Tags: France Telecom | FTE | Deutsche Telekom | DTEGY | Telefonica | TEF | Iliad

France Telecom Struggles for Growth

By    |   Thursday, 07 Jul 2011 04:12 PM

France Telecom (FTE), the country’s largest telecommunications company and the fourth-biggest in Europe, has hit the skids. While it recently forecast a return to profit growth by 2014, analysts are skeptical. Earnings before interest, taxes, depreciation, and amortization (EBITDA) at France Telecom slid 1.3 percent in the first quarter from a year earlier to 3.73 billion euros ($5.33 billion).

The company’s shares have underperformed competitors such as Deutsche Telekom (DTEGY) and Spain's Telefonica (TEF). France Telecom’s stock has gained 12.5 percent in the past year, while Deutsche Telekom has surged 24 percent and Telefonica has risen 19 percent.

France Telecom will face increased competition in its home market next year from the entrance of a fourth mobile service provider, Iliad (ILD).

"Given the tough start to 2011 and lingering uncertainty about a new mobile entrant in France in 2012, we are not sure that the (company’s) medium-term guidance will be correctly appreciated by investors and the market," Benoit Maynard, an analyst at Natixis, wrote after the company released its forecast.

France Telecom faces the classic problem of a big phone company in a mature market: Growth has tapered off while the cost of modernizing networks to accommodate mushrooming data services continues to rise.

Acquisitions, dispositions

The company wants to continue its acquisitions in emerging markets, following recent purchases in Morocco, Iraq, and Egypt. Last year, France Telecom set a goal of doubling emerging market revenue by 2015, with an emphasis on purchases in Africa and the Mideast.

Meanwhile, it is considering sales of some assets in Europe outside of France. Market speculation has centered on Austria, Portugal, Belgium and Switzerland.

Analysts don’t think the company’s woes are over. “The operating environment remains challenging, with a combination of regulatory pressures, structural declines in fixed-line telephony, and maturing mobile operations,” writes Standard & Poor’s analyst Alex Wisch.

“Beyond France, we think FTE is also over-exposed to a number of markets we expect to remain tough over the next several years, including Spain, Poland, and Romania.”

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France Telecom (FTE), the country s largest telecommunications company and the fourth-biggest in Europe, has hit the skids. While it recently forecast a return to profit growth by 2014, analysts are skeptical. Earnings before interest, taxes, depreciation, and amortization...
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2011-12-07
Thursday, 07 Jul 2011 04:12 PM
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