Bouygues Telecom looks set to face another difficult year after analysts revised previous EBITDA forecasts downwards for 2014 and said they expect to see further declines in earnings in 2015.
Jefferies analysts--who previously forecast a decline in EBITDA of around 20 per cent to €690 million ($822 million) in 2014 due to the weight of re-pricing pressure, higher marketing costs and the non-recurrence of a sales tax gain in the second quarter of 2013--have further trimmed their forecast for the French operator to €670 million. The operator reported EBITDA of €538 million--down €189 million year-on-year--for the first nine months of 2014.
What's more, the analysts said in a research note that forced migration from discontinued legacy plans will further cannibalise EBITDA in 2015, and said they "model €634 million". They also noted that while Bouygues insists that operating free cash flow (OpFCF) will be above zero in 2014, "there now appears to be less conviction about 2015. We model OpFCF slipping to a €(51)m outflow," Jefferies commented.
"The company now appears to be conceding that capex cannot be trimmed again next year to keep pace with eroding EBITDA," the analysts added.
The comments from Jefferies indicate that France-based Bouygues Telecom still has a fight on its hands to remain competitive in a market with four key players. It faces strong mobile and fixed competition from Orange and Numericable-SFR, while Free Mobile continues to add pressure with its low-cost mobile plans.
Bouygues Telecom, which suffered the most following the arrival of Free Mobile in 2012, has long been regarded as the most obvious takeover candidate should the market consolidate further, although previous efforts by Orange and Iliad to come to a deal reportedly collapsed over price. Bouygues Telecom recently unveiled a new range of mobile plans that it hoped will boost its ongoing efforts to increase its competitiveness in a market with four players.
In November last year, Dexter Goei, the CEO of Numericable-SFR parent company Altice, further stirred up the telecoms market consolidation debate in France after he made it clear that his company would be more than interested in buying Bouygues Telecom.
Meanwhile there was some good news for Bouygues Telecom at the end of December 2014: Reuters reported that the Conseil d'Etat, France's highest administrative court, ruled in favour of the operator in its appeal against the annual fees that operators pay the state for spectrum previously used for 2G to be reassigned for LTE. Bouygues Telecom had appealed against the way the fee was calculated.
- see this Reuters article
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