France Telecom has lost E8.3 billion after writing off its MobilCom stake.
France Telecom and its 85%-owned mobile unit Orange have reported mixed 2001 results. France Telecom made an overall loss of E8.3 billion, following an E10.2 billion write-off. However, Orange’s ebitda doubled to reach E8 billion – above analyst estimates.
Most of the charges came from stakes in German mobile operator MobilCom and UK cable operator NTL. The value of the MobilCom stake was written down to zero, while the NTL stake was devalued significantly. The French telco also said it would cut debt by another E8 billion, partly through the sale of its 26.6% stake in Italy’s Wind.
Overall, the results give the impression of a company with the worst behind it. The Internet boom mistakes have been written off, but its actual businesses are doing extremely well. Orange, for example, is now the biggest mobile operator in the UK and France. Even Internet unit Wanadoo broke even at ebitda level.
Indeed, France Telecom’s cash cows look safe. Orange UK and France will continue to increase their revenues, and the French fixed-line unit will continue to bring in large (albeit declining) profits. However, the company may not have put its worries behind it just yet.
It needs a buyer for Wind, for a start. While Italian generator Enel owns the rest of the company, and has a great deal of cash to spare, it’s less clear that it has a burning desire to splash out on France Telecom’s stake. However, it’s hard to see who else would want to buy it. The French firm may be forced to sell to Enel, at a lower price than hoped.
In the longer term, after the Wind sale and the problems with MobilCom, France Telecom may end up without a mobile presence in Italy or Germany. This would be a major setback to its pan-European coverage plans. But it isn’t yet clear whether it would follow mmO2 and accept this diminished status, or splash out on still more acquisitions to shore itself up.
