Bouygues Telecom reports 29% drop in earnings in H1 2014

Bouygues Telecom reported a 29 per cent drop in core earnings in the first half of 2014, as the French operator continued to suffer from ongoing pricing adjustments on France's mobile telecoms market.

The company, which is part of the telecoms and construction conglomerate Bouygues Group, said EBITDA fell to €332 million ($437 million) in the first six months from €469 million in the corresponding period of last year. Sales also fell by 5 per cent to €2.2 billion, out of total group sales of €15 billion. Net profit was 55 per cent lower at €22 million.

The group had been expecting to see a further decline in profitability at Bouygues Telecom, which is pursuing a restructuring programme in order to prepare for a future as a standalone fourth operator in France. The company said the first-half financial results were affected by ongoing re-pricing within the mobile customer base.

However, Jefferies analysts noted that while re-pricing pressure continues to weigh on the telecoms business, restructuring costs were also larger than expected: Jefferies had estimated restructuring costs would amount to around €200 million, but the actual costs came in much higher at €344 million.

"Any reversal in unused provisions would bolster FY EBITDA according to the company's definition and hence aid the attainment of FY guidance," the analysts added in a research note.

Bouygues Telecom confirmed its target of generating slightly positive "EBITDA minus capex" in 2014, and said it is continuing to implement its aggressive strategy to cut costs.

The company said in June that it planned to cut 1,516 jobs after the failure of talks to merge with SFR-- which was snapped up by Altice earlier this year--and continues to insist that it is making good progress, saying it has the "necessary strengths to regain increased competitiveness, as early as 2016, in a market with four players."

Little more has been said about a further consolidation of the French market since Orange and Iliad failed to reach an agreement on an acquisition of Bouygues Telecom. Iliad has since turned its attention to the U.S. market, where it made an offer for T-Mobile US. That offer was reportedly dismissed as too low, and it's not clear what further moves will be made.

For more:
- see Bouygues' results statement

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