France Telecom profit hit by impairment charge

French operator group France Telecom has seen its net income slide by 79 per cent year-on-year to €820m for the full year 2012. The firm’s profit was substantially impacted by an impairment charge of €1.841bn in 2012 on units in Poland, Egypt and Romania.

Consolidated revenues stood at €43.5bn, a decrease of 0.6 per cent year-on-year. There were also positives for the firm; mobile unit France Telecom-Orange had 230.7 million customers at 31 December 2012, an increase of three per cent year on year. In Africa and the Middle East the firm saw seven million net additions and now it has 81.6 million customers in those markets.

The group also launched 4G services in six countries.

Orange Chairman and CEO Stéphane Richard described 2012 as “particularly turbulent”, but said that the group showed its resilience by achieving its financial targets, such as an operational cash flow of €8bn.

“In addition, the group continued to capitalise on its networks, with almost €6bn of investments, and in particular it accelerated the rollout of optical fibre and 4G in France,” he said. “The Group’s customer base surpassed 230 million globally, of which over 80 million are in Africa and the Middle East, an increase of ten per cent on a year earlier.”

The results of another Europe-dominated telco reinforces the sense of gloom across the industry, according to Emeka Obiodu, principal analyst at research firm Ovum.

“We are not surprised by this. In France where the entry of Iliad’s Free Mobile has triggered intense price competition, revenues have fallen by five per cent on a comparable basis,” he said. “This matters a lot as France Telecom makes about half of its revenues from its home market. Sadly, better performance in smaller overseas markets is not going to be enough to offset such a big challenge at home. An impairment charge in Poland compounded the gloom and the performance of Everything Everywhere in the UK leaves much to be desired”.

However, Obiodu added that Spain offers some hope to the group. There, France Telecom grew its revenues at a time when its peers in the market are struggling.

“It attributes this to increases in mobile internet usage and take up of triple play bundles. Can France Telecom recreate its Spanish success in France? Unfortunately, it is unlikely. And this is the crux of the matter,” he said.

“For all the talk about a single EU market, each country’s telecoms market remains intrinsically individual, independent and unique. The group is the dominant player in France, but has had to pursue a challenger strategy in Spain. As such, the group is akin to the hippy teenager in Spain, but a full member of the establishment in France.”

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