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Profit Crunch for Euro Giants

Ray Le Maistre
LR Mobile News Analysis
Ray Le Maistre, Editor-in-Chief
2/25/2010

Two of Europe's biggest carriers today unveiled their latest full-year financial results, with the news reflecting how grim a year 2009 was for nearly everyone.

The past year has been particularly grueling for Orange (NYSE: FTE). As well as seeing its full-year revenues dip nearly 2 percent to €46 billion (US$62.1 billion) and its net income dip 25 percent to €3 billion ($4 billion), the carrier suffered a turbulent 2009 as personnel issues dominated the headlines. (See France Telecom Reports 2009, Shakeup at France Telecom, FT Signs 'Senior' Staff Deal, FT Suspends Restructuring, FT Responds to Suicides, and Further Tragedy at FT.)

As a result of the operator's woes, CEO Didier Lombard is stepping aside earlier than expected, and is being succeeded (from March 1) by Stéphane Richard (pronounced Ree-shar, for anyone considering calling him plain ol' Richard), who has already announced his new management team. (See FT Unveils New Top Team, France Telecom to Get New CEO, and FT's CEO Under Pressure.)

The French giant is still growing its worldwide subscriber base, though. It ended 2009 with 192.7 million customers (of which 132.6 million are mobile customers), up 5.7 percent from a year earlier.

Deutsche Telekom AG (NYSE: DT) also increased its global customer base, though by slightly less than 2 percent to 205 million, and also increased its annual revenues, by 4.8 percent to €64.6 billion ($87.4 billion), though this was aided by the consolidation of Greek incumbent OTE S.A. , in which DT holds a controlling stake. (See Deutsche Telekom Reports 2009.)

Without OTE's 2009 revenues of €5.4 billion ($7.3 billion), the German giant's overall sales would have been in decline. (See OTE Reports Q4.)

DT's profits, though, did take a hammering. Its net income sank by 76 percent to €353 million ($477 million).

The carrier also outlined some of its key objectives for 2010, including the rollout of HSPA+ mobile broadband services, with downlink speeds of up to 21 Mbit/s, in its top 30 markets. At the same time it's planning to offer a HSPA+ dongle (or "data stick") in the US, and offer its first HSPA+-enabled smartphones in the second half of the year.

The German giant also pledged to connect 75 percent of its 3G sites with Ethernet backhaul by the end of the year. Globally, DT plans to add 5,000 3G base stations this year.

Another of Europe's major carriers, Telecom Italia (TIM) , was also due to unveil its group earnings for 2009 this week and discuss a new three-year plan, but has postponed all of that until March 25 while its wholesale voice unit, TI Sparkle, is subjected to a money-laundering probe. (See T Italia Delays 2009 Results and T Italia Updates on Probe.)

The operator has issued a statement saying its 2009 group revenues were down 5.6 percent at €27.2 billion ($36.8 billion), while earnings before interest, tax, depreciation, and amortization (EBITDA) was roughly the same as in 2008 at €11.3 billion ($15.3 billion).

— Ray Le Maistre, International Managing Editor, Light Reading

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