Growth for Thales in Satellites & Security activities ... · in Satellites & Security activities Strengthened cooperation with Alcatel. 2 ... Optimising "Go-to-market together "4

Denis Denis RanqueRanque, , Chairman Chairman & CEO of Thales & CEO of Thales 5th April 2006

Growth Growth for Thalesfor Thalesin Satellites & in Satellites & Security activitiesSecurity activities

Strengthened cooperation with AlcatelStrengthened cooperation with Alcatel

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A major step in Thales’ development

Accelerates growth

� Acquisition of activities worth 2 billion euros in the Security/Transport and Space domains

Strengthens Thales in its capacity as a major critical information systems integrator

� Leadership positions in assets brought

� Widening of the institutional customer base

� Dual technologies

Broadens its multi-domestic presencein Europe & North America

Strengthened position at the heart of the consolidatio n of European Defence & Security industry

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A strengthened industrial partnership with Alcatel

� Rationalisation of the scope of activities

� Specialisation in respective areas of expertise

� Strengthening of industrial and technological coopera tion

� Sharing of R&D & patents

� Benefiting from a wide base of common technologies

� Sharing joint centres of excellence in network cent ric architecture

� Boosting the marketing & sales momentum

� Access to the respective commercial networks of bot h groups

� Optimising "Go-to-market together "

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Evolution of shareholding

� Increase of Alcatel’s stake in Thales’ capital

� Shareholders’ pact provisions upheld

� Government’s strategic interests preserved through specific provisions

Post operation shareholding Current shareholding structure

Float48,9%

Public sector31,3%

GIMD (1)

5,7%Employees

4,6%

Alcatel9,5%

Public sector27.1%

Alcatel21.6%

GIMD (1)

4.9%

Employees4.0%

Float42.4%

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New leadership positions in key capabilities

(1) Proforma figures(2) On a proportional basis (3) Remaining stake in JVs held by Finmeccanica

Transport Systems Division

(TSD)

Integration & Services Division

(ISD)

67% in Alcatel Alenia Space

(AAS) (3)

33% inTelespazio (3)

Security /Transport

Space

Worldwide N°2 of signalling solutions for railway and metro transport

Specialist systems integrator in the transport & energy domains

European leader in satellites, Worldwide N°2 in commercial satellites and N°1 for payloads

Worldwide leader in satellite services

Total revenues of perimeter contributed: € 2bnCurrent income from operations: ~ € 135m

2005 Revenuesin €m

900

1,100

6

TSD per market

2005 revenues

Security of Transport & Energy infrastructures

Urbannetworks

18%

Railway transport

(main lines)82%

ISD per market

Public sector/

Security~35%

Transports ~ 35%

Energy~ 30%

~ 4 100Employees (100%)

~ 900Revenues

~ 2 000Order book at end 2005

2005 in €m

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Transport Systems Division (TSD)

Integrated signalling systems for rail transport and urban networks

A strong growth market

� € 5bn / year� Annual growth +5 / +6 %� Products with ever increasing technological content

Remarkable operational track record� + 15% / year over the last 10 years� Operational margin up to 2 digit figure� Order book of more than 2 years

Strategic positioning

� Within strong growth segments

� trans-European control systems for trains (ETCS),

� radio control for metro systems (CBTC)

� On a world-wide scale � 3,100 employees, 11 operational sites

� With a strong technological culture� 1,150 engineers, for the past 5 years R&D represent s 10% of revenues

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Transport Systems Division (TSD)

Integrated signalling systems for rail transport and urban networks

Main Lines� TGV Links Spain

4 out of 5 lines in service

� Ankara – Istanbul� DB Berlin (ETCS)� Lötschberg Tunnel (Switzerland )

Urban networks� New-York – JFK Airport� London – Jubilee & Northern Lines� Paris – Line 13� Hong-Kong – Disneyland Resort Line� Shanghaï – Line M8� Dubai – Metro

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Integration Services Division (ISD)

Integrated systems for management of critical infrastr uctures(not including telecoms operators )

High potential for growth sustained by:

� Recognised expertise in « low current cabling » system s

� Major customers within the transport sector

� RATP, London Metro, German Railways

� Major customers within the energy sector

� Total, ENI, RTE,…

� Recent successes in airport systems

� Dubai, Orlando,…

� Established in France, Italy, Germany, Portugal, Spa in, Austria and Mexico

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Integration Services Division (ISD)

Transport

� Dubaï Metro:

� Control & communications systems

� Passenger information in real time

� Dubaï Airport

� Communications & security systems

� RATP� Tetra radio network integration

� TGV Lines in Spain

� Detection in real time of operational anomalies

Energy

� Total (Nigeria) / Agip (Kazakhstan)

� Integrated off-shore communication & control systems

� RTE: Fibre optic network

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Leader in the security of critical infrastructures

Control centres

Telecoms

Sensors

Thales

� Expert in homeland security applications

� Expert in the securityof critical infrastructures:

• Control centres

• Applications

• Sensors

� Expertise in major systems

Alcatel contributions

� Expertise in telecomms for critical infrastructures by a world leader

� Attractive customer portfolio in the transport and energy sectors

� Top quality telecomsprime contracting & engineering teams

Revenues of ~ € 2bn in infrastructure security systems

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Alcatel Alenia Space (AAS)

European leader by merging Alcatel & Finmeccanica acti vities

7,200Employees (100%)

1,000Revenues

1,700 Order book at end 2005

2005 in €mAt 67%

Distribution of 2005 revenues by activity

3/4 Observation& Science

1/4 Navigation

Civilcommunications

35%Civil

Institutions 45%

Defence20%

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Alcatel Alenia Space (AAS)

A complete range of civil and military satellite sy stems:� Communications� Navigation� Observation� Scientific Missions

Unique technological expertise and innovation:� Complete prime contractorship

� 8 civil and military programmes underway� Satellites

� 45 “spacebus” satellites (mainly communications): 40 already launched (25 still operational), 12 unde r development

� 11 Meteosat (weather)� 11 scientific� 8 monitoring

� Payloads

� 150 communication

� 36 environmental/ observation

� 20 scientific A

A first class industrial capability� 7,200 employees across 4 European countries

European leader grouping together Alcatel and Finmec canica activities

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Telespazio

2005 in €mUp to 33%

Large range of service offering

� Control & management operations for satellites

� Satellite capacity distributor

� Earth observation services

� Navigation

A diverse customer base

� Public and private satellite operators

� Broadcasters of media programmes

1,330 employees

� 6 sites in Italy, 4 sites in France

Order book at end 2005 ~ 240

Revenues 100

Employees (100%) 1,330

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Completing Thales’ expertise in large-scale defence s ystems

� Expertise in all aspects from integrated defence syst ems to space components

� Strengthening of relationships with significant ins titutional customers

� Strategic contracts� Symbol X (F)

� Syracuse (F)

� Helios (F)

� Sicral (It)

� Cosmo (It)

� Experience in all military use of space � Optical Observation

� Communications

� Observation radar

Contributed assets

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Thales, leader in high tech civil systems

� Major institutional contracts

� Galileo

� GMES, Cosmo

� Weather satellite

� Commercial capacities at the

service of major customers

� Space Communications

� Pay loads

� Integrated Systems for transport

Assets contributed

Benefiting from technological links

with a world leader in telecommunications

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Multi-domestic expansion

� A strengthened multi-domestic industrial presence i n Europe (Germany, Italy,…) and North America

* Excluding Telespazio : 1 330 employees mainly in F rance and Italy

+ 4,409

Total : 36,159

France

+ 1,464

Total : 4,450

Germany

+ 2,429

Total : 2,783

Italy

+ 856

Total : 1,113

Canada

… Employees of contributed companies*… Proforma Thales employees *

(with 100% of JV personnel, incl for AAS)

+ 670

Total : 2,091

Spain

+ 575

Total : 1,028

Belgium

+ 11,348

Total : 69,158

World

+ 9,907

Total : 58,990

Europe

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Capabilities with strong growth perspectives

Space

Security / Transport

� Renewed investment cycles in satellites :

� Implementation of triple-play

� Advantages of Galileo programme

� Increase in military budgets

� Outsourcing of telemetric operations,

� Satellite command & control,

� Strategic franco-italian positioning

� Strong market dynamics in the Transport and Energy sectors:

� Growing Security needs

� Increased infrastructure requirements

� Increasing technological content

GROWTH FACTORS

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A significant potential for operational synergies

� Objectives of operational synergies (for 2008) � approx 50m € for a full year

� Low start up costs

� Significant mid term potential� resulting from the cooperation agreement

� Strengthening of competitive position

� ISD access to Thales content

� Access to ISD platform by Thales

� Optimisation of marketing & sales policy

Security/Transport � Access to defence export

markets

� Development of applications for Telecom / Navigation / Observation

� Optimisation of R&D policy

Space

� Purchasing

� R&D

� Telecom networks

� Commercial network

Cooperation agreement

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Financial data

2006

� Contribution of :� Transport / Security : 100% of TSD & ISD

� Space : 67% of AAS & 33% of Telespazio

� Issuance of 26.67 million Thales shares in favour o f Alcatel� € 1,067m for a reference price of € 40 / Thales sha re

� Cash payment to Alcatel of € 673m*

2009

� Potential price complement on AAS on the basis of a n evaluation by a mandated expert (with share of upside above an eval uation of € 760 m)

Valuation of contributed assets : € 1,740mSecurity and Transport activities: ~60%

Space activities: ~40%

* not-including balance sheet adjustments

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An operation designed to create value

Acceleration of growth

� Revenue increase of more than €2bn

� In high-growth areas

Positive impact on margins

Financial stability and flexibility upheld

� Reduced debt of Thales at end 2005: €398m

� Cash payment of €673m

Accretive on Thales adjusted earning per sharefrom the first year onwards

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Next steps

Key steps before closing

� Agreement finalised with Finmeccanica

� Consultation of the Working Councils

� Opinion of the financial market authority (AMF)

� Approval of the Commission des Participations et des Transferts

� Finalisation of contribution agreements

� Clearance from the competent competition/ regulator y authorities

� Approval by Thales’ Extraordinary General Sharehold ers Meeting

Closing of transaction expected in 2nd half 2006

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Thales at the heart of European Industry consolidation

� Leadership positions in Thales’ key areas of expert ise

� Potential for growth acceleration

� Privileged access to major civil and institutional c ustomers

� Strengthening of Thales’ multi-domestic strategy

� Significant development potential of dual technologie s

A growth driven transaction designed to create value