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Emerging Growth Pumps Up FT

Growth in emerging markets and domestic broadband, plus a tax break, helped France Telecom achieve a 41% leap in net income in H1

August 2, 2007

2 Min Read
Emerging Growth Pumps Up FT

Orange (NYSE: FTE) saw its stock jump more than 3 percent on the Paris exchange this morning as it reported improving revenues and much better than expected profits, helped by a strong performance from some emerging markets and some tax benefits. (See FT Reports 2Q07.)

For the first six months of this year the French carrier reported revenues of €25.9 billion ($35.4 billion), up 2 percent compared with a year ago and in line with expectations, and net income of €3.3 billion ($4.5 billion), up 41 percent from the first half of 2006.

The sharp jump in profits was largely due to a €671 million ($916 million) decrease in tax, though even without such one-time items the carrier's net income would have been €2.4 billion ($3.28 billion) -- 8 percent better year on year, and better than financial analysts were expecting.

FT's share price rose by €0.62, more than 3 percent, to €20.28 in morning trading in Paris.

The carrier cited strong growth in emerging markets -– including its mobile operations in Poland, Cameroon, Ivory Coast, Dominican Republic, Egypt, Jordan, Madagascar, Mauritius, Mexico, Moldova, Romania, Senegal, Slovakia, and Vietnam -- as one factor driving up its sales. Revenues from those markets accounted for 13 percent of all sales in the first six months, compared with 10 percent in the same period a year ago.

Even revenues from "mature Western European markets" -– which includes Belgium, France, U.K., Spain, Poland, Belgium, Switzerland, and the Netherlands -– were up slightly, a reverse of the trend that FT experienced in 2006.

In France, for example, FT reported an increase in revenues for its fixed services division to €8.8 billion ($12 billion), up more than 1 percent year on year, with rapid broadband growth countering the ongoing decline in traditional voice revenues.

On June 30, FT had nearly 6.6 million DSL subscribers, of which nearly 4.3 million were renting a Livebox home gateway. More than 3 million of those French broadband customers use VOIP services, and 837,000 subscribe to the operator's IPTV services. A year ago FT had 306,000 IPTV users in France. (See France Telecom: 'More IPTV, Please'.)

CEO Didier Lombard said the carrier is benefiting from service innovations being driven by the Orange Labs it has set up. He cited the Unik fixed/mobile convergence service and the early stages of the operator's fiber-to-the-home (FTTH) rollout as examples of new services that are attracting and retaining customers and driving revenue growth. (See FT Intros Orange Labs Network, Orange Doubles FMC Customers, and FT Fleshes Out FTTH .)

— Ray Le Maistre, International News Editor, Light Reading

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