France Telecom slows customer losses in Q2 as Free roaming deal boosts results

France Telecom (FT) has reassured investors with better than anticipated first-half results, indicating that it can fight back against low-cost rivals, especially Iliad's Free Mobile.

The company said it lost 615,000 French customers in the first three months of the year after Free Mobile launched its cut-price service, but has been able to stem customer losses to 155,000 in the second quarter.

FT CEO Stéphane Richard said that domestic revenues fell by only 1.2 per cent in the second quarter--lower than expected due to the roaming deal struck with Free Mobile, reports Les Echos. This deal is estimated to provide income of around €500 million during 2012, a figure Stéphane Richard agreed was "a realistic order of magnitude", according to the French newspaper.

Richard was also bullish about the future: "We have withstood the shock that constituted the arrival of the fourth operator [Free Mobile]," he said, according to Les Echos. "At least in its first phase, the impact of Free Mobile is behind us."

At a group level, the company said that sales declined by 2 per cent to €21.8 billion in the first half, with net income down from to €1.9 billion compared to €2.1 billion in the year-ago period. 

Richard also indicated that the group would cut back on its marketing costs, and was looking more closely at reducing handset subsidies. However, he said he disagreed with the legal action taken by  Iliad against SFR, which claimed that subsidies are nothing more than consumer credit in disguise. Richard said he believes handsets subsidies are understood by customers, and there will be "a strong appetite" for this method of financing when the new iPhone 5 is launched, according to Les Echos.

Separately, Richard said that France Telecom is keen to resume its acquisition efforts in Europe, but ruled out a merger with German rival Deutsche Telekom. "I am not saying that we are going to buy everything, of course, but we will see and follow closely the situation in the big European markets where we are," he told Reuters.

The FT chief dismissed rumours that it might dispose of its stake in Everything Everywhere (EE), and confirmed that the company had not held any talks with private equity firms on this topic. However, he kept the story alive by suggesting that it "could be an option" to buy the Deutsche Telekom stake in EE, but added "as far as I know they are not sellers themselves."

For more:
- see this release
- see this Financial Times article
- see this Les Echos article (translated via Google Translate)
- see this Reuters article
- see this Bloomberg article

Related Articles:
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Bouygues CEO wants to end Orange/Free Mobile roaming deal
Salanave: How French operators are adjusting to 'the new normal'
Report: SFR, Bouygues plan job cuts amid tough low-end competition
Analyst: Free Mobile driving structural change within France

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