technicolor - 2018 Registration document

PRESENTATION OF THE GROUP

ORGANIZATION AND BUSINESS OVERVIEW

Organization With the acquisition of Cisco Connected Devices in November 2015, Connected Home doubled its size, and increased its industrial and technological scale across all major geographies, particularly in North America, the largest market in volume and value. The segment is structured around dedicated teams focused on the development of our partnership with Pay-TV operators and Network Service Providers. The segment also benefits from a strong transversal services organization including operations, global supply chain management, procurement, sales operations, quality assurance, and hardware performance. This organization also hosts all business re-engineering and transformation programs for Connected Home. Connected Home had approximately 1,602 employees at the end of December 2018, of which around 269 employees belong to the Manaus manufacturing facility in Brazil. Contract structuring and process In most cases, a Connected Home customer issues a request for proposal (“RFP”) or a request for quotation (“RFQ”) for a product they wish to procure. All vendors, including Technicolor, quote their best terms, based on their understanding of the product. Typically, a shortlist of considered vendors is created and technical discussions are held with those vendors. A best and final offer is made, and one or two vendors are awarded. Our offers, which include pricing, are made considering the best view we have on forward looking component costs, the R&D effort to develop the product, and fixed costs. The standard contractual process is divided into five main steps: presale partnership to help refine a new product definition; • request for Price/Request for Quote process; • development, which ranges widely from about 6 to 18 months; • Global Internet traffic is growing, fueled by increasing service consumption, particularly video through Over-The-Top services, as well as the connectivity of millions of additional devices, often referred to as IoT. With the increasing amount of data that will cross global IP networks in the next few years, households will demand greater connectivity speed, which will drive transition to new standards and technologies (advanced video codecs, DOCSIS 3.1, 10G Fiber, G.fast, and 5G). The Smart Home and IoT ecosystems can increase customer retention and generate additional revenue as NSPs go beyond traditional triple/quad-play offerings and develop new services to increase Average Revenue Per User (“ARPU”). deployment; • maintenance. • Industry Trends

The CPE industry continues to evolve towards more powerful, more open, and more complex platforms and devices. This evolution will continue to provide more and more opportunity for new software services opportunities, sending CPE device information to the cloud for the application of artificial intelligence and deep learning algorithms, to arrive at richer insight of the health of the access and home network for the NSPs, as well as new service offerings to consumers. In 2018, our industry faced cost and supply continuity challenges resulting from global shortages of components. Technicolor led the industry in taking actions to mitigate the impact and guarantee supply. The component environment remains challenging: although the situation with the prices for memory chips is gradually • improving, the costs for MLCCs have continued to increase materially; starting from mid-2018, the segment is invoicing clients for the vast • majority of these identifiable component cost increases. The industry also experienced the significant drop in the cable video market in North American 2018, which was partially offset by stronger demand in broadband. Market Position in 2018 Technicolor achieved a market share of c. 17% worldwide excluding China (sources: Dell’Oro, IHS Markit, Technicolor estimates). The Group’s market position differs depending on market segments and geography. By product category, Technicolor was number two worldwide in value for broadband modems and gateways, with industry-recognized leadership in wireless and broadband technologies for Cable and Telecom operators. Technicolor was also number two worldwide in value for digital set-top box, with leading positions in the Cable and Satellite segments. Technicolor’s key competitors in the CPE market include Arris, Humax, Huawei, Sagemcom, Samsung, and ZTE. Revenue highlights The Connected Home segment generated consolidated revenues of €2,218 million in 2018, accounting for 55% of the Group’s reported consolidated revenues. Connected Home shipped a total of 39.1 million products in 2018, or more than 752,000 devices per week. By product category, video devices represented 56% of total volumes in 2018 (2017: 59%), while broadband devices represented 44% of total shipments (2017: 41%) of which 9.6% of total volumes from Manaus. On the video side, Ultra-High definition products represented around 33.3% of the Group’s digital set-top box revenues in 2018.

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TECHNICOLOR REGISTRATION DOCUMENT 2018