction (e.g., an expected sale
or purchase) and could affect profit. The hedged item is not recorded in the statement of financial position; thus the
effective portion of the change in fair value of the hedging instrument is recognized in other comprehensive income. It
is reclassified in profit or loss when the hedged item affects profit or is reclassified in the initial cost of the hedged item
where it concerns covering acquisition cost of a non-financial asset;
 The net investment hedge is a hedge against exposure to changes in value attributable to the foreign currency risk of a
net investment in a foreign operation that could affect profit when the investment is sold. The effective portion of net
investment hedges is recognized through other comprehensive income and reclassified in profit or loss when the net
investment is sold.
The cessation of hedge accounting may result in particular from the elimination of the hedged item, voluntary termination
of the hedging relationship, or the cancelation or maturity of the hedging instrument. The accounting consequences are as
follows:
 for fair value hedges: the fair value adjustment of debt at the date of cessation of the hedging relationship is amortized
based on a recalculated effective interest rate on that date;
 for cash flow hedges: the amounts recorded in other comprehensive income are reclassified into profit or loss when
the hedged item is eliminated. In other cases, they are taken straight to profit or loss over the remaining term of the
hedging relationship as originally defined.
In both cases, the subsequent changes in value of the hedging instrument are recognized in profit or loss.
2.20 Provisions
Under IAS 37 - Provisions, Contingent Liabilities and Assets, provisions are booked when, at the end of the reporting
period, the Group has a legal, regulatory, contractual or implicit obligation resulting from past events and it is probable that
an outflow of resources generating economic benefits will be required to meet the obligation and that the amount can be
reliably estimated.
232
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash
flows at a pre-tax discount rate that reflects current market assessments of the time value of money, taking into account
the risks attached to the liability as appropriate. If a reliable estimate of the amount of the obligation cannot be made, no
provision is recognized and a report is made in the notes.
Provisions mainly include:
 Provisions to cover litigation and disputes concerning the Group’s activities. Their amounts are estimated based on a
case-by-case risk assessment. Events occurring during proceedings may lead at any time to a reassessment of such
estimates;
 Provisions for restructuring, which are booked once the restructuring has been announced and a plan has been
detailed or launched. Such provisions are generally not discounted due to their short-term nature;
 Provisions for site remediation, which are assessed based on the number of sites involved, an average unit cost of site
remediation and assumptions about the life of the decommissioning asset and the discount rate. When a site is
decommissioned, the corresponding provision is reversed;
 Provisions for employee benefits are detailed in the following section.
2.21 Employee benefits
The Group provides employee benefits through contributions to defined-contribution plans and defined-benefit plans. The
Group recognizes pension costs related to defined-contribution plans as they are incurred under personnel expenses in
the Consolidated Statement of Income .
Estimates of the Group’s pension and end-of-service benefit obligations are calculated annually, in accordance with the
provisions of revised IAS 19 - Employee Benefits (“IAS 19R”), with the assistance of independent actuaries, using the
projected unit credit method and considering actuarial assumptions including the probable turnover of beneficiaries, salary
increases, projected life expectancy, the probable future length of employees’ service and an appropriate discount rate
updated annually.
The Group recognizes the corresponding net expense over the entire estimated period of service of the employees. The
actuarial gains and losses on post-employment benefits are recognized in their entirety as “Other items of comprehensive
income” in the period in which they occur.
The cost of the plans is recognized through operating income, with the exception of the accretion cost, which is recognized
as other financial expenses and income.
The cost of past services generated by plan changes and reductions is recognized immediately and in full in the
Consolidated Statement of Income.
2.22 Share-based payments
The Group has granted options that will be settled as equity instruments. In accordance with IFRS 2 – Share-based
Payments, the benefit granted to employees under stock option plans, assessed at the time of the award of the option, is
additional compensation.
Plans granting instruments settled as equity instruments are measured at the grant date based on the fair value of the
equity instruments granted. They are recognized on a straight-line basis as personnel expenses over the vesting period,
taking into account the Group’s estimate of the number of options that will vest at the end of the period. In addition, for
plans based on non-market performance conditions, the probability of achieving the performance objective is assessed
each year and the expense adjusted accordingly.
The fair value of options granted is determined using the Black-Scholes valuation model and takes into account an annual
reassessment of the expected number of exercisable options. The expense recognized is adjusted accordingly.
2.23 Borrowing costs
Under IAS 23 – Borrowing Costs, a qualifying asset is an asset that takes a substantial period of time before it can be
used or sold. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying
asset are capitalized as part of the cost of that asset. The Group notes that it does not take a substantial amount of time to
get assets ready for their intended use because of the incremental roll-out of the network. The application of IAS 23
consequently has no impact on the Group’s Consolidated Financial Statements.
2.24 Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to holders of ordinary shares of the parent by the
weighted average number of ordinary shares outstanding during the period, excluding any treasury shares held by the
Group.
233
Diluted earnings per share are calculated by dividing the profit attributable to holders of ordinary shares of the parent by
the weighted average number of ordinary shares outstanding during the period, based on the assumption that all
potentially dilutive instruments are converted and that the assumed proceeds from the conversion of these instruments
have been used to acquire shares of the Group at the average market price for the fiscal year period during which these
instruments were outstanding.
Potentially dilutive instruments include stock options, if dilutive.
234
Use of Estimates
3
Use of estimates
The preparation of the Consolidated Financial Statements in accordance with IFRS requires the Group to make a certain
number of estimates and assumptions that are realistic and reasonable. Thus, the application of accounting principles in
the preparation of the Consolidated Financial Statements described in Note 2 – Accounting rules and methods implies
decisions, estimates and assumptions that have an influence on the amounts of the assets and liabilities and on income
and expenses as well.
Such estimates are prepared based on the going concern assumption, established using currently available information
and in view of the current economic environment. In the current economic environment, changes in facts and
circumstances may result in revised estimates or assumptions, which could affect the financial position, results of
operations and cash flows of the Group.
Significant estimates and assumptions relate to the measurement of the following items:
 Provisions: assessment of the risk on a case-by-case basis; it is stipulated that the occurrence of events during a
proceeding period may at any time trigger a reassessment of the risk (Note 26– Provisions and Note 34 – Disputes).
 Employee benefits: assumptions updated annually, such as the probability of personnel remaining with the Group until
retirement, the projected change in future compensation, the discount rate and the mortality table (Note 28 – Postemployment benefits).
 Revenue: identification of the separable elements of a packaged offer and allocation on the basis of the relative fair
values of each element; the period of deferred revenue related to costs to access the service on the basis of the type
of product and the term of the contract; presentation as net or gross revenue depending on whether the Group is
acting as agent or principal (Note 8 – Segment information).
 Fair value of financial instruments: fair value is determined by reference to the market price at the end of the period.
For financial instruments for which there is no active market, fair value is estimated based on models that rely on
observable market data or by the use of various valuation techniques, such as discounted cash flows (Note 31 –
Financial instruments).
 Deferred taxes: estimates for the recognition of deferred tax assets updated annually such as the future tax results of
the Group or the likely changes in active and passive temporary differences (Note 13 – Income taxes).
 Impairment tests: these tests concern goodwill and intangible assets with an indefinite life span; in the context of
impairment tests, the assumptions relating to the determination of Cash-Generating Units (CGU), future cash flows
and discount rates are updated annually (Note 14 – Goodwill and impairment tests).
 Intangible assets and property, plant and equipment: estimate of the useful life based in particular on the effective
obsolescence of the assets and the use made of those assets (Note 15 – Intangible assets and Note 16 – Property,
plant and equipment).
 Trade and other receivables: trade receivables are provisioned (i) on the basis of the historically observed recovery
rate and/or (ii) on the basis of a specific recoverability analysis.
In the context of the Purchase Price Allocation, the Group made estimates in order to determine the fair value of the
identifiable assets and liabilities and the contingent liabilities.
235
4
4.1 Memorandum of Understanding (MoU) signed with Vivendi on February 28, 2015
On February 18, 2015, Numericable-SFR and its majority shareholder Altice filed a firm offer to buy the 20% interest held
by Vivendi in Numericable-SFR, at €40 per share, representing a total of approximately €3.9 billion.
On February 27, 2015, Vivendi’s Supervisory Board accepted Numericable-SFR’s offer, signing final agreements to buy
the 20% interest held by Vivendi.
The acquisition was completed on May 6, 2015, half of it paid by Numericable-SFR as part of a share repurchase plan
authorized by the Shareholders’ Meeting of April 28, 2015, combined with a cash payment, and the other half paid by
Altice.
The share purchase made by Numericable-SFR, for a total of €1,948 million, was financed through a Revolving Credit
Facility (RCF) drawdown (the available amount was raised by €750 million to €1,125 million in 2015) of €1,050 million and
the balance from the Group’s available cash.
At its meeting of May 28, 2015, the Board of Directors decided to cancel treasury shares (48,693,922 shares), reducing
consolidated equity by €1,948 million.
Again under the MoU signed with Vivendi:
(i) In early May 2015, Vivendi paid to Numericable-SFR €116 million under the price adjustment procedure agreed
between the parties for the acquisition of SFR. This price adjustment was recognized as follows:
- in the Group’s “restated” Consolidated Financial Statements at December 31, 2014: recognition of a claim on
Vivendi in the “Other current financial assets” caption for €120 million (representing the price adjustment as valued
at the acquisition date) through a reduction of the goodwill recognized in the SFR acquisition;
- in the 2015 Consolidated Financial Statements: recognition of a financial expense in the amount of €4 million
(presented in “Other financial expenses”).
(ii) Vivendi permanently waived the earn-out payment of €750 million that Numericable-SFR would have owed to Vivendi
if EBITDA - Capex had reached €2 billion in any fiscal year before December 31, 2024. The Group reported net
financial income of €643.5 million (excluding tax effects) for 2015, corresponding to the discounted value of the earnout in the Group’s non-current financial liabilities at December 31, 2014, as well as tax income of €40.5 million in 2015.
The €643.5 million was recognized a financial income insofar as there was no element indicating that the waiver of the
earn-out was known at the time of the acquisition.
(iii) Vivendi undertook to repay to SFR, should the tax authorities definitively disallow the merger of SFR and Vivendi
Telecom International (VTI) signed in December 2011, up to €711 million that SFR had paid to it as part of its inclusion
in Vivendi’s tax consolidation group.
4.2 New Term loans for a total amount equivalent to €1,680 million
On October 22, 2015, Numericable-SFR successfully raised two new term loans: (i) one for $1,340 million and (ii) another
for €500 million (the “Term Loans”). The Term Loans have a fixed maturity in January 2023 and bear interest at
LIBOR/EURIBOR (with a floor at 0.75%) plus a margin of 4.00%. The two loans were placed at 98.5% of their face value.
The total amount of the Term Loans denominated in US dollars was converted into a euro loan for €1,184 million with a
margin of 4.15% plus the EURIBOR (without a floor) using currency and rate hedging instruments.
Following the placement of these new debts, the average maturity of the Numericable-SFR debt rose from 5.9 years to 6.1
years, and the average cost of the debt from 4.8% to 4.9%.
236
4.3 Mobile telephony frequencies assigned to SFR
On November 24, 2015, pursuant to Decision 2015-1454, ARCEP selected SFR for the acquisition of 2*5 MHz in the 700
MHz band.
The authorization to use the frequencies was issued by ARCEP on December 8, 2015, Decision 2015-1569. At that date,
the license was capitalized for €466 million (excluding spectrum readjustment costs). The commitments related to this
license are described in Note 33 – Contractual commitments and obligations.
4.4 Dividend distribution
The Numericable-SFR Shareholders’ Meeting of December 15, 2015 approved an exceptional dividend distribution to
shareholders of €5.70 per share, representing a total of €2.5 billion charged to the “paid-in capital” caption.
This distribution was financed by a loan in the amount of €1.6 billion and the balance from available cash and cash
equivalents. The dividend was paid before December 31, 2015.
4.5 Search by the Competition Authority in the Group’s premises on April 2, 2015
Accused by some of its competitors that the Group and SFR anticipated the Competition Authority’s decision of October
31, 2014 authorizing the Group’s takeover of SFR, the Competition Authority, overseen by the data privacy commission,
gathered data from Group locations to identify factors that may indicate that it had acted prematurely on the expectation
that this concentration would be authorized. The Group disputes the facts put forward by its competitors.
237
5
5.1 Acquisition of SFR
On April 5, 2014, the Supervisory Board of the Vivendi Group accepted the offer from Altice, the Group’s majority
shareholder, to purchase its subsidiary SFR, along with that company’s own subsidiaries.
On June 20, 2014, Vivendi, Altice and Numericable signed the final merger agreement between SFR and NumericableSFR which emerged from discussions with the representative bodies of the personnel concerned.
After obtaining the approval of the Competition Authority on October 26, 2014, the acquisition was completed on
November 27, 2014.
The acquisition price for SFR represents an estimated total amount at the acquisition date of €17.1 billion, including
€13.2 billion in cash (See also Note 37 – Subsequent events).
This acquisition was financed through (i) the arrangement of €11.7 billion in new funding in May 2014 (see Note 5.3 Financing the SFT acquisition and refinancing of existing debt) and (ii) the completion of a capital increase of €4.7 billion
on October 28, 2014 (see Note 5.4 - Capital increases).
See also Note 6 – Changes in scope.
5.2 Acquisition of Virgin Mobile
On May 16, 2014, the Group entered into exclusive negotiations with Omer Telecom for the acquisition of Virgin Mobile.
The Group announced on June 27, 2014 that it had signed with the shareholders of the Group’s holding company
operating in France as Virgin Mobile, Omer Telecom Limited, the final purchase agreement for the entire share capital of
Omer Telecom Limited after consulting with the representative bodies of the personnel concerned.
The acquisition was completed on December 4, 2014 after obtaining approval from the Competition Authority. The
acquisition price for Virgin represented a total of €295 million.
Vivendi invested €200 million to finance the acquisition. This amount was deducted from SFR’s purchase price.
See also Note 6 – Changes in scope.
5.3 Financing the acquisition of SFR and refinancing the existing debt
To finance the SFR acquisition, in May 2014, the Group raised the equivalent of €11,653 million through bond issues (for
an equivalent amount of €7,873 million) and the placement of new bank borrowings (for a total amount equivalent to
€3,780 million), both in euros and in US dollars (see Note 24 – Financial liabilities).
Of the money raised through these new borrowings, €2,750 million was used by the Group to:
 repay the full amount of Group’s former Senior Debt of €2,638 million;
 pay the early redemption fee on bonds for €89 million;
 pay a portion of the costs for arranging new financing.
The repayment of the Group’s former Senior Debt has been analyzed as an extinguishment of existing debt. Accordingly:
 the costs of extinguishing bond debt incurred by the Group were recognized in other financial expenses for €89 million;
 the costs relating to the extinguishment of debt, which were originally recorded at amortized cost, were recognized in
other financial expenses in the amount of €22 million;
In addition, on May 21, 2014, the Group signed a new Revolving Credit Facility (RCF) for a maximum amount of
€750 million, €300 million of which was available immediately and the balance of which was available after the completion
of the SFR acquisition. As of December 31, 2014, this credit line was undrawn.
The costs associated with the arrangement of bond debt, bank loans and the RCF, or €250 million in total, were
recognized at amortized cost using the effective interest rate method in accordance with IAS 39, and are thus spread over
the maturity of the debt.
5.4 Capital increases
Numericable-SFR carried out several capital increases during the year:
 The Board of Directors meeting of October 28, 2014 voted to increase the capital through a public offering for a total
amount of €4,733 million (including €266 million in new shares issued and €4,467 million in additional paid-in capital).
 The costs incurred in connection with the capital increase were fully charged to additional paid-in capital in a total
amount of €13 million.
238
 On November 27, 2014, as part of the completion of the SFR acquisition, Numericable-SFR carried out a capital
increase of €2,376 million (€97 million in capital, €2,278 million in additional paid-in capital) in consideration for the inkind contribution by Vivendi of SFR securities. Following these transactions, Vivendi now holds a 20% stake in
Numericable-SFR.
 On December 30, 2014, Numericable-SFR carried out a €0.5 million capital increase through an employee share
offering.
Following these transactions, the Company’s share capital amounted to €487 million and additional paid-in capital totaled
€8,842 million.
239
Changes in scope
6
Changes in scope
The purpose of this note is to provide additional details on the acquisitions of SFR and Virgin Mobile in 2014; the work to
allocate the acquisition price was finalized within twelve months after the acquisition date. The amounts are expressed in
millions of euros.
Subgroup acquired
SFR
Virgin mobile
November 27, 2014
December 4, 2014
99,99% (a)
100%
Consideration paid at the acquisition date
17,012
288
17,300
Of which cash (b)
13,166
295
13,461
3,282
-
3,282
684
-
684
(120)
(7)
(127)
Acquisition date
Percentage of voting rights acquired
Of which issues of Numericable-SFR shares (c)
Of which earn-out (d)
Of which price adjustment (e)
(a)
(b)
(c)
(d)
(e)
Total
Numericable acquired all the shares of SIG 50, and all the shares of SFR S.A., which is 225,214,842 shares, less 10 shares.
The net amount of €200 million corresponds to Vivendi’s investment in funding the Virgin Mobile acquisition.
In consideration for the SFR shares tendered by Vivendi, Vivendi obtained a 20% stake in the new Numericable-SFR entity. In accordance
with the revised IFRS 3, these shares were measured at their fair value at the date of issue, i.e., on the basis of the opening market price on
November 27, 2014.
Discounted fair value at December 31, 2014 of the potential €750 million earn-out to Vivendi as part of the SFR acquisition deal. It should be
noted that this amount will be due to Vivendi once the aggregate “Ebitda – Capex” for the newly formed group reaches €2 billion during any of
the fiscal years ending no later than December 31, 2024. Also refer to Note 4 - Significant events for the fiscal year ended December 31, 2015.
Pursuant to the price adjustment procedure agreed on by the parties for the acquisition of SFR, an adjustment in the SFR price was
recognized in the Group’s “restated” Consolidated Financial Statements at December 31, 2014 in the form of a claim against Vivendi for €120
million (corresponding to the price adjustment as measured on the acquisition date). The Virgin Mobile price adjustment was recognized in the
same way for the amount of €7 million.
SFR
Virgin Mobile
Total
Other intangible assets
7,807
187
7,994
4,173
9
4,182
124
-
124
Other non-current financial assets
132
-
132
Deferred tax assets
140
25
165
12,377
221
12,598
335
5
340
2,581
65
2,646
-
-
-
Income tax receivable
9
1
10
247
7
254
3,172
78
3,250
15,548
299
15,847
SFR
Virgin Mobile
Total
Non-current assets acquired
Inventories
Current assets acquired
IDENTIFIABLE ASSETS ACQUIRED
Identifiable liabilities assumed
240
Changes in scope
Non-current financial liabilities
48
16
64
512
10
522
1,343
56
1,399
509
-
509
2,412
82
2,494
4
-
4
353
-
353
4,558
131
4,689
Current income tax liabilities
83
-
83
Current liabilities assumed
4,998
131
5,130
IDENTIFIABLE LIABILITIES ASSUMED
7,410
213
7,623
SFR
Virgin Mobile
Total
8,874
202
9,076
Non-current liabilities assumed
Current financial liabilities
Current provisions
GOODWILL
In accordance with IFRS 3R - Business Combinations, the acquisitions of SFR and Virgin Mobile were recognized as
business combinations. The identifiable assets acquired and liabilities assumed were measured at fair value at the
acquisition date under Purchase Price Accounting (PPA).
6.1
Items of the SFR opening balance sheet and determination of goodwill
The fair value of the identifiable assets and liabilities of SFR was determined on the basis of the last SFR business plan
available on the acquisition date using commonly used valuation methods:
 Customer relations: fair value was determined based on the excess profits method. This method is based on the
discounting of the profits attributable to customer relationships, net of the asset contributing charges. These charges
represent the remuneration of the assets necessary to generate the profits associated with customer relationships
such as, for example, the brand, licenses, working capital requirement or tangible assets.
 SFR brand: the valuation of the SFR brand is based on the royalties’ method. This method is based on the discounted
sum of the royalties saved by the brand holder. These royalties are calculated by applying a market royalty rate to the
future revenues generated by the sale of products and services associated with the brand.
In addition, contingent liabilities related to disputes were estimated on the basis of work performed by the Group Financial
Department assisted by advisors.
The principal adjustments are related to the fair value of the intangible assets, including:
 the creation of intangible assets representing customer relationships for €2,675 million;
 the creation of intangible assets representing the “SFR brand” for €1,050 million;
 deferred tax liabilities for €1,341 million, corresponding to the tax effects associated with the adjustments in value
made in the determination of the opening balance sheet.
The principal assumptions to which the assets on the opening balance sheet are sensitive are as follows:
 Customer relationships: attrition rate, change in ARPUs and operating margins;
 SFR brand: royalty rate and life span used.
Residual goodwill was €8,874 million and primarily represents the value of future custom relations, the human capital of
the company and the synergies specific to the Group expected from this acquisition.
241
Changes in scope
6.2
Acquisition of Virgin Mobile
On December 4, 2014, Numericable-SFR acquired 100% of Virgin Mobile for the price of €295 million.
The main adjustments resulting from marking the assets acquired and the liabilities assumed to fair value correspond to
the adjustments in fair value of the intangible assets, including:
 the creation of intangible assets representing customer relations for €160 million;
 deferred tax liabilities for €56 million, corresponding to the tax effects associated with the adjustments in value made in
the determination of the opening balance sheet.
Residual goodwill was €202 million and primarily represents the value of future customer relations, the human capital of
the company and synergies specific to the Group expected from this acquisition.
6.3
Transition from provisional goodwill to definitive goodwill
The transition from provisional goodwill in Note 6 – Changes in scope to the 2014 Consolidated Financial Statements to
definitive goodwill is presented below:
SFR
Virgin Mobile
Total
11,145
312
11,457
Price adjustment
(120)
(7)
(127)
Customer bases
(2,675)
(160)
(2,835)
SFR's tradename
(1,050)
-
(1,050)
Other assets
(92)
-
(92)
Provisions (including contingent liabilities)
331
1
331
1,341
56
1,397
(5)
-
(5)
8,874
202
9,076
(in € millions)
Provisional goodwill
Other liabilities
DEFINITIVE GOODWILL
The impact of these adjustments on net income for fiscal year 2015 is a charge of €268 million; this charge consists
primarily of (i) amortization related to non-current assets recognized for €474 million and (ii) deferred tax income for
€173 million.
In addition, the direct costs related to the acquisitions of SFR and Virgin Mobile amounted to €16 million in 2015 and
€61 million in 2014.
242
7
Reconciliation of operating income to adjusted EBITDA
The following table shows the reconciliation of the operating income in the Consolidated Financial Statements to adjusted
EBITDA:
December 31,
December 31, 2015
2014 restated 1
937
91
2,554
496
SFR and Virgin Mobile acquisition expenses
16
61
Restructuring costs (a)
80
10
9
9
263
42
3,860
708
(in € millions)
Operating income
Depreciation, amortization and impairment
Costs relating to stock option plans
Other non-recurring costs (b)
ADJUSTED EBITDA
(a) In 2015, it includes the costs for restoration of the tertiary sites resulting from the combination of the employees on the Saint-Denis site
(€37 million), the costs for termination of contracts related primarily to the network (€15 million) and provisions related to store closings
(€14 million).
(b) In 2015, it includes the gains or losses on tangible and intangible assets (€188 million) and the impact over the period of the additional costs
before renegotiation of contracts (€45 million).
Adjusted EBITDA is the key indicator used by the Group to measure performance. This financial indicator is not defined in
IFRS. Adjusted EBITDA excludes certain items that Numericable-SFR considers not relevant to its recurring operating
activities.
8
Segment information
As stated in Note 2.6 - Segment information, the Group has three operating segments:
 B2B Operations
 B2C Operations
 Wholesale
The following tables show revenue and adjusted EBITDA broken down by the three operating segments defined by the
Group. For information, these two aggregates are performance indicators used and monitored by the Group to direct
operating activities.
8.1
Revenue
Revenue is primarily generated in France.
The breakdown by operating segments before intra-segment eliminations is as follows:
December 31,
December 31, 2015
2014 restated 1
B2C
7,795
1,414
B2B
2,144
468
Wholesale
1,799
396
Intercompany
(699)
(108)
11,039
2,170
(in € millions)
TOTAL
The contributed revenue is detailed as follows:
December 31,
(in € millions)
December 31, 2015
2014 restated 1
243
B2C
7,595
1,409
B2B
2,116
464
Wholesale
1,328
297
11,039
2,170
December 31, 2015
2014 restated 1
B2C
2,373
477
B2B
686
96
Wholesale
801
135
3,860
708
TOTAL
8.2
Adjusted EBITDA
The contributed adjusted EBITDA breaks down by segment as follows:
December 31,
(in € millions)
TOTAL
9
Staff costs and employee benefit expenses and average number of employees
Staff costs and employee benefit expenses break down as follows:
December 31,
December 31, 2015
2014 restated 1
15,816
3,349
Wages and salaries
(706)
(184)
Social security costs
(328)
(66)
Employee profit-sharing
(52)
4
Capitalized payroll costs
270
100
(816)
(146)
(9)
(9)
Employee benefit plans
(10)
(1)
Other (b)
(43)
(14)
(877)
(170)
(in € millions, except for headcount)
Average annual headcount (a)
Staff costs
Costs related to stock option plans
S TAFF COS TS AND EMP LOYEE BENEFIT EXP ENS ES
(a)
(b)
Full-time equivalent.
Includes among other things the costs of various personnel as well as the provisions for risks, excluding the provisions for retirement benefits
(see Note 38 – Restated information).
The amount of staff costs included in “Other non-recurring expenses and income” is €7 million.
244
Income tax expense
10
Other operating expenses consist primarily of the following items:
(in € millions)
December 31, 2015
Network operation and maintenance
(807)
Sales and marketing
(615)
Customer service
(514)
General and administrative expenses
(309)
Taxes
(223)
(2,467)
OTHER OP ERATING EXP ENS ES
Given the change in the presentation of the Consolidated Financial Statements described in Note 1.1 – Basis of
preparation of the financial information and the creation of new cost accounting centers in 2015 as a result of the changes
within the Group, there is no comparison of the other operating expenses with respect to December 31, 2014.
11
Other non-recurring income and expenses consist of the following items:
December 31,
December 31, 2015
2014 restated 1
Net restructuring costs
(80)
(10)
(47)
(86)
(188)
(16)
(in € millions)
Gain and loss on sales of property, plant, equipment and intangible assets
Other
0
(314)
OTHER NON-RECURRING INCOME AND EXP ENS ES
(112)
See Note 7 - Reconciliation of operating income to adjusted EBITDA.
12
Net financial income
The cost of gross debt was up from €504 million in 2014 to €781 million in 2015. It is primarily comprised of the following
items:
 The interest on the senior debt for €616 million in 2015 versus €433 million in 2014. The increase in interest over 2014
comes from the new fixed-term loans contracted in July and November 2015;
 The amortization of the financial expenses related to the placement of the financing, which represents a charge of
€49 million in 2015 versus €55 million in 2014 (in 2014, this amount included a non-recurring expense of €22 million
for the unamortized portion of the expenses on the debt extinguished in May 2014);
 The currency translation adjustments on the financial debt and instruments in dollars, recognized through profit or loss
for €30 million in 2015 compared with €17 million in 2014. It should be noted that the Group arranged cross-currency
swaps to hedge the EUR/USD exchange rate risk stemming from the interest payments and repayment of principal to
be made in US dollars for the bonds and term loans related to the 2014 refinancing and the acquisition of SFR, as well
as for the new term loans contracted in 2015;
 An expense of €86 million in 2015 (zero in 2014) corresponding to the negative fair value of the rate swaps contracted
by the Group in July 2015 for the purpose of cancelling the rate hedge on the coupons over the period of 2019-2022
on the 2022 and 2024 Bonds against payment of a cash balance to Numericable-SFR. As these swaps were not
classified as hedges, their fair value at December 31, 2015 was recognized directly in financial income.
Financial income and other financial expenses are detailed below:
December 31,
((in € millions)
December 31, 2015
2014 restated 1
245
Income tax expense
Earn-out liability to Vivendi extinction (a)
644
-
Other financial income (b)
138
15
FINANCIAL INCOME
782
15
-
(89)
Provisions and unwinding of discount
(18)
(7)
Other
(29)
(15)
OTHER FINANCIAL EXP ENS ES
(47)
(111)
Costs of extinguishing debt (refinancing)
(a)
(b)
13
Vivendi definitively waived the potential earn-out of €750 million. Accordingly, the Group recognized net financial income of €644 million
representing the discounted value of the earn-out that appeared in the Group’s non-current financial liabilities at December 31, 2014.
Primarily includes financial income of €124 million for guarantees granted by Vivendi.
Income tax expense
13.1 Income tax expense components
December 31,
((in € millions)
December 31, 2015
2014 restated 1
(232)
33
17
284
(215)
317
Tax income (expense)
Current
Deferred
INCOME TAX INCOME (EXP ENS E)
246
Income tax expense
13.2 Tax proof
December 31,
December 31, 2015
2014 restated 1
682
(188)
(215)
317
6
4
P ROFIT BEFORE TAXES
892
(509)
Statutory tax rate in France
38.0%
38.0%
(339)
193
Effects of permanent differences (a)
258
(47)
Tax credits/tax assessments
(42)
3
CVAE net of current and deferred taxes (b)
(41)
(10)
Differences on income tax rate (c)
(28)
-
Reassessments of deferred taxes (d)
(23)
178
1
(0)
((in € millions)
Net income (loss)
Neutralization :
Income tax expense (income) (d)
Theoretical tax (d)
Reconciliation between the theoretical tax rate and the effective tax rate :
Other
INCOME TAX INCOME (EXP ENS E)
Effective tax rate (d)
(a)
(b)
(c)
(d)
(215)
317
24.1%
62.4%
Corresponds primarily to the theoretical tax calculated on the financial income of €750 million recognized following Vivendi’s waiver of the
potential earn-out (see Note 4 - Significant events for the fiscal year ended December 31, 2015).
Corresponds to the tax charge on the added value of businesses (CVAE) reclassified as corporate income tax under the IFRS (€81 million),
net of the tax (€40 million).
Article 15 of the 2014 Supplementary Budget Act extended the application of the 10.7% tax on the corporate income tax stipulated by Article
235 ter ZAA of the French General Tax Code for fiscal years ending up to December 30, 2016. As the Group companies close their fiscal
year at December 31, this contribution will no longer be applicable in 2016. In this context, the rate used to calculate deferred taxes fell from
38% at December 31, 2015 to 34.43% (i.e., a corporate rate of 33.3% plus the social surtax of 3.3%).
In 2014, the Group recorded a net tax savings related to the capitalization of loss carry forwards. As a result, the theoretical tax calculated on
income from continuing operations and the effective tax rate show a tax expense (tax income).
247
Income tax expense
13.3 Change in deferred taxes by type
The change in deferred taxes for the year is broken down in the following table according to the deferred tax basis:
((in € millions)
Deferred tax assets
December 31, 2014
restated
Income statement
1,162
(210)
(61)
891
82
24
(14)
92
407
(7)
(13)
388
71
24
(21)
74
133
6
4
142
Tax losses (a)
Provisions
Property, plant and equipment and intangible
assets
Other
Other December 31, 2015
Offsetting (b)
(523)
-
(208)
(730)
Deferred tax assets, gross
1,332
(164)
(312)
856
Unrecognized tax assets
Tax losses (a)
(703)
42
60
(601)
Other
(128)
(117)
(8)
(253)
501
(239)
(260)
2
1,603
(232)
7
1,378
91
Deferred tax assets, net
Property, plant and equipment and intangible
assets
83
15
(8)
130
(39)
(13)
78
Offsetting (b)
(523)
-
(208)
(730)
1,294
(256)
(222)
816
NET DEFERRED TAX AS S ETS (LIABILITIES )
(793)
17
(38)
(814)
Other
(a)
As of December 31, 2015, the Group recognized a deferred tax asset for €290 million on the basis of projections of future use of the loss carry
forward deemed probable.
It should be noted that the majority of all losses are indefinitely deferrable.
(b) In accordance with IAS 12 – Income Tax, the deferred tax assets and liabilities of a given tax group may be offset against each other provided
they all relate to income tax levied by the same tax authority; the Group has a legally enforceable right to offset tax assets and liabilities.
13.4 Tax receivables
At year-end, tax receivables corresponded mainly to the corporate income tax installments paid in 2015.
248
14
Goodwill and impairment tests
14.1 Change in goodwill
December 31, 2014
December 31, 2015
restated
10,554
1,484
Acquisitions (a)
-
9,076
Disposals
-
(5)
Other
-
-
10,554
10,554
(in € millions)
Net carrying amount
NET VALUE AT END OF YEAR
(a)
See Note 6 – Changes in scope.
For the purposes of the impairment tests, goodwill is allocated in value at the level of the three operating segments
monitored by the Group as follows:
December 31, 2014
December 31, 2015
restated
B2C Operations
5,613
5,613
B2B Operations
3,017
3,017
Wholesale
1,924
1,924
10,554
10,554
(in € millions)
TOTAL
14.2 Impairment tests
The impairment tests described in this note were on the goodwill of the Group, on the basis of their useful value, assessed
from projections of discounted future cash flows taking into consideration the operating segments as defined by the Group
(see Note 2.6 – Segment information).
14.3 Principal assumptions used
The goodwill impairment test was conducted on the basis of the operating segments defined above. In accordance with
IAS 36 on impairment of goodwill, the impairment test is performed by comparing the carrying amount with the recoverable
amount for each of the operating segments.
The conditions for allocation of assets and liabilities shared by the operating segments are described in Note 2.14 –
Impairment of assets.
The recoverable amount is determined based on the value in use using a discounted cash flow model. The value in use is
determined by using cash projects based on financial budgets approved by Management covering a six-year period.
Projections of subscribers, revenue, costs and capital expenditure are based on reasonable and acceptable assumptions
that represent Management’s best estimates. These assumptions are based on the projected number of subscribers, the
level of expenses to improve network infrastructures, and the savings related to the continued implementation of the
synergies identified by the Group. The projections are based on both past experience and the expected future market
penetration of the various products. All these elements have been assigned, either directly or indirectly, to the operating
segments of the Group.
As indicated in Note 2.14 – Impairment of assets, the determination of the value in use also depends on assumptions such
as the discount rate and the perpetuity growth rate.
The value in use is determined from the following estimates at December 31, 2015:
Basis of recoverable amount
Value in use
249
Methodology
DCF
Projection period
6 years
Post-tax discount rate
7.00%
Perpetuity growth rate
1.00%
At December 31, 2015, the recoverable value would be equal to the carrying value if one of the main assumptions
changed as follows:
B2B
B2C
Wholesale
Discount rate increase
+ 4.4%
+ 1.4%
+ 1.9%
Growth rate decrease
- 7.2%
- 1.9%
- 2.7%
- 11.5%
- 4.8%
- 6.7%
Decrease in the adjusted Ebitda margin over the business plan and terminal value period
15
15.1 Intangible assets by type:
The presentation of the breakdown of intangible assets by type was changed to offer better readability following the
application of Purchase Price Accounting:
December 31, 2014
restated
December 31, 2015
Gross
Amort, dep. &
impairment
Net
Gross
Amort, dep. &
impairment
Net
SFR trade name (a)
1,050
(76)
974
1,050
(6)
1,044
Licenses (b)
2,190
(149)
2,041
1,756
(12)
1,745
Customer bases (c)
2,875
(368)
2,508
2,875
(32)
2,843
Software
1,887
(754)
1,134
1,504
(304)
1,200
Other intangible assets (d)
2,316
(989)
1,327
2,146
(583)
1,563
10,318
(2,335)
7,983
9,331
(936)
8,395
(in € millions)
TOTAL
(a)
(b)
(c)
(d)
The SFR brand was valued at the time of application of Purchase Price Accounting (refer to Note 6 – Changes in scope) and is amortized
over 15 years.
Includes the licenses held by SFR at the time it was acquired (refer to Note 2.11 – Intangible assets). In addition, in the context of the
allocation of frequencies in the 700 MHz band, SFR acquired new frequencies for the amount of €466 million (excluding spectra). This
amount was discounted.
Includes mainly:
The SFR customer base as valued at the time of application of Purchase Price Accounting for a gross value of €2,700 million amortized over
9 years;
The Virgin Mobile customer base as valued at the time of application of Purchase Price Accounting for a gross value of €160 million
amortized over 5 years.
Primarily include the rights to use the cable infrastructure and civil engineering facilities built by the historical operator France Telecom, the
concession contracts (IFRIC 12), the costs of customer acquisition and service access fees.
250
15.2 Change in net intangible assets:
The following is a breakdown of the change in intangible assets:
December 31, 2014
December 31, 2015
restated
8,395
307
(1,454)
(144)
Acquisitions
1,158
158
Disposals
(147)
(10)
-
7,994
32
89
7,983
8,395
(in € millions)
Net carrying amount in the opening balance
Amortization and impairment
Changes in scope
Other
NET BOOK VALUE IN THE CLOS ING BALANCE
15.3 Breakdown of amortization and impairment:
The following is a breakdown of amortization and impairment:
December 31, 2014
December 31, 2015
restated
(70)
(6)
Licenses
(137)
(12)
Customer bases
(336)
(28)
Software
(447)
(38)
(464)
(60)
(1,454)
(144)
(in € millions)
SFR trade name
TOTAL
16
16.1 Property, plant and equipment by type:
The following is a breakdown of property, plant and equipment by type:
December 31, 2014
restated
December 31, 2015
Gross
Dep. &
impairment
Net
Gross
Dep. &
impairment
Net
90
(1)
88
85
(1)
84
Buildings
1,656
(257)
1,399
1,553
(135)
1,418
Technical equipment
5,235
(2,158)
3,078
4,955
(1,942)
3,012
344
(7)
338
346
(6)
340
Other
1,266
(543)
724
981
(192)
789
TOTAL
8,591
(2,965)
5,627
7,920
(2,277)
5,643
(in € millions)
Land
Assets in progress
Buildings mainly consist of technical website hosting, constructed buildings and their respective amenities.
Technical facilities include mainly network and transmission equipment.
Property, plant and equipment in progress consist of equipment and network infrastructures.
“Other” items include boxes (ADSL, fiber and cable).
251
16.2 Change in net property, plant and equipment:
The following is a breakdown of the change in property, plant and equipment:
December 31, 2014
(in € millions)
December 31, 2015
restated
5,643
1,465
(1,100)
(352)
1,213
444
(80)
(25)
-
4,182
(50)
(70)
5,627
5,643
Net carrying amount in the opening balance
Amortization, depreciation and impairment
Acquisitions
Disposals
Changes in scope
Other
NET BOOK VALUE IN THE CLOS ING BALANCE
16.3 Breakdown of amortization and impairment:
The following is a breakdown of amortization and impairment:
December 31, 2014
December 31, 2015
restated
Buildings
(140)
(15)
Technical equipment
(575)
(293)
(0)
2
(384)
(46)
(1,100)
(352)
(in € millions)
Assets in progress
Other tangible assets
TOTAL
16.4 Property, plant and equipment financed by finance leases:
The net carrying amount of the assets held through finance lease contracts breaks down as follows:
December 31, 2014
December 31, 2015
restated
6
6
Buildings
32
37
Network and technical equipment
88
65
3
4
128
112
(in € millions)
Land
Other
TOTAL
252
6.2
17
6
The change for the fiscal year can be analyzed as follows:
(in € millions)
Balance as at December 31, 2014 restated
126
Equity in net income
6
Other (a)
(23)
BALANCE AS AT DECEMBER 31, 2015
110
(a)
Including the capital reimbursement of the real estate companies Rimbaud 3 and Rimbaud 4 for €18 million.
The equity associate that made the best contribution to results is Synerail Construction, the company in charge of
construction within GSMR (€6 million).
17.1 Main interests in associates
The amount of “Investments in associates” breaks down as follows:
December 31, 2014
(in € millions)
Numergy
(a)
La Poste Telecom
(b)
Other associates
Associates
Synerail (c)
Foncière Rimbaud
(d)
Joint ventures
TOTAL
December 31, 2015
restated
78
79
-
-
26
19
104
98
-
-
6
28
6
28
110
126
The main investments in associates are as follows:
(a) SFR, Bull and Caisse des Dépôts formed Numergy in 2012 (in which the Group holds 46.7%). This company offers IT
infrastructure capable of hosting data and applications, accessible remotely as a secure service known as "cloud
computing" services. The Group’s share amounting to €105 million is only 25% paid up. The debt for the unpaid
portion appears in liabilities in the amount of €79 million (see Note 30 – Other current liabilities). The value of the
securities was reduced to the amount of capital not paid up, i.e., €79 million at end-2014. As a result of new losses
recorded in 2015, the value of the securities is €78 million.
On January 22, 2016, the Group acquired the shares held by Caisse des Dépôts and Bull (see Note 37 - Subsequent
events).
(b) In 2011, SFR and La Poste formed La Poste Telecom, of which they own 49% and 51%, respectively. This subsidiary
is a virtual mobile operator in the retail mobile telephony market under the trademark La Poste Mobile. The negative
value of the equity interests in La Poste Telecom was adjusted to zero by offsetting against provisions totaling
€21.4 million at year-end 2015.
(c) On February 18, 2010, a group comprised of SFR, Vinci and AXA (30% each) and TDF (10%) signed a GSM-R
public-private partnership contract with Réseau Ferré de France. This contract, worth a total of one billion euros over
a 15-year term, is to finance, build, operate and maintain a digital telecommunications network to provide voice and
data communication between trains and ground control teams in conference mode. The network will be rolled out
gradually on 14,000 km of traditional and high-speed rail lines in France. The negative value of the equity interests in
Synerail was adjusted to zero by offsetting against provisions totaling €4.2 million at end-2015.
253
6.2
6
(d) SFR and Vinci Immobilier, a subsidiary of Vinci Group, have four subsidiaries in common which they own 50:50 –
Foncière Rimbaud 1, Foncière Rimbaud 2, Foncière Rimbaud 3 and Foncière Rimbaud 4 – as part of the
construction of SFR’s headquarters in Saint-Denis. This project was completed in two tranches. The first tranche of
buildings carried by Foncière Rimbaud 1 and Foncière Rimbaud 2 was delivered in late 2013. The second tranche
carried by Foncière Rimbaud 3 and Foncière Rimbaud 4 was delivered in the third quarter of 2015. As a portion of
the property complex was sold off-plan (VEFA), Foncière Rimbaud companies continue for the time needed to
finalize the operations.
The shareholding percentages of these principal equity associates are indicated in Note 35 – List of consolidated entities.
17.2 Condensed financial information
The following table presents the condensed financial information on significant equity associates:
Numergy
La Poste Telecom
Synerail
2015
2014
2015
2014
2015
2014
4
2
202
182
167
170
Net income (loss)
(16)
(20)
(9)
(6)
2
(18)
Equity
168*
184
(83)
(67)
(15)
(33)
2
5
51
56
487
435
175
190
38
40
598
528
(in € millions)
Revenues
Cash (-)/Net debt (+)
Total balance sheet
*
Of which €79 million in subscribed capital not paid by SFR as of December 31, 2015.
18
December 31, 2014
(in € millions)
Derivative financial instruments (a)
Other (b)
Non-current financial assets
OTHER NON- CURRENT AS S ETS
(a)
(b)
19
December 31, 2015
restated
1,915
911
198
92
2,112
1,003
57
50
2,169
1,053
See Note 25.1 - Fair value of derivative instruments.
Includes the offsetting entry for the financial income of €124 million recognized for the guarantees granted by Vivendi.
Inventories
December 31, 2014
December 31, 2015
restated
317
281
13
18
Inventories - gross
331
299
Impairment
(45)
(43)
INVENTORIES - NET VALUE
286
256
(in € millions)
Inventories of terminals and accessories
Other
Inventories are primarily comprised of handsets (mobile and boxes) and accessories.
The handsets inventories at December 31, 2015 consisted of €110 million classified as inventories on deposit with
distributors (classified as agents) (€109 million in 2014).
254
6.2
20
6
December 31, 2014
December 31, 2015
restated
Trade receivables (a)
2,277
2,246
Impairment of doubtful debts (b)
(442)
(475)
Trade receivables, net
1,835
1,771
Receivables from suppliers
217
193
Tax and social security receivables
538
599
Prepaid expenses
108
160
25
9
2,723
2,732
270
250
1
1
271
252
(in € millions)
Other receivables non-operating
TRADE AND OTHER RECEIVABLES , NET
Corporate tax (c)
Corporate tax integration receivables
TAX RECEIVABLES
(a) The trade receivables disclosed above are measured at amortized cost. Due to their short-term maturity, fair value and amortized cost are
an estimate for the nominal amount of trade receivables.
(b) The Group considers that there is no significant risk of not recovering unprovisioned receivables due. The concentration of counterparty risk
connected with trade receivables is limited as the Group’s customer portfolio is highly diversified and not concentrated given the large
number of customers, especially in B2C activities, with many millions of individual customers.
In the B2B segment, the twenty principal customers of the Group represent less than 5% of Group revenue.
In the operator business, revenue is more concentrated as the largest customers are the telecommunication operators (Orange, Bouygues
Telecom, Free Mobile, etc.) for which the risk is moderate given the reciprocal interconnection flows. Orange, the Group’s largest operator
customer, is also its largest supplier.
(c) Tax receivables represent the installment paid in 2015.
21
December 31, 2014
December 31, 2015
restated
Price adjustment - SFR and Virgin Mobile (a)
-
127
Derivative financial instruments
-
1
Other
2
7
OTHER CURRENT FINANCIAL AS S ETS
2
135
(in € millions)
(a)
See Note 6 – Changes in scope
22
Cash and cash equivalents as of December 31, 2015 can be broken down as follows:
December 31, 2014
December 31, 2015
restated
Cash
210
191
Cash equivalents (a)
144
429
CAS H AND CAS H EQUIVALENTS
355
620
(in € millions)
(a)
Cash equivalents mainly correspond to money-market UCITS.
255
6.2
23
6
Equity
At December 31, 2015, Numericable-SFR’s share capital, based on the number of shares issued at that date, amounted
to €440,129,753 comprising 440,129,753 ordinary shares with a nominal value of €1 each.
23.1 Change in share capital
Date
Transaction
Shares issued
486,939,225
December 31, 2014
May 28, 2015
Cancellation of treasury shares
November 24, 2015
Exercise of stock options
(48,693,922)
1,884,450
DECEMBER 31, 2015
440,129,753
23.2 Treasury shares
As indicated in Note 4 – Significant events for the fiscal year ended December 31, 2015, in May 2015, the Group bought
back 48,693,922 of its own shares from Vivendi. These shares were then cancelled on May 28, 2015.
In addition, in early 2014, the Group signed a liquidity contract with Exane BNP Paribas in order to improve the liquidity
of its traded shares and the regularity of their prices on NYSE Euronext Paris.
As of December 31, 2015, the Group held 44,517 treasury shares as part of the liquidity contract.
23.3 Earnings per share
(in € millions)
NET INCOME US ED FOR CALCULATING BAS IC EARNINGS P ER S HARE
December 31, December 31, 2014
restated
2015
675
(188)
-
-
675
(188)
Impact of dilutive instruments :
Stock option plans (a)
NET INCOME US ED FOR CALCULATING DILUTED EARNINGS P ER S HARE
(a)
Stock options granted at end-2015 (7,502,636 options) are non-dilutive in view of the change in share price between the grant date and the
balance sheet date, and the valuation of the plans.
The table below shows the weighted average number of ordinary shares used for calculating basic and diluted earnings
per share:
(number of shares)
WEIGHTED AVERAGE NUMBER OF ORDINARY S HARES
December 31,
2015
December 31, 2014
restated
458,180,714
181,038,305
-
-
458,180,714
181,038,305
Impact of dilutive instruments :
Stock option plans
WEIGHTED AVERAGE NUMBER OF S HARES OUTS TANDING - DILUTED
256
6
6.2
23.4 Capital management and dividends
The Group manages its capital as part of a financial policy intended to ensure flexible access to capital markets,
including for selective investment in development projects, and to remunerate shareholders.
The amounts available for shareholder remuneration, when in the form of dividends, are determined (i) based on
distributable profits and reserves, in accordance with French standards, of the entity Numericable-SFR, the Group’s
parent company and (ii) restrictions in bond terms and conditions lifted in 2014 limiting the Group’s capacity to pay
dividends and (iii) commitments made in existing shareholder agreements.
The Shareholders’ Meeting of December 15, 2015 approved an exceptional distribution of dividends in the amount of
€5.70 per share, a total amount of €2.5 billion, which was charged to the “additional paid-in capital” caption.
The Group did not pay dividends to its shareholders in fiscal years 2014 or 2013.
24
Financial liabilities break down as follows:
Current
(in € millions)
Bonds
Total
Non-current
December 31, December 31, December 31, December 31, December 31, December 31,
2015 2014 restated
2015
2014 restated
2015
2014 restated
173
163
9,305
8,572
9,478
8,735
81
16
7,050
3,967
7,132
3,983
-
-
87
-
87
-
254
179
16,443
12,539
16,697
12,718
31
37
35
32
66
69
-
-
43
40
43
40
14
17
121
69
135
86
Bank overdrafts
126
36
-
-
126
36
Vivendi earn-out
-
-
-
644
-
644
Other
418
9
16
25
434
34
588
99
215
810
803
909
FINANCIAL LIABILITIES
842
278
16,658
13,349
17,500
13,627
Term loans
Borrowings and financial liabilities
Finance lease liabilities
Perpetual subordinated notes
("TSDI")
Financial liabilities issued in US dollars are converted at the following closing rate:
 At December 31, 2015: €1 = $1.0887
 At December 31, 2014: €1 = $1.211
257
6.2
6
24.1 Bonds
Bonds can be broken down as follows:
Maturity
in foreign
currency
Coupon
in euros 1
Original
amount
(millions) in
foreign
currency
EUR
May 2022
5.38%
5.38%
1,000
EUR
May 2024
5.63%
5.63%
USD
May 2019
4.88%
USD
May 2022
USD
May 2024
Coupon
Original currency
Outstanding amount at
December 31 (millions) in
euros 3
2014
2015
1,000
1,000
1,000
1,250
1,250
1,250
1,250
4.35%
2,400
1,736
1,982
2,204
6.00%
5.14%
4,000
2,893
3,303
3,674
6.25%
5.38%
1,375
994
1,135
1,263
7,873
8,670
9,392
TOTAL
1
2
3
Original
amount
(millions) in
euros 2
Corresponds to the interest rate of hedging instruments.
Corresponding value at the exchange rate of hedging instruments (€1 = $1.3827).
Amounts expressed exclude accrued interest (€201 million as of December 31, 2015 and €186 million as of December 31, 2014) and
exclude the impact of the effective interest rate (€115 million as of December 31, 2015 and €121 million as of December 31, 2014).
Including accrued interest and impact of EIR, the total bond borrowings amounted to €9,478 million as of December 31, 2015 and €8,735
million as of December 31, 2014.
24.2 Bank borrowings
In July 2015, the Group drew two new tranches of the Term Loan in order to repay the Revolving Credit Facility (RCF)
that had been drawn in the amount of €800 million at June 30, 2015:
 a B5 tranche denominated in US dollars in the amount of €498 million;
 a B5 tranche of €300 million.
These tranches will mature in July 2022 and will be repaid at the rate of 0.25% of the nominal amount each quarter.
In November 2015, the Group drew two new tranches of the Term Loan in order to finance the dividend paid in
December 2015:
 a B6 tranche denominated in US dollars in the amount of €1,184 million;
 a B6 tranche of €500 million.
These tranches will mature in January 2023 and will be repaid at the rate of 0.25% of the nominal amount each quarter.
258
6
6.2
Bank loans break down as follows (the new tranches issued in 2015 are shown in italics):
Reference
Currency
EUR
Maturity
interest
rate
B1/B2/B4 May 2020
Euribor 3M
Tranche
USD
B1 May 2020
USD
B2 May 2020
Libor 3M
Libor 3M
Margin
in foreign
currency
Margin
1
in
euros 2
4.500%
4.500%
4.500%
4.500%
4.214%
4.209%
Original
Original
amount
amount
(millions) in
foreign (millions) in
euros
currency
Outstanding
amount at
December 31
(millions) in euros 4
2014
2015
1,900
1,900
1,900
1,881
1,394
1,008
3
1,151
1,268
872
3
996
1,097
498
3
-
505
1,206
USD
B5
July 2022
Libor 3M
4.563%
4.043%
550
EUR
B5
July 2022
Euribor 3M
4.563%
4.563%
300
300
-
300
3
-
1,231
USD
EUR
Revolving Credit Facility (RCF)
B6 Jan. 2023
Libor 3M
4.750%
4.150%
1,340
B6 Jan. 2023
Euribor 3M
4.750%
4.750%
500
500
-
500
-
-
-
450
6,262
4,047
7,232
5
TOTAL
1
2
3
4
5
1,184
Including a minimum ("floor") of 0.75%. Interest is payable quarterly at the end of January, April, July and October.
Corresponds to the interest rate of hedging instruments.
For loans in dollars, the corresponding value at the exchange rate for hedging instruments (€1=$1.3827 for tranches B1/B2, €1=$1.1041
for tranche B5, €1= $1.1318 for tranche B6).
Amounts expressed exclude accrued interest (€49 million as of December 31, 2015 and €32 million as of December 31, 2014) and exclude
the impact of the effective interest rate (€149 million as of December 31, 2015 and €96 million as of December 31, 2014). Including
accrued interest and impact of EIR, total bank borrowings amounted to €7,132 million as of December 31, 2015, and €3,983 million as of
December 31, 2014.
In May 2014, the Group signed a Revolving Credit Facility (“RCF”) agreement wherein the maximum amount able to be drawn rose from
€750 million at end-2014 to €1,125 million at end-2015. At December 31, 2015, this line of credit had been drawn by €450 million (it had
not been drawn at end-2014).
Bank loans, with the exception of the RCF, will all be repaid at the rate of 0.25% of the nominal amount each quarter.
24.3 Vivendi earn-out
The earn-out, which would have been due from Numericable-SFR to Vivendi if EBITDA-CAPEX reaching €2 billion in any
fiscal year before December 31, 2024, was canceled under the agreement signed with Vivendi in February 2015.
24.4 Other
Other financial liabilities include, as of December 31, 2015, a debt for €171 million linked to the setting-up, during the
fiscal year, of a non-deconsolidated receivables securitization contract and a debt of €241 million linked to the setting-up
of a reverse factoring contract during the fiscal year.
259
6.2
6
Securitization
In late March 2015, SFR SA sold without recourse its portfolio of company receivables established March 22, 2015, net
of assets and excluding certain customers not eligible for this type of transaction for a price of €210 million to Ester
Finance Titrisation, a 100% owned subsidiary of the Crédit Agricole Corporate and Investment Banking group. Each
month, SFR SA sells without recourse the new receivables that have arisen during the month and returns the payments
received on the receivables sold during the preceding sales to Ester. Ester Finance Titrisation has committed to
purchasing the receivables of the Business segment of SFR SA for a 5-year period, for a maximum of €220 million, on a
monthly basis and via a revolving structure. This commitment could end as is standard for this type of transaction with
the occurrence of certain events (bankruptcy of seller or its shareholder, noncompliance with certain obligations or
commitment, default of payment connected to the securitization transaction, and noncompliance with certain
performance covenants solely related to the portfolio sold). SFR SA continues to handle the relationship with the
Business customer, billing, collection and recovery of receivables. Ester Finance Titrisation pays SFR SA for these
services. As the sale is without recourse, Ester Finance Titrisation assumes the risk of dilution, non-payment or nonrecoverability. In order to protect itself from this risk, the sale price is not the face value of the receivables, but the face
value with a discount. SFR SA pays Ester Finance Titrisation for its irrevocable commitment to purchase eligible
receivables from SFR SA with a commission of 0.70% per year. SFR SA also pays, at the reference rate, which is the
average of the 1-month EURIBOR and 2-month EURIBOR, plus a 1.40% margin per year, for the provision of Ester
Finance Titrisation funds between the sale date and date of effective payment of the bill by SFR SA’s business customer.
Reverse factoring
In August 2015, SFR SA, a subsidiary of the BNP Paribas Group and around ten of the main service or equipment
providers of SFR SA set up new agreements for payment of SFR SA’s provider bills. By amending the contract linking
the provider and SFR SA, it was determined that the BNP Paribas subsidiary would take over the invoices of this
provider in exchange for payment at the initial bill deadline. In a separate agreement, SFR SA committed to paying the
subsidiary of BNP Paribas for a bill with an extended deadline, whose extension could not exceed 360 days after the
provider issued it. SFR SA pays the subsidiary of the BNP Paribas Group to extend the maturity date of the invoice to
EURIBOR 1, plus a margin. As of December 31, 2015, the invoices of 8 providers, at around €207 million, were
incorporated into this maturity extension program. These invoices will mature in the third or fourth quarter of 2016.
In November 2015, SFR SA, a subsidiary of the Société Générale Group and other group providers established
agreements that were similar to those described above to extend the maturity of some invoices of these providers. As of
December 31, 2015, the invoices of 4 providers at around €33 million were incorporated into this maturity extension
program. These invoices will mature in the third or fourth quarter of 2016.
24.5 NET FINANCIAL DEBT
Net financial debt as defined and utilized by the Group can be broken down as follows:
December 31, 2015
December 31, 2014
restated
Bonds
9,392
8,670
Term loans
7,231
4,047
Finance lease liabilities
66
69
147
70
16,836
12,856
355
620
Net derivative instruments
1,828
912
Financial Assets contributing to net financial debt (b)
2,183
1,532
14,653
11,325
(in € millions)
Financial Liabilities contributing to net financial debt (a)
NET FINANCIAL DEBT (A) – (B)
(a) Liability items correspond to the nominal value of financial liabilities (excluding accrued interest, impact of EIR, perpetual subordinated
notes, operating debts (notably guarantee deposits, securitization debts and reverse factoring) and earn-out to Vivendi). All these liabilities
are translated at the closing exchange rates.
(b) Asset items consist of cash and cash equivalents, near-cash assets, and the value of derivatives, which, as of December 31, 2015, show a
positive currency translation impact of €2,080 million and an interest rate loss of €252 million. The corresponding figures as of December
31, 2014 were a positive currency effect of €1,063 million and an interest rate loss of €151 million.
260
6
6.2
24.6 Senior Debt Liquidity Risk
The following table breaks downs, for the Group’s senior debt (bonds, bank loans and RCF) the future undiscounted
cash flows (interest payments and repayment of the nominal amount).
2016
2017
2018
2019
2020
2021 and
beyond
Total
USD bonds
278
278
278
991
299
5,613
7,738
USD term loans
196
194
191
200
1,882
1,813
4,476
EUR bonds
124
124
124
124
124
2,606
3,226
EUR term loans
149
149
148
147
1,895
835
3,324
23
23
23
23
461
-
555
770
768
765
1,485
4,661
10,867
19,318
(in € millions)
RCF
TOTAL
The main assumptions used in this schedule are as follows:
 US dollar amounts are translated to euros at the closing rate (€1 = $1.0887) and also refer to the specific
assumptions for debts denominated in US dollars as described in Note 2.4 - Liquidity risk on debts in foreign
currencies;
 Calculations of interest are based on the Euribor and Libor rates at December 31, 2015 (which leads at that date to
applying the floor on variable rate loans);
 The maturity dates of bonds and loans are positioned at the contractual maturity date (no early repayment is
planned).
25
25.1 Fair value of derivative instruments
(in € millions)
Note
25.2
25.3
Type
Cross-currency swaps
Interest rate swaps
December 31,
2015
December 31,
2014 restated
2019 USD bonds
430
218
2022 USD bonds
740
333
2024 USD bonds
253
114
2020 USD refinancing term loan
261
127
2020 USD non-refinancing term loan
225
119
2022 USD term loan
1
-
2023 USD term loan
5
-
(86)
-
1,915
911
(87)
-
NET DERIVATIVE INS TRUMENTS
1,828
911
o/w currency effect
2,080
1,063
o/w interest rate effect
(252)
(151)
Underlying element
Fixed rate - Floating rate
Derivative instruments classified as assets
Derivative instruments classified as liabilities
In accordance with IAS 39, the Group uses the fair value method to recognize its derivative instruments.
261
6
6.2
The fair value of derivative financial instruments (cross currency swaps) traded over-the-counter is calculated on the
basis of models commonly used by traders to measure these types of instruments. The resulting fair values are checked
against bank valuations.
The measurement of the fair value of derivative financial instruments includes a “counterparty risk” component for asset
derivatives and an “own credit risk” component for liability derivatives. Credit risk is measured on the basis of the usual
mathematical models and market data (implicit credit spreads).
A three-level hierarchy is applied when measuring fair value:
 Level 1: prices listed on an active market;
 Level 2: internal model with parameters that are observable using internal valuation techniques. These techniques
rely on the usual mathematical calculation methods that include observable market data (futures prices, yield curve,
etc.);
 Level 3: an internal model with non-observable parameters.
At December 31, 2015, the fair value of the derivatives was Level 2.
25.2 Cross currency swaps
Cross currency swaps subscribed to by the Group are intended to neutralize the exchange rate impacting future financial
flows (nominal amount, coupons) or to convert the LIBOR exposure for drawdowns in US dollars for the Term Loan into
EURIBOR exposure.
Hedges established are detailed in the table below:
Notional
(in € millions)
2019 bonds
USD
2,400
Margin
EUR
1,736
USD
4.875%
Initial exchange
Final exchange
EUR
date
date
4.354%
3
May 15, 2019
3
April 30, 2015
2022 bonds
4,000
2,893
6.000%
5.143%
April 30, 2015
May 15, 20221
2024 bonds
1,375
994
6.250%
5.383%
April 30, 2015 3
May 15, 20221
2020 (« refi ») term loan
1,397
1,010
L+3,750%
E+4,210%
May 21,2014
May 15, 2019
2020 (« non-refi ») term
loan
1,203
550
2023 term loan
1,340
1
2
3
February 15August 15
Jan. 31 -
2022 term loan
TOTAL
Coupons
payment
date
12,265
870
L+3,750%
E+4,210%
April 30, 20153
May 15, 2019
498
2
2
August 3, 2015
July 31, 20221
E+4,130%
Nov. 10, 2015
Jan. 31, 2023 1
L+3,250%
1,184 L+4,000% 2
E+2,730%
April 30 July 31 and
October 31
9,185
Banks benefit from a five-year termination clause in their favor:
- in May 2019, for 2022 and 2024 Bonds;
- in July 2020 for the 2022 Loan;
- in November 2020 for the 2023 Loan;
Banks may thus unilaterally terminate the hedging agreement and have Numericable-SFR pay, or pay the balance under the agreement to
Numericable-SFR (depending on the market conditions at such time).
A minimum (floor) of 0.75% applies to the LIBOR and EURIBOR.
Once the completion date of the acquisition of SFR was known, in October 2014 the Group signed a currency swap with Société Générale
to bring forward the date of the first swap to late November 2014 in order to have enough euros available to make the cash payment to
Vivendi.
The swap agreements described above are guaranteed and benefit from the same security as granted for the bonds and
bank loans (see Note 33 – Commitments and contractual obligations).
262
6.2
6
25.3 Interest rate swaps
In early July 2015, the Group made swaps for the purpose of cancelling the hedging of coupon rates for the USD leg for
the 2019-2022 period, as concerns the 2022 and 2024 Bonds, against payment of the balance to Numericable-SFR.
Fixed interest rates of 6% and 6.25% respectively on these Bonds were moreover changed to variable LIBOR rates, plus
a margin of 2.03% and 2.28% respectively (for the 2019-2022 period).
These swaps were not qualified as a hedge, and their negative fair value of €86 million as of December 31, 2015 was
recognized directly in income.
25.4 Liquidity risk on foreign currency debts
The following table breaks down, for the bonds and loans denominated in dollars, the future undiscounted cash flows
(interest payments and repayment of the nominal amount).
The main assumptions used in this schedule are as follows:
 Amounts in dollars are translated to euros at the closing rate (€1 = $1.0887);
 Calculations of interest are based on the EURIBOR and LIBOR rates at December 31, 2015 (which leads at that date
to applying the floor on variable rate loans);
 The maturity dates of bonds and loans are positioned at the contractual maturity date (no early repayment is
planned);
 The final trade date for the swaps was scheduled for the closer of (i) the final trade date provided for in the swap
agreement and, where applicable, (ii) the date on which the banks have the option to terminate the agreement early.
2016
2017
2018
2019
2020
2021 and
beyond
Total
USD Bonds (A)
278
278
278
991
299
5,613
7,738
Flows in USD
407
407
407
2,582
299
5,613
9,716
Swap - flows in USD
(407)
(407)
(407)
(7,372)
-
-
(8,592)
Swap - flows in EUR
278
278
278
5,781
-
-
6,615
USD Term loans (B)
196
194
191
200
1,882
1,813
4,476
Flows in USD
230
229
227
226
2,423
1,813
5,149
Swap - flows in USD
(176)
(179)
(180)
(134)
(3,958)
-
(4,627)
Swap - flows in EUR
143
144
144
108
3,416
-
3,954
TOTAL = (A)+(B)
474
472
469
1,191
2,181
7,426
12,214
(in € millions)
25.5 Credit risk and counterparty risk
Numericable- SFR is exposed to bank counterparty risk in its investments and derivatives; Numericable-SFR therefore
uses strict criteria when selecting public, financial or industrial institutions in which to invest or contract derivatives, in
particular in terms of their financial rating.
263
6.2
26
6
Provisions
December 31, 2015
Opening
restated1
Increase
Utilization
Reversal and
changes of
accounting
estimates
121
12
(0)
-
(8)
125
11
56
(27)
(0)
14
55
76
4
(2)
-
39
117
756
157
(68)
(72)
(16)
758
P ROVIS IONS
965
230
(97)
(72)
29
1,055
Current provisions
330
107
(64)
(45)
(0)
328
635
122
(33)
(27)
29
727
(in € millions)
(a)
Restructuring
Technical site restoration
Litigation and other
1
(a)
(b)
(c)
(c)
(b)
Other
Closing
See Note 38 – Restated Information.
Employee benefit plans: see Note 28 - Post-Employment Benefits.
Site restoration expenses: the Group has an obligation to restore the technical sites of its network at the end of the lease when they are not
renewed or are terminated early.
Litigation and other: these are included in provisions mainly when their amounts and types are not disclosed, because disclosing them may
harm the Group. Provisions for litigation cover the risks connected with court action against the Group (see Note 34 - Litigation). All
provisioned disputes are currently awaiting hearing or motions in a court. The unused portion of provisions recognized at the beginning of
the period reflects disputes that have been settled by the Group paying amounts smaller than those provisioned, or to a downward reassessment of the risk.
The restated table for fiscal year 2014 is presented below:
December 31, 2014 restated
Reversal
Opening
published
Change in
scope
Increase
Utilization
and
changes of
accounting
estimates
10
105
6
-
-
Restructuring
-
36
11
(35)
(0)
-
11
Technical site restoration
-
60
3
(2)
-
15
76
Litigation and other
70
343
396
(47)
(4)
(2)
756
P ROVIS IONS
80
543
417
(84)
(4)
12
965
6
340
60
(72)
(4)
0
330
74
204
357
(11)
(0)
12
635
(in € millions)
Current provisions
Other
Closing
restated
-
121
264
6
6.2
27
Share-based payments
Between 2013 and 2015, the Board of Directors adopted a number of stock option plans in favor of certain corporate
officers of Numericable-SFR and employees of the Group.
The exercise of options is subject to conditions of employment and performance (based on revenue and EBITDA –
Capex indicators of the Group).
The vesting occurs in three periods:
 50% at the end of two years;
 25% at the end of three years;
 25% at the end of four years.
The main assumptions used for the valuation of the various stock option plans are listed in the table below:
November
January
May
November
April
September
Plan / Date
2013
2014
2014
2014
2015
2015
Total fair value on grant date (in thousands of
euros)
9,702
1,145
269
12,251
2,653
514
Exercise price of the option (in euros)*
11.37
12.67
17.84
24.78
44.21
38.81
Anticipated volatility (weighted average)
25%
25%
25%
25%
26%
27%
Expiry date (maturity)
November
2021
January
2022
May
2022
November
2022
April
2023
September
2023
Anticipated dividends
4%
4%
4%
4%
4%
4%
0.75%
1%
0.50%
0.25%
0%
0%
Risk-free interest rate (based on government
bonds)
*Adjusted following payment of the €5.7 per share dividend in December 2015.
The following table shows the change in the number of subscription options for outstanding shares during the period,
along with the number of exercisable options not exercised at period-end (figures expressed in thousands of options).
November
January
May
November
April
September
Plan / Date
2013
2014
2014
2014
2015
2015
Options outstanding as at January 1, 2015
(Number of options)
5,227
528
92
2,346
-
-
Granted
-
-
-
-
355
90
Cancelled, lapsed
-
(314)
(46)
(64)
-
-
(1,817)
-
(46)
(21)
-
-
638
40
-
422
54
17
OP TIONS OUTS TANDING AS AT DECEMBER
31, 2015
4,048
255
-
2,684
409
106
o/w exercisable as at December 31, 2015
1,194
124
-
202
-
-
Exercised
Adjustment 12/2015*
*
Adjusted for the number of outstanding options following payment of the €5.7 per share dividend in December 2015.
The following table shows the change in the total number of options and the corresponding weighted average prices
(WAPs):
Plan / Date
Number
WAP
8,193
15.4
445
43.1
(424)
17.9
(1,884)
13.9
Adjustment 12/2015 *
1,171
21.8
OP TIONS OUTS TANDING AS AT DECEMBER 31, 2015
7,502
18.4
Options outstanding as at January 1, 2015
Granted
Cancelled, lapsed
Exercised
*
Adjusted for the number of outstanding options following payment of the €5.7 per share dividend in December 2015.
265
6.2
28
6
All Group employees benefit from severance packages upon retirement based on the collective bargaining agreement
with the company to which they are attached.
The rights to conventional retirement benefits vested by employees were evaluated individually, based on various
parameters and assumptions such as the employee’s age, position, length of service in the Group and salary, according
to the terms of their employment agreement.
28.1 Assumptions used for defined-benefit plans
December 31, 2015
December 31, 2014
restated
Discount rate
2%
2%
Expected salary increase rate
2%
3%
Inflation rate
2%
2%
December 31, 2015
December 31, 2014
restated
121
10
Service cost
10
1
Interest cost
2
0
Actuarial loss (gain)
(8)
3
Benefit paid
(0)
(0)
-
106
125
121
Demographic assumptions are specific to each company.
28.2 Change in commitments
(in € millions)
Benefit obligation - opening balance
Business combinations
BENEFIT OBLIGATION - CLOS ING BALANCE
The Group had no hedge assets as of December 31, 2015 or as of December 31, 2014.
28.3 Breakdown of recognized expense in the Consolidated statement of income
December 31, 2015
December 31, 2014
restated
Service cost
10
1
Interest cost
2
0
Benefit paid
(0)
(0)
NET P ERIOD EXP ENS E OF P OS T-EMP LOYMENT BENEFITS
12
2
(in € millions)
266
6.2
6
28.4 Actuarial gains and losses recognized in comprehensive income
December 31, 2015
December 31, 2014
restated
Actuarial losses (gains) from experience
(4)
0
Actuarial losses (gains) from changes of assumptions
(4)
3
ACTUARIAL LOS S ES (GAINS ) RECOGNIZED IN COMP REHENS IVE INCOME
(8)
3
ACTUARIAL LOS SES (GAINS ) CUMULATED IN COMP REHENSIVE INCOME
(OCI)
(3)
5
(in € millions)
28.5 Sensitivities
The impact of a change in discount rate for the actuarial liability is presented in the table below:
(in € millions)
Benefit obligation at 1.75%
131
125
120
29
This item breaks down as follows:
(in € millions)
Deferred income (a)
GSM and LTE licenses
(b)
Numergy capital not paid up
(c)
Other
OTHER NON CURRENT LIABILITIES
(a)
December 31, 2015
December 31, 2014
restated
306
382
440
112
-
63
35
25
780
582
Prepaid income of more than one year, mainly consisting of unrecognized revenues from network leasing. The current portion of deferred
revenue (i.e., revenue to be recognized in the twelve months following the close of the fiscal year) is presented in “Other Current Liabilities”
as indicated in Note 30 – Trade payables and other current liabilities.
(b) Debt maturing at the latest in 2021.
(c) The debt was reclassified in the short-term, following SFR’s acquisition of shares held by other shareholders in January 2016 (see Note 37 Subsequent events).
267
6.2
30
6
30.1. Trade payables and other liabilities
December 31, 2015
December 31, 2014
restated
2,811
2,899
Payables from purchase of intangible and tangible assets
793
690
Advances and deposits from customers, credit customers
461
418
Tax liabilities
431
559
Social security liabilities
383
438
0
7
4,878
5,011
(in € millions)
Trade payables and other liabilities
Other
TRADE P AYABLES AND OTHER LIABILITIES
30.2 Other current liabilities
December 31, 2015
December 31, 2014
restated
508
590
Numergy capital not paid up (b)
79
16
Other
11
-
597
606
(in € millions)
Prepaid income (a)
OTHER CURRENT LIABILITIES
(a) See Note 29 – Other non-current liabilities.
(b) The long-term debt was reclassified to short-term following SFR’s acquisition of shares held by other shareholders in January 2016 (see
Note 37 – Subsequent events).
268
6
6.2
31
Financial instruments
31.1 Fair value of financial instruments
The following tables show the net carrying amount per category and the fair value of the Group’s financial instruments at
December 31 of each year:
December 31, 2015
(in € millions)
Note
Assets/liabilities
measured at fair
value through
income
Assets
available
for sale
Loans and
receivables
Assets/liabilities Derivatives
at amortized qualifying
cost as hedges
Total net
carrying
value
Fair value
2,615
2,615
1,915
1,915
125
198
198
57
57
57
2
2
355
355
16 355
16 062
87
87
Assets
Trade and other
receivables*
20
Derivative
instruments
classified as
assets
18
Non-current
financial assets
18
Other non-current
assets
18
Current financial
assets
21
Cash and cash
equivalents
22
2,615
491
1,424
9
64
2
355
Liabilities
Non-current long
term borrowings
and financial
liabilities
16 355
24
Derivative
instruments
classified as
liabilities
24
87
Other non-current
financial liabilities
24
215
215
215
Other non-current
liabilities *
29
475
475
475
24
254
254
254
Other financial
liabilities
24
588
588
588
Trade payables
and other liabilities
30
4,878
4,878
4,878
Other current
liabilities *
30
90
90
90
Short-term
borrowings and
* Excluding prepaid expenses and income.
269
6
6.2
December 31, 2014 restated
Assets/liabilities
(in € millions)
Note
Assets
measured at fair
value through available for
income
sale
Assets/liabilities Derivatives
Loans and
receivables
at amortized
cost
qualifying
as hedges
Total net
carrying
value
Fair value
2,572
2,572
912
912
3
93
93
50
50
50
134
134
620
620
Assets
Trade and other
receivables*
2,572
20
Derivative
instruments
classified as
assets
912
18
Non-current
financial assets
18
Other non-current
assets
18
Current financial
assets
21
Cash and cash
equivalents
22
1
9
79
134
620
Liabilities
Non-current long
term borrowings
and financial
liabilities
24
12,539
12,539
12,601
Other non-current
24
810
810
810
Other non-current
liabilities *
29
200
200
200
24
179
179
184
Other financial
liabilities
24
99
99
99
Trade payables
and other liabilities
30
5,011
5,011
5,011
Other current
liabilities *
30
16
16
16
Short-term
borrowings and
* Excluding prepaid expenses and income.
The carrying amount of trade and other receivables, of cash and cash equivalents, and of trade payables and other
current liabilities is nearly equal to their fair value given the short maturities of these instruments, or otherwise, their
recognition at their discounted value.
With the exception of derivatives, loans and other short-term and long-term financial debts, and other current and noncurrent financial liabilities are measured at their amortized cost, which corresponds to the estimated value of the financial
liability when initially recognized, minus repayments of principal, and plus or minus cumulative amortization, measured
using the effective interest rate method.
270
6
6.2
Derivatives are measured at fair value through the income statement, or through other items of comprehensive income,
for the effective portion of the change in fair value of derivatives qualifying as cash flow hedges.
Fair value measurement through the balance sheet
Fair value is calculated using market prices. When market prices are not available, an analysis of discounted cash flow is
carried out.
In accordance with IFRS 7, a three-level hierarchy is applied when measuring fair value:
 Level 1: prices listed on an active market;
 Level 2: internal model with parameters that are observable using internal valuation techniques. These techniques
rely on the usual mathematical calculation methods that include observable market data (futures prices, yield curve,
etc.);
 Level 3: an internal model with non-observable parameters.
The following table shows the measurement method used for financial assets and liabilities measured at fair value at
December 31 of each year:
2015
(in € millions)
Fair value
Level 1
Level 2
Level 3
Financial assets measured at fair value
1,915
1,915
9
9
355
355
Financial liabilities measured at fair value
87
87
2014 restated
(in € millions)
Fair value
Level 1
Level 2
Level 3
Financial assets measured at fair value
912
912
10
1
620
620
9
Financial liabilities measured at fair value
31.2 Financial risk management and derivative instruments
The Group’s treasury department provides services, coordinates access to national and international financial markets,
measures and manages the financial risks connected with the Group’s activities. These risks include market risks (mainly
exchange rate and interest rate risks), credit risks and liquidity risks. The Group seeks to minimize the effects of these
risks by using derivative financial instruments to hedge risk exposures.
31.3 Currency risk
The Group’s exchange rate risk relates to bond issues and bank borrowings denominated in US dollars.
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6.2
6
The Group’s borrowings arranged in US dollars are fully hedged by derivative instruments in the form of cross currency
swaps. The following table shows the impact of hedging on the initial debt (at the debt issue date), before and after
hedging.
Initial position
Hedging instrument
Final position
In foreign
currency
In euros
In foreign
currency
In euros
In foreign
currency
In euros
USD
(2,400)
-
2,400
(1,736)
-
(1,736)
2022 Bonds
USD
(4,000)
-
4,000
(2,893)
-
(2,893)
2024 Bonds
USD
(1,375)
-
1,375
(994)
-
(994)
2020 (« refi ») term loan
USD
(1,394)
-
1,394
(1,008)
-
(1,008)
2020 (« non refi ») term loan
USD
(1,206)
-
1,206
(872)
-
(872)
2022 Loan
USD
(550)
-
550
(498)
-
(498)
2023 Loan
USD
(1,340)
-
1,340
(1,184)
-
(1,184)
(12,265)
-
12,265
(9,185)
-
(9,185)
Original amounts, expressed
in millions
Currency
2019 Bonds
TOTAL
The following table shows the impact of hedging on the residual debt as of December 31, 2015, before and after
hedging:
Initial position
Hedging instrument
Final position
In foreign
currency
In euros
In foreign
currency
In euros
In foreign
currency
In euros
USD
(2,400)
-
2,400
(1,736)
-
(1,736)
2022 Bonds
USD
(4,000)
-
4,000
(2,893)
-
(2,893)
2024 Bonds
USD
(1,375)
-
1,375
(994)
-
(994)
2020 (“refi”) term loan
USD
(1,380)
-
1,394
(1,008)
14
(1,008)
2020 (“non refi”) term loan
USD
(1,194)
-
1,206
(872)
12
(872)
2022 Loan
USD
(550)
-
550
(498)
-
(498)
2023 Loan
USD
(1,340)
-
1,340
(1,184)
-
(1,184)
(12,239)
-
12,265
(9,185)
26
(9,185)
Amounts as at December 31,
2015 expressed in millions
Currency
2019 Bonds
TOTAL
Analysis of sensitivity to exchange rate risk
At December 31, 2015, a sudden 10% change in value of the euro against the US dollar would have, given the assets
and liabilities on the balance sheet, an immaterial impact on the Group’s currency translation results given the hedging
instruments set up by the Group. For the purposes of this analysis, all other variables, in particular interest rates, are
assumed to remain unchanged.
Interest rate risk
The Group is exposed to interest rate risks mainly on bank borrowings on a variable interest rate basis. The Group limits
such risks, when it considers appropriate, through interest rate swaps and interest rate caps.
Interest rate sensitivity analysis
The analysis of sensitivity to interest rate fluctuations for instruments at variable rates takes into accounts all variable
flows of financial instruments. The analysis assumes that the liabilities and financial instruments on the balance sheet at
December 31, 2015 remain unchanged over the year. For the purposes of this analysis, all other variables, in particular
exchange rates, are assumed to remain unchanged.
A 50 basis point rise (fall) in the EURIBOR at the period-end date would result in an approximately €10 million increase
(decrease) in the cost of debt.
272
6.2
6
31.4 Liquidity risk management
The Group manages liquidity risk by maintaining adequate levels of cash, cash equivalents and lines of credit, by
continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and
liabilities.
Cash position including cash equivalents
As of December 31, 2015, Numericable-SFR’s cash position more than covered the repayment schedules of its current
financial debt:
Available amounts (in € millions)
Cash
211
Cash equivalents
144
Available amounts for drawing from lines of credit
675
CAS H P OS ITION
1,030
Rating of Numericable-SFR
The Group’s current rating is as follows:
Rating agency
Rating
Standard & Poor’s
B+ (negative outlook)
Moody’s
B1 (stable outlook)
31.5 Management of credit risk and counterparty risk
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the
Group. Financial instruments that could increase credit risk are mainly trade receivables, cash investments and
derivative instruments.
Trade receivables
The Group considers that it has extremely limited exposure to concentrations of credit risk with respect to trade accounts
receivable due to its large and diverse customer base (residential and public institutions) operating in numerous
industries across France.
Cash investments and derivative instruments
Numericable-SFR is exposed to bank counterparty risk in its investments and derivatives, and therefore uses strict
criteria when selecting public, financial or industrial institutions in which to invest or contract derivatives, in particular in
terms of their financial rating.
273
6.2
32
6
Related party transactions
Parties related to the Group include:
 All companies included in the consolidation scope, regardless of whether they are fully consolidated or equity
associates;
 Altice N.V. and the entities that it consolidates;
 All the members of the Executive Committee of Numericable-SFR.
Transactions between fully consolidated entities within the consolidation scope have been eliminated when preparing the
Consolidated Financial Statements. Details of transactions between the Group and other related parties are disclosed
below.
32.1 Senior executive compensation
The Group’s senior executives include members of Numericable-SFR’s Executive Committee.
The following table shows the compensation allocated to individuals who were, at period-end, or had been in previous
years, members of the Executive Committee.
(in € millions)
Short-term benefits
(a)
Share-based payment
(b)
(c)
EXECUTIVE COMP ENS ATION
(a)
(b)
(c)
December 31, 2015
December 31, 2014
restated
5
5
0
0
8
5
13
10
Includes gross salaries, fixed component and variable component, profit-sharing as well as benefits in kind recognized during the year.
Corresponds to the cost of services rendered.
Expense recorded in the income statement under stock option plans (including employer’s contributions owed under the terms of the plans).
274
6.2
6
32.2 Associates and joint ventures
Associates and joint ventures, measured through equity, are presented in Note 17 – Investments in associates.
The main transactions with equity associates relate to:
 La Poste Telecom as part of its telephony activities,
 Numergy as part of “cloud computing” services,
 Synerail as part of the GSM-R public-private partnership,
 Foncière Rimbaud (1 to 4) with the Vinci Group as part of building SFR SA’s headquarters.
Associates
(in € millions)
Joint ventures
2015
2014
2015
2014
64
68
20
30
-
-
17
30
Current assets
64
68
3
0
Liabilities
86
80
-
-
Current liabilities
86
17
-
-
-
63
-
-
Net income (expense)
69
4
4
0
Operating income
99
4
3
0
(31)
(0)
-
-
1
-
1
-
48
47
91
95
-
-
-
-
48
47
71
60
-
-
21
34
Assets
Non-current assets
Non-current liabilities
Operating expenses
Net financial income (expense)
Off-balance sheet commitments
Operating
Financial
Pledges
32.3 Shareholders
Transactions with Vivendi and its subsidiaries
Vivendi sold its shares in the Numericable-SFR Group’s capital on May 6, 2015. Excluding the agreements presented in
Note 4.1 – Memorandum of Understanding signed with Vivendi on February 28, 2015, the transactions with Vivendi and
its subsidiaries until the sale date were immaterial.
Transactions with subsidiaries of Altice N.V.
In 2015, the main transactions with Altice N.V. subsidiaries were as follows:
(in € millions)
December 31, 2015
December 31, 2014
Total income
21
15
(47)
(11)
Total expenses
These transactions were conducted as part of the Group’s activities with the following companies:
 Altice Luxembourg S.A.: purchase of services;
 Coditel Brabant, Outremer Telecom, Caboviséo, Hot, Portugal Telecom: telecommunication services;
 Auberimmo: reinvoicing of rents;
 MCS, Sport TV: televisual royalties;
 Altice Management Europe: customer services.
275
6.2
33
6
Commitments and contractual obligations
The significant contractual commitments undertaken or received by the Group are disclosed below.
33.1 Commitments relating to bonds and term loans arranged in May 2014, July and
October 2015
In May 2014, the Group issued bonds and set up term loans to refinance its historic debt and fund a portion of the SFR
acquisition. In July 2015, in the form of an additional facility under the same legal documentation as the loans taken out
in May 2014, the Group set up new term loan for the purpose of refinancing its revolving credit lines. Then, in order to
fund a portion of the December 2015 distribution, the Group took out a term loan in October 2015. The latter was also
structured as an additional tranche under the existing documentation.
As part of these various loans, established under the same financial documentation, a certain number of Group
subsidiaries (Numericable-SFR, SFR, Ypso France, Ypso Holding, Altice B2B France, NC Numericable, Numericable US
LLC and Numericable US SAS, Completel and Ypso Finance) pledged certain assets to banks (equity instruments of
Group companies, bank accounts intercompany loans, trademarks and goodwill).
Additionally, in the event of a change in control (should a company other than Altice N.V. or an affiliate of Altice N.V.
come to hold more than 51% of Numericable-SFR), the Group would have to offer to repay its debt for an amount equal
to 101% of the amount outstanding on that debt.
Bond issues also include certain restrictions that limit the Group’s ability to:
 incur or guarantee any additional debt, subject to a consolidated net debt leverage ratio (4.0 for total debt and 3.25
for bonds);
 make investments or other payments that are subject to restrictions (including dividends);
 grant sureties;
 dispose of subsidiaries’ assets and equity instruments;
 conclude certain transactions with its affiliates;
 enter into agreements limiting the ability of its subsidiaries to pay it dividends or repay intercompany loans and
advances; and
 carry out mergers or consolidations.
33.2 Commitments assumed by Numericable-SFR towards the French Competition
Authority under its concentration operation and the monitoring of these commitments
in 2015
On October 30, 2014, the French Competition Authority authorized exclusive control of SFR by the Altice Group, the
parent company of Numericable-SFR, subject to compliance with several commitments (Decision No. 14.DCC-160 of
October 30, 2014 by the Competition Authority). In compliance with this decision, Numericable-SFR implemented the
respective commitments.
On January 22, 2015, the Competition Authority independently began an inquiry to examine the terms under which
Numericable-SFR is carrying out its commitment to sell mobile services from Outremer Télécom (Only) to Réunion and
Mayotte.
Furthermore, and following a complaint from Bouygues Telecom, the Competition Authority officially opened an inquiry
on October 12, 2015 to examine the terms under which Numericable-SFR performs its commitments relating to the joint
investment agreement entered into with Bouygues Telecom to roll out fiber optics in very densely populated areas.
These two inquiries in no way prejudice any future measures that could be taken by the Competition Authority.
276
6.2
6
33.3 Commitments relating to assets (excluding network sharing)
The amount of the contractual commitments to acquire intangible assets and property, plant and equipment amount to
€674 million as of December 31, 2015. The amount includes commitments related to the use of telecommunications
systems.
The commitment schedule is as follows:
Maturity
Minimum future
payments - 2015
Less than
one year
Two to five
years
More than
five years
2014
180
18
39
123
179
80
12
49
19
72
Other investments
414
400
14
-
383
TOTAL NET INVES TMENT COMMITMENTS
674
430
102
143
634
(in € millions)
Commitments relating to Delegated Public
Services
Commitments relating to Less Dense Areas
(ZMD) (a)
(a)
Commitments relating to the deployment of FTTH (Fiber To The Home) in less densely populated areas (ZMD).
33.4 Agreement to share part of SFR’s mobile network
On January 31, 2014, SFR and Bouygues Telecom signed a strategic agreement to share their mobile networks. They
will deploy a new shared-access mobile network in an area covering 57% of the population. The agreement allows the
two operators to improve their mobile coverage and to achieve significant savings over time.
The agreement is based on two principles:
 create a special purpose joint venture (Infracos) to manage the shared assets of the radio sites, i.e., the passive
infrastructures and geographical sites where the telecom infrastructures and equipment are deployed. SFR and
Bouygues Telecom each retain full ownership of their own telecom equipment assets and frequencies;
 set up a RAN-sharing service that 2G, 3G and 4G operators can use in the shared territory. Each operator is
responsible for the part of the shared territory in which it designs, deploys, operates and maintains the RAN-sharing
service.
The sharing agreement is similar to many mechanisms set up in other European countries. Each operator retains its own
independent innovation capacity and total commercial and pricing independence. The first deliveries of cell plans were
on April 30, 2014. On that occasion, each operator was informed of its partner’s deployment plans, as exchanges of
technical information about the sites when developing the sharing agreement had been prohibited by ARCEP. This
exchange of information led on October 24, 2014 to the agreement being adjusted, in particular regarding certain
engineering choices that had been made at a time when the negotiating parties did not have full access to relevant data
about each other’s networks. The target network completion date was pushed back by a year, from the end of 2017 to
the end of 2018, to take into account previous deployment delays encountered.
The first roll-outs of the RAN sharing coverage were in September 2015, and 706 sites were rolled out by 2015. SFR
estimates that as of late December, this agreement corresponds to approximately €1,796 million in commitments given,
and approximately €2,190 million in commitments received, for a net commitment of approximately €394 million, covering
the entire long-term agreement.
277
6.2
6
33.5 Intangible assets and property, plant and equipment relating to SFR
telecommunication activities
SFR is the holder of operating authorizations for its networks and the provision of its telecommunications services on the
French territory, as presented below:
Band
Technology
Decisions
Start
End
700 MHz
4G (2 × 5 MHz)
ARCEP Dec. n° 15-1569
December 8, 2015
December 8, 2035
800 MHz
4G (2 × 10 MHz)
January 17, 2012
January 17, 2032
900 MHz
2G/3G (2 × 10 MHz)
March 25, 2006
March 25, 2021
3G (2 × 14,8+5 MHz)
Dec. Issued on July 18, 2001
August 21, 2001
August 21, 2021
3G (2 × 5 MHz)
June 8, 2010
June 8, 2030
4G (2 × 15 MHz)
October 11, 2011
October 11, 2031
1800 MHz 2G/4G (2 × 23,8 MHz)
2,1 GHz
2,6 GHz
The applicable financial terms are as follows:
 for the GSM license (900 MHz and 1800 MHz): annual payments for 15 years which are broken down each year into
two parts: a fixed component amounting to €25 million per year (this discounted amount was capitalized as €278
million in 2006) and a variable component corresponding to 1% of the revenue generated during the year with this 2G
technology;
 for the UMTS license (2.1 GHz): the fixed component paid in 2001, i.e., €619 million, was recognized in intangible
assets and the variable component of the royalty amounted to 1% of the annual revenue generated by this activity.
Additionally, under this license, SFR acquired new frequencies for €300 million in June 2010, for a 20-year period;
 for the LTE licenses (2.6 GHz, 800 MHz, 700 MHz): the fixed components paid in October 2011 (€150 million) and
January 2012 (€1,065 million) were recognized in intangible assets on the license allocation dates published in the
Official Journal in October 2011 and January 2012. SFR acquired new frequencies in December 2015, for €466
million, payable in four installments. The variable portion of the royalty is 1% of the annual revenue generated by this
activity. The variable components of these license fees, which cannot be reliably measured in advance, are not
recorded on the balance sheet but are recognized under expenses for the period in which they are incurred.
Furthermore, SFR is paying a contribution to the spectrum development fund for frequency bands which were thus
developed, as decided by the French Prime Minister (700 MHz, 800 MHz, 2.1 GHz and 2.6 GHz,) as well as a tax to the
National Frequencies Agency intended to cover the complete costs incurred by this establishment for the collection and
treatment of claims of users of audiovisual communications services relating to interference caused by the start-up of
radio-electric stations (700 MHz and 800 MHz).
33.6 Coverage commitments relating to SFR telecommunication licenses
On November 30, 2009, the Regulatory Authority on Electronic Communications and Postal Services (ARCEP)
demanded that SFR comply with the 99.3% coverage rate of the UMTS network in the metropolitan population as of
December 31, 2013. By Decision No. 2014-0624 dated May 27, 2014, ARCEP opened an administrative inquiry
concerning SFR in order to ensure that the UMTS coverage complied with its commitments. The result of this
investigation is as yet unknown.
As part of the allocation of the first block of LTE frequencies in October 2011 (2.6 GHz), SFR undertook to provide
coverage for 25% of France’s metropolitan population by October 11, 2015, 60% by October 11, 2019, and 75% by
October 11, 2023.
As part of the allocation of the second block of LTE frequencies in January 2012 (800 MHz), SFR undertook to meet the
following obligations:
(i) SFR must provide the following very-high-speed mobile services:
- 98% of France’s metropolitan population by January 2024 and 99.6% by January 2027;
- coverage in the primary deployment area (approximately 18% of the metropolitan population and 63%
geographically): SFR must cover 40% of the population in this primary deployment area by January 2017 and
90% by January 2022 (this obligation is to comply using 800 MHz frequencies);
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coverage at a departmental level: SFR must cover 90% of the population of each department by January 2024
and 95% by January 2027.
(ii) SFR and Bouygues Telecom have a joint obligation to pool networks or share frequencies in the primary deployment
area.
(iii) SFR has an obligation to allow roaming for Free Mobile in the primary deployment area once Free Mobile covers
25% of France’s population with its own 2.6 GHz network and if it has not signed a national roaming agreement with
another operator.
(iv) SFR must, jointly with the other holders of 800 MHz band licenses, cover the city centers identified by the public
authorities in the “white zones” program (more than 98% of the population) within no more than 15 years.
As part of the allocation of the third block of LTE frequencies in December 2015 (700 MHz,) SFR must comply with the
following deployment obligation in very-high-speed mobile networks:
 coverage of the primary deployment area: SFR must cover 50% of the population in this area by January 2022, 92%
by January 2027 and 97.7% by December 2030 (this obligation is to comply using 700 MHz frequencies);
 coverage obligation on daily trains.
33.7 Commitments relating to operating leases
The minimum future rents for operating leases are shown in the following table:
Maturity
Minimum future
payments - 2015
Less than
one year
Two to five
years
More than
five years
2014
-
-
-
-
-
1,855
284
868
703
1,781
464
53
194
216
587
1,390
230
673
486
1,193
2
0
1
0
2
137
42
62
33
150
1,991
326
930
736
1,931
-
-
-
-
-
(316)
(53)
(137)
(125)
(277)
-
-
-
-
-
(316)
(53)
(137)
(125)
(277)
-
-
-
-
-
Sublets
(316)
(53)
(137)
(125)
(277)
NET
1,676
272
793
611
1,654
(in € millions)
Land
Buildings
o/w administrative premises
o/w technical premises
o/w other
Other
Leases
Land
Buildings
o/w administrative premises
o/w technical premises
o/w other
The total future technical rents include rights of way and rents related to the right to use fiber optics.
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33.8 Commitment relating to long-term contracts
Commitments relating to long-term contracts involve mainly telecommunication network maintenance contracts.
Maturity
(in € millions)
Minimum future
payments - 2015
Less than
one year
Two to five
years
More than
five years
2014
149
76
57
16
223
(114)
(17)
(49)
(48)
(142)
35
59
8
(32)
81
Commitments given
Commitments received
NET
33.9. Other commitments
Maturity
2015
Less than
one year
Two to five
years
More than
five years
2014
60
33
-
27
52
47
35
11
1
51
45
7
19
20
81
16
-
5
10
16
21
-
1
21
39
190
75
36
79
239
Other guarantees and bank security deposits
(1)
-
-
(1)
(1)
COMMITMENTS RECEIVED
(1)
-
-
(1)
(1)
(in € millions)
Bank security guarantee GSM-R
Bank guarantees GSM-R
(a)
(a)
Other bank security deposits and guarantees
Commitments to purchase securities
Pledges
(b)
(c)
(d)
COMMITMENTS GIVEN
(a)
(b)
(c)
Public-Private Partnerships (PPP) between the SFR, Vinci, AXA and TDF groups and Réseau Ferré de France (R.F.F.).
This amount includes mainly €16 million in guarantees given as part of the tax audits underway at NC Numericable.
The Group has made unilateral promises to buy out minority interests of a financial partner in certain entities. Such promises can be made
only in the event that the Group’s entities do not meet the contractual commitments made when signing the related shareholders’
agreements.
(d) This amount does not include the pledges granted for Senior debt requirements.
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Litigation
The Group is involved in legal and administrative proceedings that have arisen in the ordinary course of business.
A provision is recorded by the Group when there is sufficient probability that such disputes will lead to costs that the
Group will bear and when the amount of these costs can be reasonably estimated. Certain Group companies are
involved in some disputes related to the ordinary activities of the Group. Only the most significant litigation and
proceedings in which the Group is involved are described below.
The Group is not aware of any governmental, legal or arbitration proceedings (including any proceedings of which the
Group is aware that are pending or threatened) other than those described below in this section that may have or have
had in the last twelve months significant effects on the financial position or profitability of the Group.
34.1 Tax disputes
34.1.1
NC Numericable
The French tax authorities have conducted audits of various Group companies since 2005 with respect to the VAT rates
applicable to our multi-play offerings. Under the French General Tax Code, television services are subject to a reduced
VAT rate of 5.5%, which was increased to 7% as of January 1, 2012 and to 10% from January 1, 2014, while Internet
and telephony services are subject to the normal VAT rate of 19.6%, increased to 20% from January 1, 2014. When
marketing multi-play offerings, the Group applies a price reduction on the price the Group would charge for these
services on a stand-alone basis. This discount is primarily applied to the portion of its multi-play offers corresponding to
its Internet and telephony services; the television service is the principal offer of the audited companies. As a result, the
VAT charged to the Group’s multi-play subscribers is lower than if the discount applied to the television portion of its
packages or if it were prorated on all services.
The French tax authorities assert that these discounts should have been calculated pro rata of the stand-alone prices of
each of the services (television, broadband Internet, fixed-line and/or mobile telephony) included in the multi-play
packages of the Group and proposed adjustments for fiscal years 2006 to 2010.
The Group has also received proposed adjustments for fiscal years 2011 and 2012 for NC Numericable, Numericable
and Est Vidéocommunication primarily affecting the application of the VAT on the multi-play offers, despite the change in
rules on January 1, 2011 that supports the Group’s practice in this area.
The Group is disputing all of the proposed reassessments planned and has initiated appeals and dispute proceedings,
which are at different stages, depending on the fiscal year in question for each of the fiscal years subject to
reassessments.
The proposed assessments have been provisioned in the financial statements as of December 31, 2015 in the amount of
€40.5 million.
34.1.2
SFR
In a proposed adjustment received on December 23, 2014, the tax authorities have contested the merger of Vivendi
Telecom International (VTI) and SFR dated December 12, 2011 and therefore intend to challenge SFR’s inclusion in the
Vivendi tax consolidation group for fiscal year 2011. The tax authorities thus intended to tax SFR separately from the
Vivendi tax consolidation group, leading to a corporate tax of €711 million (principal) plus late interest and surcharges
amounting to €663 million, for a total adjustment of €1,374 million. It should be noted that, under the agreement signed
on February 27, 2015 by Vivendi, Altice France and Numericable-SFR, Vivendi agreed to repay to SFR, if applicable, any
taxes and levies charged to SFR for fiscal year 2011, which SFR had already paid to Vivendi at the time, subject to a
maximum €711 million, if the 2011 merger of SFR and VTI is ruled invalid for tax purposes.
SFR believes it has strong legal grounds to defend the merger.
At the same time, an accounting audit of the years 2012 and 2013 led the tax authorities to make various adjustments in
the principal amount of the corporate tax. The company, which is disputing the assessments proposed, recognized a
provision of €59.5 million at December 31, 2015.
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34.2 Civil and commercial disputes
34.2.1
Wholesale disputes
Complaint by Bouygues Telecom against SFR and Orange regarding the wholesale market in mobile call
termination and the retail market in mobile telephony
The French Competition Council received a complaint from Bouygues Telecom against SFR and Orange claiming that
the latter were engaged in anticompetitive practices in the mobile call termination and mobile telephony markets. On May
15, 2009, the French Competition Authority decided to postpone its decision and remanded the case for further
investigation. On August 18, 2011 SFR received a complaint claiming unfair pricing. On December 13, 2012 the
Competition Authority fined SFR €66 million for abuse of dominant position, which SFR has paid.
SFR appealed the decision. The case was heard by the Paris Court of Appeals on February 20, 2014. The Paris Court of
Appeals rendered its judgment on June 19, 2014, dismissing SFR's appeal (the judgment was appealed to the Court of
Cassation by SFR on July 9, 2014; on October 6, 2015, the Court of Cassation rejected SFR’s appeal) and asked the
European Commission to provide an Amicus Curiae to shed light on the economic and legal issues raised by the case.
The Court of Appeals postponed ruling on the merits of the case pending the Commission's opinion. The Commission
rendered its opinion on December 1, 2014, which went against SFR. The hearing on the merits of the case was held on
December 10, 2015. The Court of Appeals will hand down its ruling on March 17, 2016. As a result of the French
Competition Authority's decision of December 13, 2012, Bouygues Telecom, OMEA and EI Telecom (NRJ Mobile)
brought suit against SFR in the Commercial Court for damages. In accordance with the transaction between SFR and
Bouygues Telecom in June 2014, the closed hearing of the conciliation proceedings was held on December 5, 2014. The
motion for discontinuance granted on September 11, 2014 ended the legal action between the two companies. With
respect to the claim by OMEA (€67.9 million) and EI Telecom (€28.6 million), SFR applied for stay on a ruling pending
the decision of the Paris Court of Appeals, and obtained it.
Claim by Mundio Mobile against SFR
Mundio Mobile, an MVNO on the SFR network, brought a claim in the form of a filing against SFR on November 5, 2014
in the Paris Commercial Court. Mundio Mobile is claiming €63.6 million in damages from SFR. Mundio Mobile accuses
SFR of unfair practices under the MVNO contract (by launching the offer of its former subsidiary Buzz Mobile). Mundio is
also challenging certain aspects of the contract including its pricing terms.
Complaint against Orange filed with the French Competition Authority (NRA ZO)
On December 9, 2009 SFR and SFR Collectivités filed a complaint with the French Competition Authority against Orange
for unfair practices. SFR withdrew its action on October 1, 2015.
As part of this complaint, on June 18, 2013 SFR sued Orange in the Paris Commercial Court (NRA ZO) for damages.
SFR is seeking €50 million in damages subject to adjustment from Orange.
SFR's lawsuit and complaint against Orange in the Paris Commercial Court (call termination – call
origination)
On February 22, 2010, SFR sued Orange demanding that it cancel the price for Orange call origination for the period
2006-2007 and replace it with a lower rate of 2% for 2006 and 15% for 2007. On June 25, 2013 SFR had all its requests
dismissed. On July 25, 2013, SFR appealed the Commercial Court ruling. On December 4, 2015, the Court of Appeals
dismissed SFR’s claim.
Complaint by Orange Réunion, Orange Mayotte and Outremer Telecom against SRR and SFR
Differential on-net/off-net pricing in the mobile telephony market in Mayotte and Reunion
Orange Réunion, Orange Mayotte and Outremer Telecom filed a complaint with the French Competition Authority in
June 2009 alleging unfair differential on-net/off-net pricing by SRR in the mobile telephony market on Mayotte and
Réunion seeking conservatory measures from the Competition Authority.
On September 15, 2009 the French Competition Authority announced provisional measures against SRR, pending its
decision on the merits. SRR had to discontinue any price spread exceeding its actual "off-net/on-net" costs in the
network concerned.
As the French Competition Authority found that SRR had not fully complied with its injunction, it fined SRR €2 million on
January 24, 2012.
In the proceedings on the merits, with regard to the “Consumers” component of the case, SRR requested and obtained a
“no contest” on the complaints on July 31, 2013. On June 13, 2014, the Authority rendered its decision for the
“Consumers” component of the case, fining SFR and its subsidiary SRR €45.9 million
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Non-residential mobile telephony market in Mayotte and Réunion
The SRR premises were raided and records seized on September 12, 2013. The operation focused on the nonresidential mobile telephony market in Réunion and Mayotte and was also in response to the complaint filed by Outremer
Telecom.
SRR appealed to the Senior Justice of the Saint-Denis Court of Appeals of Réunion against the decision authorizing the
operation and a second appeal against its procedure. On June 13, 2014, the Senior Justice of the Saint-Denis Court of
Appeals of Réunion handed down an order rescinding all the seizures at SRR in September 2013. The Competition
Authority appealed this order.
With respect to the proceedings on the merits, the Competition Authority on February 12, 2015 sent a notice of
complaints to SFR and SRR, which decided not to dispute the complaints. A report of no contest was signed on April 1,
2015. A session in front of the Authority board was held on September 15, 2015. On November 30, 2015, the French
Competition Authority fined SRR (and SFR as the parent company) €10.8 million.
Compensation disputes
Following the Competition Authority's decision of September 15, 2009 (provisional measures) and pending the
Authority's decision on the merits, on June 17, 2013 Outremer Telecom filed suit against SRR and SFR in the
Commercial Court seeking remedy for the loss it believes it suffered as a result of SRR’s practices.
Outremer Telecom is claiming €23.5 million in damages subject to adjustment for unfair practices by SRR in the
consumer market in mobile telephony on Réunion and Mayotte, and €1 million as damages in full for unfair practices by
SRR in the business market in mobile telephony on Réunion and Mayotte.
In a ruling on November 13, 2013 the Court awarded SRR and SFR a postponement until the Competition Authority
makes a decision, or until the Senior Justice of the Court of Appeals orders the postponement of the execution of the
Competition Authority's decision. The proceedings have not resumed to date even though the decision of the Senior
Justice of the Court of Appeals was handed down on July 13, 2014.
On October 8, 2014 Orange Reunion sued SRR and SFR jointly and severally to pay €135.3 million for the loss suffered
because of the practices sanctioned by the Competition Authority. To date, the merits of the case have not yet been
heard and various procedural incidents have been raised, on which a judgment is awaited.
Complaint against Orange to the Competition Authority regarding the market in mobile telephony services for
businesses
On August 9, 2010, SFR filed a complaint against Orange with the Competition Authority for anticompetitive practices in
the business mobile telephony services market.
On March 5, 2015 the Competition Authority sent a notice of complaints to Orange. Four complaints were filed against
Orange. On December 17, 2015, the Authority ordered Orange to pay a fine of €350 million.
At the same time, SFR filed suit against Orange in the Commercial Court and is seeking €512 million in damages subject
to adjustment as remedy for the loss suffered as a result of the practices in question in the proceedings with the
Competition Authority.
Orange suit against SFR in the Paris Commercial Court (overflows case)
Orange filed a claim on August 10, 2011 with the Paris Commercial Court asking the Court to order SFR to immediately
cease its unfair "overflow" practices and to order SFR to pay €309.5 million in contractual penalties. It accused SFR of
deliberately organizing overflows onto the Orange network for the purpose of economically optimizing its own network
(under designing the Primary Digital Block (PBN)). In a ruling of December 10, 2013 the Court ordered SFR to pay
Orange €22.1 million. SFR and Orange both appealed the ruling. On January 16, 2015 the Paris Court of Appeals upheld
the Commercial Court’s ruling and SFR paid the €22.1 million. On August 11, 2014, SFR also petitioned the District
Court enforcement judge, who rendered his decision on May 18, 2015 by ordering SFR to pay €600,000 (assessment of
penalty for 118 abusive overflows).
SFR v. Orange: abuse of dominant position in the second homes market
On April 24, 2012 SFR filed a complaint against Orange with the Paris Commercial Court for practices abusing its
dominant position in the retail market for mobile telephony services for non-residential customers.
On February 12, 2014, the Paris Commercial Court ordered Orange to pay to SFR €51 million for abuse of dominant
position in the second homes market.
On April 2, 2014 Orange filed an emergency motion against SFR with the Senior Justice of the Paris Court of Appeals to
suspend the provisional enforcement. This motion was denied by the Senior Justice on July 4, 2014.
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On April 2, 2014, Orange appealed the decision of the Commercial Court on the merits. On October 8, 2014 the Paris
Court of Appeals overturned the Paris Commercial Court's ruling of February 12, 2014 and dismissed SFR’s requests.
The Court of Appeals ruled that it had not been proven that a pertinent market limited to second homes actually exists. In
the absence of such a market, there was no exclusion claim to answer, due to the small number of homes concerned.
On October 13, 2014 SFR received notification of the judgment of the Paris Court of Appeals of October 8, 2014 and
repaid the €51 million to Orange in November 2014. On November 19, 2014 SFR appealed the ruling.
SFR v. Orange (non-unbundled areas)
On November 26, 2012, SFR filed a complaint with the French Competition Authority for abuse of dominant position in
the retail market for high-speed Internet access in non-unbundled areas. On October 1, 2015 SFR withdrew its petition.
Orange v. SFR and Bouygues Telecom (Sharing Agreement)
On April 29, 2014, Orange applied to the French Competition Authority to disallow the agreement signed on January 31,
2014 by SFR and Bouygues Telecom to share their mobile access networks, based on Article L. 420-1 of the French
Commercial Code and Article 101 of the Treaty on the Functioning of the European Union (TFEU). In addition to this
referral, Orange asked the Competition Authority for a certain number of injunctions against the companies involved.
In a decision dated September 25, 2014, the Competition Authority dismissed all of Orange’s requested injunctions to
stop SFR and Bouygues Telecom from implementing the agreement that they had signed to share part of their mobile
networks.
The Competition Authority ruled that “no serious and immediate harm to the general economy, the sector, consumers or
the plaintiff, can be described based on the section of the agreement relating to network sharing or from the 4G roaming
capability associated with it.”
Orange appealed the Competition Authority's decision to dismiss its provisional measures requests.
The Court of Appeals upheld this decision on January 29, 2015. Orange is now appealing the matter to the French
Supreme Court.
Claim by Bouygues Telecom against Numericable, Completel and NC Numericable
In late October 2013, Numericable, Completel and NC Numericable received a claim from Bouygues Telecom regarding
the “white label” contract signed on May 14, 2009, initially for five years and extended once for an additional five years
for the supply to Bouygues Telecom of double- and triple-play very-high-speed offers. In its letter, Bouygues Telecom
claimed damages totaling €53 million because of this contract. Bouygues Telecom alleges a loss that, according to
Bouygues Telecom, justifies damages including (i) €17.3 million for alleged pre-contractual fraud (providing erroneous
information prior to signing the contract), (ii) €33.3 million for alleged non-performance by the Group companies of their
contractual obligations and (iii) €2.4 million for alleged damage to Bouygues Telecom’s image. The Group considers
these claims unfounded both in fact and in contractual terms, and rejects both the allegations of Bouygues Telecom and
the amount of damages claimed.
On July 24, 2015, Bouygues Telecom filed suit against NC Numericable and Completel concerning the performance of
the contract to supply very-high-speed links. Bouygues Telecom is accusing NC Numericable and Completel of abusive
practices and contractual faults, and is seeking nullification of certain provisions of the contract and indemnification of
€79 million. The case was postponed until March 15, 2016 for designation of the reporting judge.
34.2.2
Consumer Disputes
CLCV's summons and complaint against SFR
On January 7, 2013, the consumer association CLCV filed a complaint against SFR in the Paris Commercial Court.
CLCV claimed that some of the clauses in SFR’s general terms of subscription, and those of some other telephone
operators, were unfair. It also asked for compensation for the collective harm inflicted. The Paris District Court ruled that
the clauses were unfair.
Free v. SFR: unfair practices for non-compliance with consumer credit provisions in a subsidized offer
On May 21, 2012, Free filed a complaint against SFR in the Paris Commercial Court. Free challenged the subsidy used
in SFR's “Carrés” offers sold over the web between June 2011 and December 2012, claiming that it constituted a form of
consumer credit and, as such, SFR was guilty of unfair practices by not complying with the consumer credit provisions, in
particular in terms of prior information to customers. Free asked the Paris Commercial Court to require SFR to inform its
customers and to order it to pay €29 million in damages. On January 15, 2013, the Commercial Court dismissed all of
Free’s requests and granted SFR €0.3 million in damages. On January 31, 2013, Free appealed the decision, which is
expected in March 2016.
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SFR v. Iliad, Free and Free mobile: unfair competition by disparagement
In June 2014, SFR filed a complaint against Iliad, Free and Free Mobile in the Paris Commercial Court for unfair
competition claiming that when Free Mobile was launched and afterwards, Iliad, Free and Free Mobile were guilty of
disparaging SFR services.
Disputes regarding the transfer of customer call centers from Toulouse, Lyon and Poitiers
Following the transfer of customer call centers from Toulouse and Lyon to the company Infomobile and the Poitiers call
centers to a subsidiary of the Bertelsmann Group, the former employees at those sites filed legal actions at Labor
Tribunals in each city to penalize what they claim were unfair employment contracts constituting fraud under Article
L. 1224-1 of the French Labor Code and also contravening the legal provisions regarding dismissal for economic
reasons. The rulings in 2013 were mixed as the Toulouse Court of Appeals penalized SFR and Téléperformance in half
of the cases while the Lyon and Poitiers courts ruled in favor of SFR. The cases are now at different stages of
proceedings: Labor Tribunal, Court of Appeals and Court of Cassation. On June 18, 2014, the Court of Cassation upheld
the decision of the Toulouse Court of Appeals (which went against SFR) and dismissed the appeal against the decision
of the Poitiers Court of Appeals.
Litigation over distribution in the independent network (Consumer market and SFR Business Team)
SFR, like companies operating an indirect distribution model, faces complaints from a certain number of its distributors
and almost routinely from former distributors. Such recurring complaints revolve around claims of sudden breach of
contractual relations, abuse of economic dependency and/or demands for requalification as a sales agent as well as,
more recently, demands for requalification as a contractual branch manager and requalification as SFR contracted point
of sale staff. SFR, after receiving four adverse judgments by the Court of Cassation regarding the status of branch
manager, was recently successful in various Courts of Appeals. Regarding the requalification of employment contracts
and sales contracts in these disputes, despite rare exceptions, SFR received favorable judgments.
Free v. SFR
In July 2015, Free filed suit against SFR in order to stop it from using the word “Fiber,” claiming that the solution
marketed by SFR is not a fiber to the home (FTTH) solution; Free considers SFR’s communication to be deceptive about
substantial qualities and, on that basis, is asking the court to find there is parasitism and unfair competition.
Familles Rurales v. SFR
In May 2015, Familles Rurales filed suit against SFR in the Paris District Court in the context of a class action seeking
remedy for the loss allegedly suffered by consumers, claiming deceptive sales practices used by SFR in its
communications about 4G
34.2.3
Other disputes
In-depth inquiry of the European Commission into the assignment of cable infrastructures by certain local
authorities
On July 17, 2013, the European Commission signaled that it had decided to open an investigation to verify whether the
transfer of public cable infrastructure between 2003 and 2006 by several French municipalities to Numericable was
consistent with European Union government aid rules. In announcing the opening of this in-depth investigation, the
European Commission indicated that it believes that the sale of public assets to a private company without proper
compensation gives the latter an economic advantage not enjoyed by its competitors, and that it therefore constitutes
government aid within the meaning of the rules of the European Union and that the free-of-charge transfer of the cable
networks and ducts by 33 French municipalities to Numericable, they have argued, confers a benefit of this type and, as
such, is government aid. The European Commission has expressed doubts about the compatibility of the alleged aid with
the rules of the European Union. The Group firmly denies the existence of any government aid. In addition, the decision
to open an investigation concerns a relatively small number of network connections (approximately 200,000), the majority
of which have not been migrated to EuroDocsis 3.0 and only allow access to a limited number of the Group’s television
services. The European Commission’s decision of July 17, 2013 was published in the Official Journal of the European
Union on September 17, 2013. Since then, discussions have continued within the framework of this process both in
terms of comments from third parties as well as those from the parties to the proceedings as to the allegation of the
existence of aid and its extent, with the Group firmly challenging the existence of any government aid.
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Dispute with Orange concerning certain IRUs
The Group signed four non-exclusive IRUs with Orange on May 6, 1999, May 18, 2001, July 2, 2004 and December 21,
2004, in connection with the Group’s acquisition of certain companies operating cable networks built by Orange. These
cable networks, accessible only through the civil engineering installations of Orange (mainly its ducts), are made
available to the Group by Orange through these non-exclusive IRUs. Each of these IRUs covers a different geographic
area and was signed for a term of 20 years.
Following ARCEP’s Decision 2008-0835 of July 24, 2008, Orange published, on September 15, 2008, a technical and
commercial offer made to telecommunication operators allowing them access to the civil engineering infrastructures of
the local wire-based network, pursuant to which the operators can roll out their own fiber networks in Orange’s ducts.
The terms of this mandatory technical and commercial offer are more restrictive than the terms that the Group enjoys
under the Orange IRUs.
As a result, in December 2011, Numericable and Orange signed amendments to the IRUs in order to comply with the
November 4, 2010 ARCEP decision and to align the operating procedures set out in the IRUs with the procedures set out
in the Orange general technical and commercial offer.
Lastly, Numericable initiated parallel proceedings against Orange before the Commercial Court of Paris on October 7,
2010 claiming damages of €2.7 billion for breach and modification of the IRUs by Orange. On April 23, 2012, the
Commercial Court of Paris ruled in favor of Orange and dismissed the Group’s claims for damages, ruling that there were
no material differences between the original operational procedures and the new operational procedures imposed on
Numericable by Orange under the terms of its general technical and commercial offer, published on September 15, 2008.
Numericable appealed this decision before the Paris Court of Appeals and claimed the same amount of damages as it
had before the Paris Commercial Court. Orange, in turn, claims that this proceeding materially impaired its brand and
image, and is seeking an order to make Numericable pay damages of €50 million. In a ruling dated June 20, 2014, the
Paris Court of Appeals dismissed Numericable’s appeal, which was referred to the Court of Cassation on August 14,
2014. On February 2, 2015, the Court of Cassation set aside the ruling of the Paris Court of Appeals except in that it
recognized NC Numericable’s interest in acting and referred the case back to the Paris Court of Appeals.
Action by Colt, Free and Orange in the General Court of the European Union concerning the DSP 92 project
Colt, Free and Orange, in three separate motions filed against the European Commission before the General Court of
the European Union seeking to annul the European Commission’s final decision of September 30, 2009 (Decision C
(2009) 7426), which held that the compensation of €59 million granted for the establishment and operation of a highspeed electronic communications network in the department of Hauts-de-Seine does not constitute government aid
within the meaning of the rules of the European Union. The Group is not party to this proceeding. Its subsidiary
Sequalum is acting as the civil party, as well as the French government and the department of Hauts-de-Seine. In three
rulings dated September 16, 2013, the General Court of the European Union rejected the requests of the three
applicants and confirmed the aforementioned decision of the European Commission. Free and Orange have appealed to
the Court of Justice of the European Union.
Litigation between Sequalum and CG 92 regarding DSP 92
A disagreement arose between the Hauts-de-Seine General Council (“CG92”) and Sequalum regarding the terms of
performance of a utilities public service concession contract (“THD Seine”) signed on March 13, 2006 between
Sequalum, a subsidiary of the Group, and the Hauts-de-Seine General Council; the purpose of this delegation was to
create a very-high-speed fiber optic network in the Hauts-de-Seine region. The Hauts-de-Seine General Council meeting
of October 17, 2014 decided to terminate the public service delegation agreement signed with Sequalum “for misconduct
by the delegatee for whom it is solely responsible.” The Hauts-de-Seine General Council demanded the payment of
penalties totaling approximately €45 million for delays, advanced by the sole delegator and disputed by Sequalum, in the
deployment of fiber optics and connections to buildings.
The demand for payment was contested in a motion filed with the Administrative Court of Cergy Pontoise on September
3, 2014. Its enforcement and the payment of the sums requested have been suspended pending a ruling on the merits.
On May 7, 2015, the General Council sent a second demand for an order for payment in the amount of €51.6 million,
orders disputed by Sequalum on July 11, 2015.
Sequalum claims that the termination was unlawful and is continuing to perform the contract, subject to any demands
that the delegator may impose. Should the competent courts confirm this interpretation, Sequalum may have to repay the
public subsidies received for the DSP 92 project, normally the outstanding component of the subsidies (the company
received €25 million in subsidies from the General Council). In turn, the department of Hauts-de-Seine will receive the
returnable assets of the DSP on July 1, 2015. Furthermore, the General Council will have to pay compensation to
Sequalum, which essentially corresponds to the net value of the assets.
On October 16, 2014, Sequalum filed a motion in the Administrative Court of Cergy Pontoise requesting the termination
of the public service concession because of force majeure residing in the irreversible disruption of the structure of the
contract.
At December 31, 2015, the assets were removed from Sequalum’s accounts in the amount of €116 million. Income
receivable in the amount of €139 million related to the expected indemnification was also recognized, an amount fully
provisioned given the situation.
286
6.2
6
Numericable-SFR states that it also has its own fiber optics in the department of Hauts-de-Seine to service its customers.
Furthermore, the revenues generated by DSP 92 accounts for a relatively immaterial percentage of Group revenues.
Operations, inspections and seizures
By Order of March 25, 2015, the Nanterre District Court authorized the rapporteur-general of the Competition Authority to
conduct inspections and seizures in order to find proof of actions prohibited by Article L 430-8-II of the Commercial Code
and any evidence of such actions before the authorization of the concentration of Numericable-SFR, Omea Telecom and
SFR. On April 9, 2015, Numericable-SFR appealed the authorization of the District Court of Nanterre and filed an appeal
against the inspection and seizure operations with the Senior Justice of the Court of Appeals of Versailles. The hearing
date is scheduled for May 26, 2016. It is understood that the opening of such an inquiry by the Competition Authority
does not in any way prejudice the results that may be

NUMERICABLE-SFR 2015 REGISTRATION DOCUMENT

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