France Telecom net profit drops 10.6%

The French telecommunications operator France Telecom's net profit slid in the first six months of 2012 by 10.6 percent due to tough competition from the arrival of new rival Free on the mobile market, results showed on Thursday. Net profit in the first half slumped by 10.6 percent from the same period a year earlier to 1.73 billion euros ($2.1 billion). Sales were 3.2 percent lower at 21.8 billion euros, a statement added, while core earnings fell by 8.0 percent to 7.004 billion euros, results that were in line with or slightly better than analysts' expectations. In early trading on the Paris stock exchanges, shares in the company jumped by 2.09 percent to 10.48 euros, while the CAC 40 index of leading stocks was 0.12 percent higher overall. In the second quarter of the year, core earnings before interest, taxes, depreciation and amortisation (Ebitda) were 6.5 percent lower at 3.57 billion euros, on sales that lost 2.1 percent to 10.92 billion euros. "Against the backdrop of a difficult macro-economic environment, I would like to emphasise the robustness of our first-half results, particularly the resilience of our French mobile operations which showed a marked improvement from the first quarter with a return to growth in the contract customer base in June," company chairman and chief executive Stephane Richard said. The French mobile market was shaken up by the arrival of Free, a unit of the French telecom group Iliad, which offered sharply lower prices along with extended services. France Telecom nonetheless confirmed its target of an operational cash flow close to eight billion euros this year, and said it would pay an interim 2012 dividend of 0.58 euros per share on September 12. By comparison, the Spanish telecoms giant Telefonica said on Wednesday that it would suspend dividend payments until next year. France Telecom said that demand for high-speed Internet service had grown by four percent on the year, but presented mixed results from its main international operations. Spanish sales gained 2.3 percent in the quarter on a 12-month comparison, while those in Poland slumped by 11 percent. The group reported net debt of 31.177 billion euros as of June 30, a decrease of 1.154 billion euros from December 31.