THE WRAP: France Tel profit drops €1b; EverythingEverywhere survives MTR cuts

Staff writer
24 Feb 2012

It’s been a week of ups and downs in terms of telco earnings, with France Telecom remaining in the black despite a €1 billion ($1.33 billion) drop in net income, EverythingEverywhere growing earnings despite termination rate cuts, and Hong Kong’s SmarTone increasing income by almost 50%.

France Telecom chief Stephane Richard claimed the firm’s 2011 performance was on-target, despite post-tax net income falling from €4.8 billion in 2010 to €3.8 billion in 2011. Revenues for the year were broadly flat on 2010, and the chief conceded the financial environment in 2011 was more challenging than predicted.

He pointed to improvements in the firm’s domestic market and in Spain, while an upsurge in the performance of the firm’s businesses in Middle East and Africa appears to validate his five year plan to double earnings from emerging markets.

In the UK, EverythingEverywhere – France Tel’s mobile joint venture with Deutsche Telekom – overcame a 2.1% fall in revenue to grow EBITDA to £1.4 billion ($2.2 billion) in 2011, and lift its EBITDA margin 1.3 percentage points. The firm blamed mobile termination rate cuts for the lower sales, but benefitted from lower subscriber churn.

Data and other service revenues proved the key to SmarTone’s success in 2H11, the firm’s fiscal 1H12, with profit up 48% year-on-year at HK$475 million ($61.2 million). The operator augmented earnings with strong sales of mobile devices and accessories, and an operating profit of HK$42 million from its Macau business.

While data services are often cited as a main driver of telco’s business, research firm Ovum warned mobile operators must rework legacy messaging services to stave off growing competition from social messaging services – those that don’t use SMS, MMS or e-mail. The firm states the rival services cost operators $13.9 billion in lost SMS revenues through 2011.

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