Bouygues S.A.

Karine Adam-Gruson - Head of Bouygues Investor Relations Philippe Marien - Deputy CEO Christian Lecoq - CFO of Bouygues Telecom

Nicolas Didio - Berenberg Nicolas Cote-Colisson - HSBC Giovanni Montalti - UBS Jerry Dellis - Jefferies Jakob Bluestone - Credit Suisse Josep Pujal - Kepler Cheuvreux Frederic Boulan - Bank of America Merrill Lynch San Dhillon - Exane BNP Paribas Dimitri Kallianiotis - Redburn

Good morning, ladies and gentlemen. I would like to remind everyone that you can find on the company website at www.bouygues.com, the earnings press release, the presentation we will be commenting on during this conference call, an Excel file with historical key figures for the Group and its business, and the Company's financial statements.

Statements made on this call are forward-looking statements. Such statements reflect objectives that are based on management's current expectations or estimate, and are subject to a number of factors and uncertainties that could cause actual figures to differ materially from those described in the forward-looking statements.

I would like to turn the call over to Mr. Philippe Marien, Deputy CEO of Bouygues.

Thank you, Karine. Good morning to all of you, and thank you for joining us.

I would like to welcome everyone to our conference call to discuss Bouygues' first quarter results. With me in the room is Christian Lecoq, CFO of Bouygues Telecom.

Following my comments, we will be answering your questions. To begin on Slide 4.

I remind you that, like every year, first quarter operating results are not indicative of the Group's full-year performance. Turning to the key highlights of the quarter.

First, the commercial activity of the construction businesses remained solid, as we are well positioned with differentiated assets to participate in markets with good growth potential, those abroad and in France, where we see some improvements. Therefore the backlog of construction businesses reached record level at end-March 2017.

Second, Bouygues Telecom demonstrated its robust growth by reporting another quarter of good commercial and financial results. As a result, current operating profit turned positive in Q1 2017, compared to a loss in Q1 2016.

In this context, we can confirm the full-year outlook shared with you in February. Jumping to key figures on Slide 5.

As every year, first quarter results are not indicative of the full-year performance of the Group. However it is worth noting that those figures confirm continued improvement in the Group's results.

Q1 2017 current operating profit and operating profit improved year-on-year by €73 million and €143 million, respectively. Operating profit, including non-current charges, of €17 million in Q1 2017, versus €87 million in Q1 2016.

Overall net profit improved by €142 million from a year ago. This positive trend gives us confidence in our ability to meet our 2017 objective of improved profitability at the Group level.

You can also see on this slide, that the Group maintains a strong financial position. Net debt rose €3.3 billion at end-March 2017, compared to €1.9 billion at end-December 2016.

The increase mainly reflects the usual seasonal impact from Colas. By end-2017, we still expect net debt of approximately €2.3 billion.

Let us now turn to Slide 6, to see the current operating results of the businesses. In line with 2016, we see that Bouygues Telecom remains the main driver of the improvement in the Group’s profitability in the first quarter of 2017, with a year-on-year operating profit increase of €74 million.

TF1 posted good operational performance in the first quarter of 2017, as well benefiting from three factors: first, an increase in the Group audience share year-on-year; second, a 2% growth in the advertising revenue of the five free-to-air channels; and finally, we see the results of the cost-cutting and programming optimization strategy implemented since the fall of 2016 and the effect of differences in the scheduling of some programs this year versus last year. The financial results of the construction businesses, as usual, are not indicative of the full-year performance due to Colas’ usual seasonality.

I will now turn to the review of operations starting with the construction businesses. Let's begin with commercial performance on Slide 9.

The first quarter, we remain - in the first quarter we remained the good momentum of 2016. As a result, the backlog reached record level of €31 billion at end-March 2017, up 4% year-on-year.

In international markets, the construction businesses remain strong. Based on our leading expertise and differentiated assets, which fulfill growing infrastructure and buildings' needs, and that meets sustainable construction challenges.

International backlog was up 2% year-on-year and up 3% at constant exchange rates. It reached €17.1 billion at end-March 2017.

Noteworthy orders for the quarter include: the construction of five large-scale solar farms in Australia for €261 million; two significant housing projects in Switzerland for a total of €190 million, including the conversion of the headquarters of the Bern Post Office into hotel, and also works on the D1 Highway in the Czech Republic for approximately €40 million. International backlog has yet to include several substantial contracts won by Colas in the PPP Project of the Southwest Calgary Ring Road in Canada.

Overall, the share of the back of the order book in international markets for Bouygues Construction and Colas remains unchanged at 57% compared to end-March 2016. Let's now turn to France, where the market is improving gradually as illustrated on Slide 10.

In the first quarter of 2017, we saw a slight upturn in the French construction sector. And end-March 2017, the order book in France was up 6% year-on-year.

Growth continues in the residential market for the fifth consecutive quarter, thanks to the same factors as in 2016. The interest rates which remain at low level, Pinel buy-to-let law, and wider access to the zero interest loan program.

Residential property reservations at Bouygues Immobilier were up 30% in the first quarter of 2017 compared to last year, benefiting from a high level of block reservations. We are therefore confident that the growth trend for 2017 should continue but it is likely to be at the lower space since 2016 was at a bid activity compared to a low point in 2015.

In building and civil works, we see some positive impact from the Grand Paris Express development. Two significant projects totaling around €700 million were included in order intake for the quarter.

First, the extension of the RER Eole with the excavation of a tunnel between the Saint-Lazare station and La Défense and the construction of a new train station at Porte Maillot. And second, we won as section of the extension of the metro line 15 South of Paris.

As in 2016, where the dynamic of the Greater Paris area is improving, thanks to the Grand Paris tenders, the market in the rest of France remains sluggish. Moving to Colas.

Activity is recovering gradually in the French road market after several years of decline and stabilization in 2016. Due to the slowdown in the decline of subsidies granted by the state, local authorities began to invest slightly more in road maintenance, since the primary roads network has deteriorated.

Three other factors should support the improvement trend of the French markets throughout the year. First, the election cycle is more favorable now since 2017 is in the mid-term of the local election cycle.

Second, the local authorities are more willing to launch some transportation projects, such as new tramways and high-quality service buses in the second part of their mandate. And last, the Grand Paris Express.

Colas has already won some contracts such as the laying of railway track on the metro line 14 for €22 million and on metro line 15 South for €35 million. Let's now move to Slide 11 to focus on Grand Paris Express project.

On the left side of the slide, you have - we have listed the Grand Paris Express contracts already won by Bouygues Construction and Colas. On the right side, we have located those contracts on the map of the Grand Paris project.

It is worth mentioning that the map represents the overall project, which will extend further away from Paris over its 25 year lifespan. For the time being, the tenders are focusing on the area across closer to Paris.

Since the launch of the first tenders Bouygues Construction and Colas are already won contracts of about €1 billion, consisting mainly of tunnel excavation and the construction of new stations, both of which are highlighted in Colas. The black dotted line represents the tenders already allocated, while solid line shows the lots that will be located within the next 15 years.

You can easily see that the majority of the tenders are not been launched yet. This gives us good visibility for the years to come.

Now let me turn over to Christian Lecoq.

Thank you, Philippe. Starting with Slide 13, you can see that we maintain good performance in mobile during the quarter, despite heavy commercial activity in the market.

We won 364,000 new mobile customers in the first quarter of 2017, of which 130,000 were new plan customers excluding MtoM. At end-March 2017, Bouygues Telecom served 13.4 million customers.

Mobile ARPU remained stable in Q1 2017 compared to Q1 2016, while the customer base was increasing. The stabilization of ARPU was achieved despite a slight drop in incoming ARPU due a structural shift in customer usage as more and more customers are using data instead of voice or text messages.

The decrease in incoming revenue was offset by lower interconnection costs. Therefore it has no impact on EBITDA.

Moving to Slide 14. The growth trend in fixed broadband is continuing, as Bouygues Telecom won 88,000 new fixed customers in the first quarter of 2017.

The total customer base is 3.2 million broadband users and we are on target to reach our target of an additional one million fixed customers by 2017 versus end-2014. The very-high-speed customer base reached 518,000 customers at end-March 2017, versus 407,000 one year ago and 482,000 at end-December 2016.

This increase comes from both the FTTH on 4G box offers. FTTH is growing quarter-on-quarter and the total number of FTTH customers was 144,000 at end-March 2017.

FTTH contributes to 26% of our fixed net adds, in line with 2016. Two-thirds of our FTTH growth in the first quarter are new customers, which is good news.

We have just established a new organization to enhance our efficiency in local sales and marketing in order to gradually accelerate our FTTH sales in future quarters. Regarding our 4G box, also our offer has been launched very recently, it is already a success as it responds to the needs of households in some rural areas suffering from lack of fiber and low DSL quality.

Looking at Slide 15. The good commercial performance of Bouygues Telecom in both mobile and fixed since 2015 led to strong financial results in Q1 2017.

Indeed Bouygues Telecom’s total sales were up 8% compared to last year. Looking at sales from network, they were up 7% year-on-year, and Q1 2017 represents the seventh consecutive quarter of growth.

EBITDA for the first quarter of 2017 was €243 million, an increase of €97 million over the first quarter of 2016. Moreover EBITDA margin was up 8.4 points to 23.4%.

Two factors contribute to this sharp hike. First, a €66 million increase in sales from network resulting from the continued good commercial performance in mobile and in fixed.

And second, a €31 million decrease in operating expenses. One-third of the decline in operating expenses is coming from recurring savings.

Indeed we are, first, a decrease of internet connection costs in mobile coming from shift in customer usage from voice and SMS to data and in fixed from the continuing unbundling of our DSL network. We currently have more than 1,900 front-end fixtures [ph] versus 1,700 one year ago.

And we've now migrate customers to our FTTH offers. Second, it is worth noting that our improved efficiency in fixed is generating grow our customer care and after sales costs.

The remaining two-thirds of the €31 million decline in operating expenses comes from non-recurring items such as improvements in bank debt, regularization of energy invoices in Q1 2016, and a different phasing in handset subsidy spending. Excluding those non-recurring items, EBITDA margin would have been 21.4%.

We are therefore confident that that we will reach our 25% EBITDA margin target in 2017. Current operating profit turned positive at Bouygues Telecom in the first three months of 2017 at €41 million compared to a loss in the first quarter of 2016.

Operating profit at €34 million, includes €7 million of non-current charges, essentially related to the rollout of mobile network sharing in the less dense areas. We have not received any proceeds from the transfer of the towers to Cellnex.

We expect to get out of them over the next three quarters of 2017. Gross CapEx of €309 million is the first quarter is in line with expectation for 2017.

Looking at Slide 16. Bouygues Telecom continues to strengthen its leadership in 4G through both coverage and densification in order to maintain its competitive advantage over the long-term.

Bouygues Telecom continues to deploy 4G sites in dense areas through its network amplification program with a target of over 50% more sites in the next four years. And in non-dense areas, Bouygues Telecom is rolling out network sharing with SFR.

At end-March 2017, Bouygues Telecom leads all operators with 11,642 4G sites in operation, while national 4G coverage increased from 85% at end-December 2016 to 88% at end-March 2017. Our target remains to reach 92% for the coverage at the end of the year and 99% in 2018.

While maintaining a sustainable leadership in 4G, Bouygues Telecom is also preparing for the arrival of 5G in order to remain the benchmark player. As 5G could be available for customers by 2019 or 2020, Bouygues Telecom is currently deploying FTTA in dense areas, including 200 sites to the backbone.

This rollout will be completed in 2019. In non-dense area, FTTA deployment is ramping up.

The deployment of FTTA will also help develop our B2B fiber network. Slide 17 highlights Bouygues Telecom’s success to the FTTH network.

As you can see at the chart, at end-March 2017, 13 million premises are committed as follows: 4 million in the very dense areas, mainly through co-investments with other operators; 6 million in the medium dense areas through co-investments with Orange by tranches of 5% of inter-agreements and 3 million premises in the Public Initiative Network areas for two rental agreements, one with Axione and one with Altitude. We have therefore increased by 4 million the number of premises secured between end-March 2017 and end-December 2016.

2.2 million premises are marketed to-date. Marketed means that horizontal, vertical and connection to the construction point are being installed and only the final point to the home needs to be done.

Bouygues Telecom targets to market 12 million premises by 2019 and a total of 20 million premises by 2022.

Thank you, Christian. I would like to briefly comment on the financial statements.

We have already looked at sales and current operating profit shown on Slide 5. The €17 million of other operating income and expenses in the first quarter of 2017 is composed of non-current charges resulting from: €7 million at Bouygues Telecom as detailed by Christian; €6 million at TF1 related to the PPA Newen impacts and 4 million at Colas associated with the preliminary works linked to the deconstruction and decontamination of the Dunkirk refinery site.

We have launched tenders for the total project and are awaiting estimates and final contracts. Until that time, we have consciously recognized some initial costs.

When we know the final estimate, we will adjust and use the provision we recognized in 2016 accordingly. Cost of net debt increased by €5 million in the first quarter, thanks to lower financial expenses following the reimbursement of a bond in May 2016 for €600 million and the issuance of a new bond at a lower rate in December 2016 for €750 million.

Turning to Slide 20. You can see a decrease in tax income of €47 million due to a reduction of losses at the Group level.

Moving to the associates and joint ventures line, the positive change is mainly explained by Alstom’s net contribution. As announced, its contribution was €45 million in the first quarter of 2017 versus zero in the same period of last year.

On Slide 21, net debt was €3.3 billion at the end-March 2017. It increased by €1.4 billion compared to end-December 2016.

The increase over year-end is mainly explained by the traditional seasonality at Colas. During this time period, we received: first, €94 million from disposals and acquisitions including the disposal of AB Groupe by TF1 in the first quarter of 2017: second, €48 million of orders including the sale of stock options and a capital increase reserved for employees as a remainder of Bouygues Confiance n°8 plan.

You can also notice that change in operations was almost the same in first quarter of 2017 compared to the first quarter of 2016. Turning to the breakdown of operations on Slide 22.

You can see that net cash flow increased year-on-year in conjunction with the improvement in the Group results. CapEx rose by €42 million due to Bouygues Telecom.

As a reminder, the transfer of the sites to Cellnex did not stop in the first quarter of 2017. And last, working capital requirement increased by roughly €100 million year-on-year, mainly due to the investment by Bouygues Immobilier in a large urban planning project near Paris, in line with the strategy that we explained in February.

Finally, we will turn our attention to the outlook for the full-year. As you can read on Slide 24, and as stated at the beginning of this call, we confirm the outlook shared with you in February.

In the construction businesses, we will continue a selective approach to focus on profitability rather than volumes, and we expect current operating margin to keep improving in 2017. TF1’s strategy should allow them to: first, maintain the average annual cost of programs for the five free-view channels at €980 million in 2017 and over the next three years; and second, to improve profitability to reach double-digit current operating margin in 2019.

Bouygues Telecom confirms its 25% EBITDA margin target for 2017 and €300 million of free cash flow in this three years’ time. Group profitability should continue to improve in 2017.

This concludes my presentation. Operator, please the floor for questions.

Hi. Thank you and congrats on the results.

I have two, three questions. First on TF1 and Bouygues Telecom.

Can you clarify the position of the Group regarding the carriage fees asked by TF1? If Bouygues Telecom is going to pay TF1?

Is it going to be on the scheme where it's going to be variable revenues and you pay on the variable revenues share with TF1, or will it be absorbed by Bouygues and then up to Bouygues Telecom to offset the charge by charging the customer? Second question on content following SFR acquisition of the Champions League.

I know your strategy to keep offering the best pay-TV content to your customers but what is your contingency plan? If exclusivity of content is giving good, let's say, commercial intake at SFR, or if generally speaking, the burning of content at SFR and maybe at Orange would start to be a very differentiating factor?

And maybe two last quick questions on Bouygues Telecom. How many 4G box do you have at the end of Q1, and what was your CapEx in FTTH in Q1 as well?

Thank you.

So about CapEx, your last question, we have spent €340 million in FTTH since the beginning of FTTH. About 4G box, we don't disclose the number for 4G box.

And about your second question on telecom, the bundling of content made today by SFR. I’m not sure that we want to doing the same today.

We still believe that [indiscernible] strategy is a good one. Today we didn't see any impact of content on ourself and also we may use that we - today SFR is trying to sell their contents through our channel, so it’s not - we don’t see that - are trying to do that at the moment.

So regarding your first question between - on the discussion between TF1 and Bouygues Telecom, and also TF1 and the other operators. The Group position is very simple.

We have two businesses, so these two businesses have to develop their own business and to try to maximize their services offer to their clients and their profit. So we agree on the principle of remuneration of TF1 by the telecom operators for providing new services to their customers, so to operators.

In parallel, we support Bouygues Telecom. We want to pay a reasonable price for these new services.

Discussion are ongoing, and definitely if the two companies are able to reach an agreement, it will be because the agreement will be the fair one for TF1 on one side, for Bouygues Telecom on the other hand. So we are absolutely - no conflict of interest at all if an agreement is reached.

We have exactly the same philosophy between TF1 and Bouygues Telecom that we had between Bouygues Construction and Bouygues Immobilier. The two companies have to develop their own business and to maximize again the services provided to their clients and their profitability.

That's all. So we don't interfere into the discussion between TF1 and Bouygues Telecom.

These two company will be able to find or not a fair agreement, and that's all.

But if - I mean, it looks simple but at the end it's still complex. Would you accept that Bouygues Telecom…

It’s not more complex. Sorry, it’s not more complex.

Just before your question, it's not more complex that building construction between Bouygues Construction and Bouygues Immobilier.

Let's see my question then. Would you accept that Bouygues Telecom takes the risk to pay upfront charges to TF1, and then after, charge to get additional revenues from Bouygues Telecom customers?

The problem is not this one. Again these two companies will discuss, or is discussing, to reach an agreement with new services on one side and the ability to sell or to include these new services in the Bouygues Telecom future services to their clients.

So again we - these discussions are underway, so clearly we are not in a position to explain to you what will be the final scheme and the final discussion. So you will see at the end what will be the arrangement between TF1 and Bouygues Telecom.

But be sure that if at the end of the day there is an agreement, it will be because it’s good for Bouygues Telecom and good for TF1, otherwise no agreement is possible. But again it's too early to say anything on the content of this agreement for sure because it is in discussion.

Thank you, Philippe.

Well, thank you. I will start with the question on telecoms.

Just watching your fixed broadband ARPU which is still sliding down. So was wondering what was coming from promotions and what was linked to a change in the product mix between Bbox and Miami?

My second question is on construction. Just wanted an update on the current state of play in the U.K.

If you could remind us a proportion of sales achieved in the country and what are the financial consequences of withdrawing from some property development projects? And very last on construction.

I was also interested in the way the Hinkley Point contract is structured. I understand there is a cost plus component, so I wonder how it works and how it protects Bouygues from delays in the construction process.

Thank you.

Hi, Nicolas. First about the fixed ARPU.

We have a decrease of this ARPU of €1 between Q1 2016 and Q1 2017. The decrease is coming from two different things.

First, promotions for us overall [ph] that have done mainly in Q4 2016 and with an impact this quarter. And second, this quarter we have fewer connection volumes due to the fact that the composition of our net growth is different.

We had less, I will say, gross adds and very better churn level, and also connections coming from the 4G box of course, so that’s the other part of the decrease of the ARPU.

Thank you.

So regarding the U.K. situation, as was mentioned previously to you, the U.K.

market regarding construction and especially in the property development area was very booming, and too booming in fact, so with negative consequences in term of execution issues. So the new situation is definitely return to a safer situation and better situation with a decrease in term of market.

So definitely we will have decrease in our order intake and backlog for building activity in U.K. which will be good news because together with this decrease in backlog and the sale, we will have an improvement in terms of operating margin because the execution condition will be better in the future.

So definitely for us this situation is better than the previous one. For Hinkley Point, we are perfectly right.

Our contract is a cost plus fee contract with target prices with a budget. So in fact this scheme obviously is good protection for any big and material overruns during the execution of this contract.

Okay. Thank you both.

Hello, good morning. A follow-up, if I may, on the previous question about the fees to be paid eventually by Bouygues Telecom to TF1.

If you can give us a bit more color about this, let's say, new additional services that TF1 may provide to Bouygues Telecom? And also if you can give us an update about the discussions you are having with the other telecom operators again to make them pay TF1?

And looking at the CapEx, if I understood correctly, you said that since the beginning of your fiber rollout you invested up to €340 million for FTTH rollout, or whether I see pretty big numbers that you have showed in terms of premises secured that you have rolled out in fiber. I'm referring to the slide that you show in Page 17 of the presentation.

So I was wondering if you can help us understand what that means in terms of premises secured. Have you achieved an agreement to have an access on an wholesale basis to this infrastructure and what will be the price that you pay, or have you actually co-invested?

How much money have you already paid? Is this 13 million premises secured something you have already paid for or that you are going to pay for?

And lastly, you were presenting guidance in terms of €1.2 billion for CapEx at the telecom unit this year. That was gross CapEx.

So this could be reduced by some disposals. If you can remind us if there is any additional asset left that you can dispose of after the disposal of towers?

Is there any impact from the disposal of towers in the Q1 numbers because if I remember well, there was a transaction - part of the transaction with Cellnex that was booked last year but there should be a tiny bit to book that also this quarter, but maybe I'm wrong on this, if you can remind us? And lastly, what impact should we expect from the rental towers on your margins at the telecom unit.

Is your EBITDA margin target going to stay as it was before? Thanks so much.

So just on your last question regarding the gross and net CapEx to Bouygues Telecom. So we have mentioned in the comments for the first quarter figures, there is no disposals according to the Cellnex agreement during the first quarter.

So it is the reason why net CapEx and gross CapEx at Bouygues Telecom level is the same number, so around €300 million for the quarter, which is in line with the €1.2 billion gross CapEx for the year. In term of disposal, more significant disposal will be the disposal in line with the Cellnex agreement and the figures are very clear.

The book value of the disposal is around - is €121 million and the selling price is €500 million, and we anticipate to sell half of the total disposals this year. So you have all the figures to make calculation.

I come back to your first question regarding discussion between TF1 and the various operators including Bouygues Telecom. You understand very well that we are in the middle of the negotiation, in the middle of their various discussion with all the operators, so it's not the proper time to make any comments on any type of fees, content of the discussion and so on.

So definitely we will not do any comments on this discussion up to the end of this discussion. And Christian will answer your other questions.

Just a point about Cellnex, when you said the disposal of the agreement of the transfer of sites, will begin this quarter, Q2. And as Philippe has explained, we expect to consider up to this year.

I think one of your question was about the agreement we signed with Cellnex in 2016 for 500 telecom towers. All these towers has been transferred last year and was accounted for last year.

So your sub-question was about CapEx for FTTH. In fact it's very difficult to link the number of premises secured to CapEx because usually you pay when - you have access to the network but you pay by countries of course in the medium dense area, but pay also, for example sometimes only for the horizontal than for the vertical than for the services than for the addiction between - the link between the horizontal and vertical.

So you have no direct link between the number of premises marketed or the number of premises secured and the total amount of CapEx spent in FTTH.

Sorry, if I may follow-up. So just to clarify €1.2 billion gross CapEx, you are going to have a positive impact of €250 million from Cellnex, if I understood well in ‘17 so the net is €950 million.

On this point I would like to…

Yes, it’s obviously correct. Just to remind you that we all have also some little disposals each year in top of those Cellnex agreement, which is very, very little bit [ph].

Okay, so let's say, it’s sensible on our side to assume that the net CapEx is going to be around this figure, €950 million, €900 million, let's say in this area. Is this a sensible assumption on our side?

Yes, I think you have also the [indiscernible].

Okay. And so in terms of fiber, I understand that for the way you presenting, there is not a direct connection between CapEx and the fiber coverage.

And exactly because of this, I would like to understand out of this 13 million premises secured, how much are going to be covered with the proprietary network and how much are going to be - or let's say you share the network and how much are going to be in wholesale. Can you give us a broad indication?

And also on the tower side, what is going to be the impact on your margins from the rental you have to pay to Cellnex? Thank you.

About FTTH, so the 13 million premises, I think we gave the split between very dense, medium dense and Public Initiative…

Sorry, again I understand that even in dense areas you may rent something and not simply rollout your infrastructure. So I would like to understand if you can give us broad percentages of the mix of these premises.

What is the percentage in which you will have something proprietary and what is the percentage in which you will simply do wholesale either on a regulated basis or a commercial agreed basis, I guess, much more likely? Thanks.

So in the medium dense area, we are buying tranches by 5%. It’s our - so it’s only CapEx.

We will see when we reach 5% if we need to buy another tranches to rent fiber. In the very dense area, we have Bouygues horizontal sometimes with small co-investment, and about the vertical, it depends on our market share.

We can rent the vertical or buy it. We don't give the percentage of vertical that we rent.

And in the Public Initiative Network, it is only location linked to the number of clients that we will have in the future.

Okay. I appreciate that.

You understand that on our side if we do not understand that what is the mix that you will cover with your proprietary coverage and what is the mix that you will rent, it’s going to be difficult for us to understand how your margin will evolve by the telecom unit and since you have a pretty really ambitious targets you been delivering well so far, it will be good to have better understanding. It's not that I want to insist on the point but maybe something you can help us understand better going forward.

And on the other moving parts - sorry, on the towers, can you help us on this side?

So about the tower that’s what we have said in the past, I think, is that agreement we signed with Cellnex is positive for us and the total, I will say - the total on the 15 years - the 15 years agreement is positive for us in term of net income and in terms of cash flow.

Sorry, in terms of net income, the impact is positive because the benefit that you get from financial expenses is higher than the cost that you book for the rentals? Is this…

Yes.

I do understand there the impact is positive on the operating level. I mean, if I look at your EBITDA margin, I guess, you have a higher operating cost.

Are you going to book it above EBITDA, I mean, the rentals that you pay?

What we have said is that this operation will have today - will have a positive impact on the net cash flow and the net results over 15 years. I don’t know what to say - so positive for us.

Okay. Thank you very much.

In other terms, this agreement has no negative impact in terms of profitability. So over the 15-year period, at the end of the day we save money compared to the previous situation.

It's very clear. So there is no - it's not an increase in our operating OpEx because of this agreement over the period.

Not even at the operating level, so this means that renting the infrastructure from a third-party is going to cost you less than what you were, let's say, paying for the operational cost to maintain this infrastructure musts. Is this what you're saying?

So regardless of my...

The rental fee plus all the expenses we had been in the past and we will not have in the future. The full balance of that over the 15 years period is positive for us.

Okay. So the deal with Cellnex is going to be actually a driver of upside on your improvement on your EBITDA margin?

No, it’s part of the overall policy, which is our ability to increase our gross CapEx because of the process of the disposal. And in terms of operating cost over the period, there is no negative impact.

So one good news in term of the possibility we have to increase our gross CapEx, and good and positive news in term of OpEx because the final figures at the end of the 15 years period will be positive compared to the previous situation. That’s exactly what we have explained three months ago, so nothing new.

Okay. Thank you.

Yes, good morning, everybody. Thank you very much for taking my questions.

First question is to do with telecom ARPUs. Could you give us a bit of visibility on how you can start to deliver some ARPU growth?

And in the event that SFR, in particular, did manage to control its churn better going forward, is there a basis upon which Bouygues Telecom can continue to grow without being reliant on the very strong customer growth. So can you grow in the medium-term through ARPU alone?

The second question has to do with the telecom cost one-offs. We understand that there were €20 million of cost reduction in the first quarter, which you described as being non-recurrent.

Could you please give us a little bit of detail as to exactly how these non-recurring items sort of rose, so what was it to cost you to reconsider your energy cost accruals this quarter or to rethink your bad debt provisioning? Some more insight into that would be very useful.

And then a final question just sort of a follow-up to the tower point is that as the outsourcing of tower sites to Cellnex gathers pace through 2017 and into 2018, are you confident that you can still continue to expand your telecom EBITDA margin? Thank you.

So start about the ARPU. Just to remind you that our target is to have a stable ARPU in mobile first, and this would be done by three things.

First, increase of the IN ARPU. Second, we still are in increase of new share in our customer base, so negative impact of course in the average ARPU.

And third, you might view that we begin to serve this quarter a slight up in incoming ARPU due to structural shift in customer usage, so customer are using more and more data instead of voice [indiscernible]. So this has negative impact of ARPU.

But without an impact of EBITDA because of course we have less interconnection cost on the opposite side. About the mobile, on the fixed ARPU, our strategy is today volume strategy as we have already explained before.

And on the long-term, our target is to increase our fixed ARPU but it’s not our strategy today. And of course we think today that we can continue to grow in the market in mobile as in fixed as we are dismal effect in the last quarter.

I didn’t say that we will have very, very high performance each quarter but we want to deliver ascertainable growth on the long-term. About the cost reduction, I think that I have explained during the call where the €20 million non-recurring charge is coming.

As you know it’s not linear. We do not ask some linear - exactly linear cost expenses.

We always have some quarter on low cost and some thing or less, it depends. But at this time, as we know that you will be surprised by the growth in EBITDA, we wanted to explain to you where more precisely from where it is coming.

So the main return on the €20 million of non-recurring gain in operating expenses is some expenses that we had last year on energies. We have also some - you know that we are accounting for our bad debt.

We are in three years after the provision, so we had bigger level impact that of provision in 2012 and 2013 after year-end three in the market and we had to accounting that in the EBITDA in 2016 and did not still incur this year of course. And the last point was phasing in handset subsidy spending.

This year we have - we decided to subsidize the handset for Christmas 2016, and last year, we didn’t do that for Christmas 2015 but more in January 2016. That’s why we have different phasing about these expenses.

And your last point was about Cellnex but I think that we have already answered that.

Sorry, on the previous question, you made the point that when you aggregate all of the operating costs, which presumably include depreciation charges, and over 15 years you believe the deal will be net income accretive. So what I'm asking is higher up the income statement, so the telecom EBITDA margin level, as the outsourcing to Cellnex phases in over the course of the next four or five quarters, will that get in the way of EBITDA margin expansion?

First, the differentiation charges are not in our EBITDA. So that’s the point, first point.

About impact of Cellnex on EBITDA, we won't have an impact this year on EBITDA about the sales of towers - the transfer of towers to Cellnex.

Okay. But as you transfer towers to Cellnex, you incur rental fees.

So that will be a new cost above the EBITDA level that wouldn't have been there previously? Okay, I’ll just follow-up...

Yes, of course but very small this year. It will be only the beginning.

And we will begin the transfer of towers this quarter in Q2, so the impacts will be very, very low this year.

Okay. Thank you very much.

Hi, good morning. I've got two questions please.

Firstly, there is obviously been a lot of headlines recently about the Belt and Road Initiative, and I appreciate China is now a major market for you. But do you think there is any read across to your business from - there obviously going to be a serious of large infrastructure projects around the world and if you could maybe comment on whether you think that may impact you down the road?

And then just secondly on the telecoms business. There was a slowdown in your plan net adds, excluding machine-to-machine, both versus Q4 and versus Q1 last year.

So it sort of seems like those maybe a little bit of a loss in subscriber momentum in the business. Do you agree with that, and if so, what do you think is driving that slowdown in the subscriber additions?

Thank you.

So I will answer your last question about the Q1 mobile performance compared to Q4 2016 and Q1 last year. We are very satisfied by our performance.

I just remind you that at the end of 2014, we decided to setup target of plus one million customers in three years, so plus one million customers in three years is around plus 85,000 customers per quarter. We think that it’s a good momentum.

And as we are after more than that, we are very happy with our performance with plus 130,000 in Q1. Our goal is not to do very good performance one quarter and then to stop.

It’s to have a sustainable record in mobile and in fixed number of clients.

So regarding the various infrastructure projects in the world, you are perfectly right and we have explained that end of February and we see no change today. So we see a series of big projects throughout the world.

So in France, the Grand Paris Express program. In Central Europe, we see - and it's part of the growth of Colas - we see infrastructure project in Central Europe financed by the EU.

In U.K., for the time being we don't see new tenders but definitely the Prime Minister has decided to launch some infrastructure project on road and railways to offset or to balance the risk of decrease in of the U.K. growth.

In North America, clearly we see in Canada the launching of new projects, PPPs and so on, and we will have some results in the coming months. And in the states, clearly we see the first impact of the Obama Plan already in the various states and we will anticipate a growth in our road activity in U.S.

in 2017. And we anticipate some good news regarding the Trump Plan, which is for the time being not in place.

But again thanks to the Obama Plan, we will see very quickly good trend in U.S. for us.

So no change of the plan that we explained to you in February, and you will see that in the figures quarter after quarter in the coming months.

And maybe just to ask one follow-up on that. Would you be interested in perhaps through acquisitions expanding into some of the areas that are more direct or some of the geographies that are more directly exposed to this Silk Road?

In terms of building and civil works, certainly not, because we don't consider that the good strategy is to acquire new company for building and civil works. For our road activity, obviously we will continue the general policy of Colas, which is work well in good countries, booming countries, carriers aggregate as per plans and obviously we will continue to do that mainly in North America, because for us it's the best area to grow in the coming years.

So definitely we will continue to look at external growth for Colas in North America in the future.

Okay. Thank you

Yes, good morning. So two questions on my side, both on Colas please.

Could you explain us the behavior of EBIT in Q1? It's a little bit counterintuitive.

Sales are up 10%, EBIT is down. What explanation can you give on that, and most important, what's the guidance for the full-year for Colas in terms of top line and margin, please?

And my second question is on the acquisition of Graymont that you announced two or three days ago. Could you tell us more details on that?

What was approximately the cost of that acquisition? What size of company are we talking about?

What sales, what kind of margin? Thank you.

Yes, sorry for my last answer. Regarding Graymont, it's not a significant acquisition for Colas.

It’s part of the usual external growth. So we have bought some assets regarding this company, so we don't give any details in term of pricing or in term of size.

So it will reinforce the positioning of Colas in the States, but again it will not be a material at the scale of Colas, either in the States or more evidently for the whole Group. Regarding the outlook, we don't change our outlook for Colas for 2017.

So sales are expected to increase from some percentage, a small increase but an increase, and current operating margin is expected stable compared to 2016. And your first question and my last answer, is regarding the first quarter, there is absolutely no explanation and no trend in the first quarter results.

You know that Colas has a very seasonal activity. The first quarter - even if there is an increase in terms of net sales, the net sales of the first quarter represents less than 16% of the full-year.

And so as it is fixed cost business, you have direct impact or an impact in terms of operating profit. So if you have some more maintenance expenses obviously, you could have some variation in the negative operating income in the first quarter with absolutely no impact for the full-year.

So there is no explanation to give because of this very low level of net sales during the first quarter even if it is an increase for the quarter but with [indiscernible]. What is important is the fact that we maintain absolutely the outlook for the full-year.

And you will see that more at the half-year results and the third quarter.

Thank you.

Hi. Thank you for taking the question.

I just wanted to ask two things. First of all on the telecom side.

Just if you could get your comment on the level of competition we are seeing right now in the market. You have pretty bunchy offers €10 for broadband, €10 for 50-gig mobile offers.

This seems to become a bit of a habit. So can you explain us the strategy here.

On the fixed line side if I understand your previous comments well, are you pushing gross volumes at any cost for now to reach to 1 million adds target? And equally on mobile, if I could get your thoughts here and what impact this could have on your business in terms of dynamics between ARPU from new customers versus your existing backlog?

And secondly on the construction side. We’ve seen a very strong Q1 in the construction unit.

Can you explain us a little bit here, in particular what type of profitability you're seeing on new contracts and to what degree we should extrapolate or not this level of margins for the next few quarters? Thank you very much.

So yes, regarding your second question, the first quarter results allows us to maintain and to confirm the general guidance we have done in February for construction. So the guidance is clearly an improvement in terms of margin for the construction business in 2017 compared to 2016.

So there is absolutely no change coming from this first quarter regarding the full guidance we have given in February, so absolutely no change. The only message is that this first quarter confirms absolutely the guidance we have given for the full-year, so absolutely no change for the full-year compared to what we have said in February.

Regarding telecom?

So regarding telecom.

Sorry, to stay on the margin point. My question was more about that we’ve seen a big increase in margins year-on-year, so to what degree - we could, to a degree, extrapolate that or...

Again my answer is no change compared to what we have said three months earlier. So there is no reason to change something regarding the expectation that we have given and you have translate that your various model, so no change.

Expectation of a small margin increase, not that high.

No change there.

For telecom, so the competition remains strong but mainly on zero-end plans, we are able to stabilize our ARPU with our ability to monetize the quality of our network with our high-end customers. About the fixed market, our strategy is still growth strategy and we intend to reach of course the plus one million subscribers at the end of this year compared to 2014.

So no change in our strategy and no change in the market about the level of competition.

So my question was around the ARPU you're getting from new customers versus the outlook [ph]?

So it depends of course. If you - once we are launching promotions, ARPU is lower than when we don’t.

But what is good for us is our ability to cross-sell or to sell our subscribers and to - at the end of the day to have stabilized ARPU in mobile and that what we want to continue to have in the future.

So selling 50-gig offers at €10, you don’t think can have a dilutive impact on ARPU?

Of course it has a negative impact but we are able to compensate that by other services sold to the customers and...

And at the end of the day, the overall ARPU is not only the old one plus the various promotion we made. The mix is more complicated than that, and as you see, it's not - it's a fact.

As you see, given with some promotion because the markets remain very aggressive in terms of competition, we are able to maintain the ARPU because on the same time we have promotion. We have also the ability to cross-sell and to sell other services to our existing customer bases or to new clients able to contract with more valued contract, and then the result at the end of the day is stabilization of ARPU.

So don't think that the promotion is the only way to make money and to get new clients. It's obviously part of the business but we don't say and we haven't said that the market is very cool and relaxed.

We have always said that the market will remain very competitive. But again thanks to quality, thanks to services either in mobile or fixed, we are able to stabilize the ARPU at the end of the day for the whole because of the mix.

But the competition is very - is still there for promotion, and for sure, part of the business as will - is with the lower ARPU than the average level, for sure.

Okay. Thank you.

Hi. One question if I may.

On B2B, it’s a segment that’s not necessarily talked about a lot. Could you quantify the size of the revenues available in the SME and SOHO segment, your market share and what ambition you have to grow?

So in the B2B market, we are - just I remind you that we are only three operators mainly in the mobile market. Our market share in mobile is between 15% and 20%.

In the fixed B2B markets, the situation is very different, with Orange with dominance with maybe between 70% and 80% market share. I think SFR has between 15% and 20% and we are only at 2% or 3% with some other local and small operators.

So our strategy is to defend fixed. On the mobile, we want to continue to strengthen our position, thanks to the quality of our 4G network.

And in 2016, we were able to attract some very big customers like Váci [ph] for example, [indiscernible] and so on. And in 2016, the BVA Market Research ranked Bouygues Telecom as the best operator in France for Orange business service and SFR business about customer satisfaction.

On the fixed side, we have launched FTTH fiber offers in 2016 for companies, and we - as I said during the call, we are accelerating the rollout of the Fiber to the Office, thanks because it is linked with the rollout of the Fiber to the Internet we are doing at the same time, and we want to come to go in the fixed market. We can do that ourselves, but we will also study growth opportunities if there are some things to do.

Okay, great. Thank you, guys.

Good morning. Thank you.

Just had two questions.

Good morning.

Good morning. Just the first one on Colas.

Clearly the French market for building seems to be getting better. Your order book is also getting better.

I just wanted to get any feel from you on the pricing environment you're building in France, if you are seeing any sort of improvements in the contracts we're winning just to give us indication in terms of margin, not for this year but going forward, if you expect this margins to go up? And my second question regarding content in telco, so just coming back to some of the questions before.

I just wanted to ask you if you were feeling under more pressure to actively sale SFR Sports to your customers, now that they will - next year show the Champions League? And if you also the need to do a more structural deal with Canal, a bit like what Iliad and Orange have done in terms of pushing also the Canal offers to your customers?

Thank you.

So about France, so our content strategy is clearly an open content strategy. We don’t think that offering this content is, I would say, profitable strategy because as you know content is very costly and we don’t think we will be able to monetize this contents with our subscriber base.

Orange tried to do that - tried to do in the past and didn’t success. We understand about SFR contents.

We understand that SFR would like to stabilize its share towards operators but today it is not still the case. Your last question was about the agreement between Canal and Iliad.

Just I remind you that this agreement is only about the Canal free offer which is TV by Canal Panorama or for Orange it is family by Canal and it is not the exclusive content of Canal about the premium channel and it is not very differentiating. We already proposed the same channel through our [indiscernible] option and for the time being we haven't seen any impact on ourselves coming from the clients.

We would like to leave Bouygues Telecom to go to Free or Orange to take this offer, but of course we closely monitor any commercial effect of this offers, and we - in the figure, we don’t exclude to propose TV by Canal option if we think that it is good for our customers.

So regarding Colas, obviously we see restart in the road market in France for the reason I mentioned previously. Obviously if the volume and the number of tenders increase, it’s good for the competition environment.

For the time being, we don't anticipate a big increase in terms of pricing because even if there is a restart, the local authorities remain under budget pressure. So we prefer to have an increase in terms of volume of works than in terms of price, because at the end of the day the budget of the local authority are not increasing or increasing a lot.

And so we consider that it's good for the market. It's good for the competition because the competition will be less intensive but we don't anticipate an increase in terms of pricing.

But at the end of the day, for sure, an increasing term of volume will have a good impact in our margin but not because it will be an increase in terms of selling pricing.

Thank you. Very clear.

Hi. Thanks for taking the follow-up questions.

I have first question on the roaming impact. Can you remind us the expected roaming impact in 2017?

Is there a positive scenario where you could get more market share in visitors roaming on your network and at the end roaming regulation could be a positive for you? And second question is on B2B/wholesale.

We have on B2B the emergence of a new player, [indiscernible] giving contracts. Is there anything in terms of M&A on the telecom side that you could do in order to get bigger in B2B and wholesale?

Thank you.

So first about European roaming regulation. Yes, you’re right.

So the impact of this regulation is, first, the evolution of roaming charges for end customers from 2017. So this will have of course a negative impact on our revenue and on our EBITDA, but this change has already been anticipated in Bouygues Telecom offers in the past because some of our offers already included data roaming, I think it was for offers from €25 per month.

That’s the first point. Second point is the roaming ties bid between foreign operators.

These ties would be lower in the future than it is now. So should have a positive for interconnect roaming cost will have to pay to foreign operators but of course we will have - we could have a positive impact through strong lines also usage coming from foreigners taking their holidays in France mainly in July or August.

So we will see this summer what will be the result of that. At the end of the day, we will think that the impact today we forecast today slight negative impact on EBITDA with retail compared to last year.

That’s about roaming. About B2B activity, today we want to continue to grow in the B2B of course fixed activity, as I said before.

If there are some M&A opportunities we will study them, but it doesn’t mean that we will do them.

Thank you.

Hi, a very quick follow-up on Colas that we've had a nice improvement in France. International was weaker.

Can you share a bit also around the perspective on this? You mentioned a couple of broader macro perspective but to what degree we can expect that to flow into orders in the coming quarters?

Thank you.

The international activity for Colas also has good highlights or outlook in front of it, mainly because of Central Europe and North America. So we are quite confident that we will have an improvement in the U.S.

situation, Canadian situation and Central Europe situation in the coming quarters.

Thank you very much.

Okay, so no more questions. So thank you very much for joining us today.

We will be announcing first half 2017 sales and earnings on August 31 this year. Should you have any question, please contact our Investor Relation team.

You have their contact information on the Press Release. So thank you very much for all of you and have a good day.

Bye.