EU incumbents face cost control challenge

A slew of 2Q and 1H11 results from incumbent European operators released today, reveal that cost cutting remains the watchword as firms struggle to maintain sales growth and profits
Here’s the headline figures at a glance.
Grew pre-tax profit 20% to £533 million (€608 million) year-on-year during calendar 2Q11 – the firm’s fiscal first quarter -, despite a 5% drop in revenues due mostly to a reduction in mobile termination rates.
Chief Ian Livingston noted the gains are due to a higher share of DSL broadband subscribers and progress at its Global Services division, which secured “its largest ever contract in Latin America” during the quarter.
France Telecom
Net income almost halved during the first six months of the year, falling from €3.7 billion at end 1H10 to €1.9 billion this year. The firm’s performance seems to have been stymied by slow sales growth, with revenues of €22.5 billion in 1H11 compared to €22.1 billion a year ago.
The operator’s performance was hit by problems at its Egypt and Ivory Coast units, and a VAT rise in its domestic market in January, however chief Stéphane Richard predicts a turnaround in the African businesses in the back-half of the year.
The Spanish incumbent blamed challenging market conditions and regulation for a 16.3% fall in net income to €3.1 billion during 1H11. The firm continues to struggle in its domestic market, where revenues fell 6.1% to €8.7 billion, but is thriving in Latin America with sales up 18.4% to €14.1 billion.
Company chief César Alierta says Brazil was the stand-out market during the period, noting that the country will soon become the firm’s main source of revenue. “We remain focused on value and, over the coming months, will continue to leverage our scale, scope and diversification to achieve our full-year guidance.”