France Telecom’s shares have fallen 7% following its H1 results.
French incumbent telco France Telecom released its H1 results on Wednesday. The company saw earnings before interest, tax, depreciation and amortization rise 14% to E6.1 billion. Total revenues rose 33.3% to E20.4 billion. However, the company also warned that its net debt had risen to E64.9 billion and that it may stay as high as E59 billion into 2004, if markets do not improve. As a result, its share price fell 7% on Thursday.
Investors’ fears are understandable. The company’s debt mountain, built up largely through the acquisition of 3G mobile licenses and mobile operator Orange, makes it one of the world’s most indebted companies (behind only GE, GM and Deutsche Telekom). France Telecom can afford to pay the interest with its fixed-line revenues, but if, as some fear, its mobile investment proves near worthless, the market valuation is still too high.
A survey published today by AT Kearney and Cambridge University found that only 4% of mobile subscribers believe they will use their phones to purchase goods and services. If this proves to be the case, it would spell doom for many of the firms that are relying on mCommerce. Even Orange would run into trouble. It may be one of the most valuable brands in the telecoms arena, but impressive subscriber growth won’t bring in enough cash to pay off the 3G debts. Revenues from data and mCommerce are vital.
But we should be wary of taking such surveys too seriously. Given the letdown of WAP and the negative press about mobile services, it’s no surprise people are apathetic. But just a few years ago, the same was true for Internet commerce and Datamonitor expects 104.7 million people will shop online this year in Europe alone.
It is likely that people will eventually change their minds and use mCommerce. The key for operators will be coming up with interesting applications. With its strong brand and coherent OrangeWorld strategy, Orange could be in a leading position here.
