For the first quarter to March 31, net income declined to 215m euros ($274m) from 494m euros ($629m) in the year-ago quarter. Belgacom’s earnings are being squeezed by falling fixed-line revenues as well as fierce competition in its domestic market from rival mobile operators.

Sales were also down 4.5% at 1.51bn euros ($1.92bn) from 1.57bn euros ($2.01bn) in 2005. However, excluding non-recurring revenue of 238m euros ($302m) from the disposal of Belgacom Directory Services in the first quarter 2005, revenue grew 12.5%, primarily boosted by the acquisition of Belgian network services provider Telindus Group NV earlier this year. Analysts had expected sales of 1.475bn euros ($1.88bn).

Belgacom offers fixed-line, internet, mobile, and IT services in Belgium. Telindus has been included in Belgacom’s consolidated accounts since January, and contributed 179m euros ($227.5m) to revenue at the carrier’s core fixed-line services, FLS, division. Services generated 40% of the Telindus revenue, and products 60%.

In 2005 Belgacom branched out into television after it acquired the broadcasting rights to Belgian football (Jupiler League) for the next three years. Belgacom TV passed the 50,000-customer mark at the end of April.

Revenue at the FLS unit rose 20.8% to 909m euros ($1.15bn), from 753m euros ($957m) in the same period in 2005, mostly down to Telindus. Out of the 909m euros ($1.15bn) sales, core activities including voice and internet raised 728m euros ($925.6m), Belgacom TV raised 2m euros ($2.5m), while Telindus contributed 179m euros ($227.5m).

Voice access and traffic revenue declined 7.7% compared to the year-ago quarter. However, FLS was able to improve its customer-retention trends mostly in the residential segment thanks to new pricing plans. Internet revenue increased 5% as the result of an 18% growth of xDSL lines.

Belgacom’s mobile unit, Proximus, added almost 7,000 new customers bringing its total mobile customer base to 4.26 million. ARPU levels for its active customer base rose to 39.8 euros ($50.64), but revenue from the unit declined 0.6% or 3m euros ($3.8m) to 527m euros ($670m) during the quarter as fierce competition took its toll.

Proximus is Belgium’s largest mobile operator, and competes with rivals such as France Telecom’s Mobistar SA and Royal KPN’s BASE in a country of 10 million people. Proximus is part-owned by Vodafone Group Plc and is the only mobile operator offering a 3G service for residential customers in the Belgian market.

Revenue at the International Carrier Services division, which is Belgacom’s international wholesale joint venture, rose 9% to 172m euros ($218m).

Looking forward, Belgacom stuck to prior guidance of a decline in both fixed-line and mobile revenues for the year. Sales at FLS are expected to decline 3%, and Belgacom TV is expected to a negative EBITDA impact of about 30m euros ($38m) to 40m euros ($50.1m), although customers are expected to top 100,000 by the year-end.

The outlook is equally depressed for Proximus, where increasing competition and the possibility of price declines of interconnections rates will place additional pressure on revenues, with an expected decline of 3%. It also warned that if Proximus is forced to maintain market share against very aggressive pricing actions of rivals, this could lead to a further decline of 2% in sales in 2006.

Shares in Belgacom fell 1.09% to 25.30 euros ($32.13) on the Brussels Stock Exchange as the markets digested the results and outlook. The acquisition of Telindus boosted the first-quarter results, but Belgacom will be under intense pressure to sustain growth and profitability of the enlarged entity going forward.