For the quarter ending March 31, France Telecom posted revenue of 11.62bn euros ($14.99bn) up from 11.51bn euros ($14.85bn) in the year-ago quarter. The rise came despite the result being adversely impacted by consolidation activity, notably the disposal of Orange Denmark. However, the carrier confirmed that foreign exchange variations had a positive impact of 138m euros ($178m) on first-quarter revenue.
The quarter also got a boost from a government decision to end at the start of the year its so-called Bill-and-Keep mechanism by Orange, France Telecom’s mobile unit. The end of that system resulted in an increase in call-termination charges paid back to third-party mobile operators, adding 201m euros ($259m) to France Telecom’s bottom line in the quarter.
Meanwhile, gross operating margin amounted to 4.38b euros ($), up 3.3% from last year’s figure, as a result of cost-cutting efforts.
France Telecom does not post net income figures on a quarterly basis, despite the fact that it has presented the figures under new International Financial Reporting Standards accounting rules, instead of French GAAP. Publicly listed companies in Europe began the switch to IFRS at the start of the year. The aim of the new rules is to harmonize the global presentation of financial results, making it easier to compare companies across borders.
This change was cited earlier this month as a reason for the alarming rise in debt levels at France Telecom. Its debt has risen by 6bn euros ($7.7bn) to a staggering 49.9bn euros ($64.48bn), as it conforms to the new accounting rules. In addition, France Telecom is on something of a spending spree at the moment.
Orange continues to be the bedrock for the carrier, and the unit provides most of the revenue growth for the group, accounting for 45.8% of the overall revenue. For the first quarter, Orange posted revenue of just over 5.3bn euros ($6.83bn), up 8.9% year-on-year. Subscriber numbers rose in most markets giving an overall increase of 12.9%. However, in France, subscriber figures fell 4.5%.
This news was further compounded by Orange’s poor performance in the UK, one of its core European markets, where revenue fell 4.3% year-on-year to 1.36bn euros ($1.75bn). The mobile operator blamed the decline on falling termination rates. Average revenue per user in the UK was down from 273 euros ($352) to 270 euros ($348), and minutes of use per subscriber fell from 143 to 142. This is worrying, according to UK analyst firm Ovum, because although UK contract customers rose to 33.6%, it is thought the majority of Orange UK customers are prepaid. Ovum said Orange is trying to increase customer spend in this segment through its promotional loyalty scheme called Repay for high-spending prepaid customers.
Looking forward, the carrier said its first-quarter results have enabled it to reaffirm its guidance for 2005. The company has set a target of 3% to 5% revenue growth.
