France Telecom's Q1 profits dragged down by Europe, MEA seen as saviour

Increased competition in Europe and political upheaval in Egypt badly dented first-quarter profits at France Telecom (FT) Orange. While the company reported sales for the group up 2.5 per cent at €11.23 billion compared to the same period in 2010, EBITDA for the quarter was down 1.3 per cent at €3.73 billion.

Stéphane Richard, chairman and CEO of FT, maintained that the quarter's performance had been strong, according to a report carried by the Financial Times, "despite intensified competition in France and exceptional political conditions in certain emerging countries."

In an effort to improve its financial position, Richard said that FT is reviewing its European portfolio, with its business operations in Austria, Belgium, and Romania being evaluated as to their future.

With the exception of France, Poland and Spain, all the other countries in the company's portfolio are involved in the review, which will look at ways the company can consolidate or even sell operations, FT CFO Gervais Pellissier told reporters on a conference call, according to Bloomberg.

The operator also said its businesses in Africa and the Middle East were powering ahead with sales growth for the quarter of 5.8 per cent (excluding Egypt), and had targeted these regions to double their revenues by 2015.

France Teleocm had warned in February that multiple factors were weighing down its profits in France, where company gets more than half of its sales and profit. The company said the arrival early next year of France's fourth 3G operator, Free Mobile, had already triggered intense competition among existing operators, and that the increase in value added tax, which can only partially be passed on to customers, had been particularly damaging.

While FT is expected to launch several marketing initiatives to improve its performance in France, Reuters reported that analysts are awaiting the outcome of FT's strategic review before they change their negative outlook for the company. No disposals are thought to be under negotiation currently, and the company is expected to provide an update on its portfolio review at an investor meeting planned for May 31.

For more:
- see this Financial Times article
- see this Bloomberg article
- see this WSJ article (sub. req.)
- see this Reuters article

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