For the six months ended June 30, France Telecom posted a 24.1% fall in net income to 2.76bn euros ($3.51bn) from 3.63bn euros ($4.62bn) a year earlier. Sales rose 9.3% to 25.85bn euros ($32.96bn) from 23.66bn euros ($30.12bn) a year ago.
The apparently healthy rise in sales was mostly down to FT’s acquisition of the Spanish mobile operator, Amena Movil, for 10.6bn euros ($12.9bn) in July 2005. When this acquisition is discarded, sales growth was a much less impressive 1.4%.
France Telecom continues to rely on Orange to act as its primary growth engine, and during the first six months of the year its mobile sales helped make up for a drop in revenue from fixed-line and business services. Sales from Personal Communication Services (or mobile) rose 22.3% year-on-year to 13.43bn euros ($17.09bn) when the Spanish acquisition is included, and only 6.1% when it is not.
During the six months net debt at the carrier fell to 47.23bn euros ($60.15bn) from 47.84bn euros ($60.92bn) at the year of last year. This is considerably down from the record 68bn euros ($74.6bn) it owed back in 2002, when it posted one of the largest ever net losses in French corporate history. The loss was so large that many questioned whether the carrier would survive, and it took an aid package organized by the French government, and a new management team to turn things around.
However, in recent times the carrier was forced to issue two profit warnings in quick succession. The first warning came last October and the second in January. In February it also revealed plans to lose 17,000 positions, or 11% of its 203,000-strong workforce, but said at the time that this would be achieved through natural wastage, mostly in France.
When France Telecom issued its second profit warning in January, it also forecast lower-than-expected like-for-like revenue growth of 2% in 2006. However, it now seems that it cannot even meet this revised target, and it has warned that it sees no rebound in sales before the end of 2006.
Today, I can tell you we will not be at 2%, but I cannot tell you where we will be, said the carrier’s finance director Gervais Pellissier. Later on, he told analysts that the carrier preferred not to give revenues targets where the business environment could change. FT is sticking to its 9% sales growth for the year, but again this will mostly as a result of the Amena Movil acquisition.
Its ADS shares on the New York Stock Exchange fell 1.32% to $22.40 where shares in the carrier have fallen by as much as 30% in the past year.