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Mobile services

France's Bouygues Hikes Profitability Targets

Bouygues Telecom has sharply raised its profitability targets after making better-than-expected progress on cost-cutting activities and issuing a bullish outlook for network sales.

France's third-biggest mobile phone company, Bouygues Telecom recently rejected a takeover bid from cable group Altice and is under pressure to prove that it can thrive as a standalone player. (See Bouygues Chief Bitter Over Iliad's Inclusion, Altice Queries Bouygues' Motives in Rejecting €10B Bid, Bouygues Says 'Non' to Altice and Altice Confirms Bid for Bouygues Telecom.)

Altice had hoped to merge Bouygues with its Numericable-SFR unit, currently France's second-biggest operator, and create a new market leader, but the move would have left France with just three network players and ran into opposition from political figures.

Bouygues is now insisting that it can boost EBITDA from less than 16% of revenues in 2014 to 25% in 2017 and as much as 35% in the long term.

It says it is confident of realizing savings of €400 million ($448 million) across its fixed and mobile operations between the end of 2013 and 2016 -- €100 million ($112 million) more than it had originally planned.

Bouygues already claims to have slashed €600 million ($672 million) in costs between 2011 and 2013 -- more than double an initial target -- and it will have achieved overall savings of about €800 million ($897 million) over the 2011-2016 period if it can realize its latest objectives.

That also means the company will have cut operating costs per customer by 40% over this period.

Bouygues says it has now shed around 2,000 employees in connection with its cost-saving initiatives, with overall staff numbers falling from 9,659 at the end of 2012 to 8,817 in December 2014.

Besides streamlining its fixed and mobile operations, the company believes it can increase sales from network activities by 10% between 2014 and 2017, adding another 1 million customers to each of its fixed and mobile businesses over that period.

Network-related sales accounted for 89% of the €4.4 billion ($4.9 billion) that Bouygues generated in revenues last year, but were 7% lower than in 2013.


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Although the year-on-year rate of decline slowed to 3% in the first six months of this year, Bouygues will need to make some big improvements in what remains a fiercely competitive market if it is to boost network-based revenues from €3.9 billion ($4.4 billion) last year to €4.4 billion ($4.9 billion) in 2017. (See Orange Earnings Dip on Price Competition and Iliad Plans Next Assault on French Rivals.)

Its customer-growth projections also look ambitious: The broadband business picked up another 415,000 customers in 2014 to end the year with nearly 2.43 million in total, but Bouygues managed to lose 22,000 mobile customers over the same period, leaving it with about 11.1 million subscribers in December.

That said, Bouygues has staged something of a mobile turnaround in the first half of 2015, adding another 312,000 subscribers to bring its total to more than 11.4 million, and maintaining this momentum will be absolutely critical.

The operator says it has been making improvements to its network and tariff plans. By aggregating spectrum in the 800MHz, 1800MHz and 2.6GHz bands, it plans to launch 300Mbit/s services in the coming years and also aims to increase 4G coverage to 99% of the French population by 2018 from a current level of 72%.

A network-sharing agreement with Numericable-SFR is designed to help Bouygues expand its footprint while saving about €100 million in operating costs and capital expenditure from 2018.

Bouygues plans to spend about €750 million ($840 million) in capital expenditure each year over the foreseeable future, having invested about €684 million ($766 million) in capex in 2014.

The share price of the Bouygues Group, which is also a major player in France's construction industry, had risen by 4% on the Euronext Paris exchange by lunchtime Tuesday following the company's update.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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