France Telecom sales soar

January 29, 2002 Posted: 0900 GMT

LONDON (CNN) -- France Telecom said on Tuesday sales rose 28 percent in 2001 as its mobile phone business Orange signed up more customers.

Sales rose to 43 billion ($37 billion) in the year ending December 31. Analysts polled by Reuters had forecast sales of 43.15 billion, up from 33.7 billion in 2000.

France Telecom (PFTE), the country's dominant phone company, like its European rival has seen its stocks crumble under the pressure of debts accumulated betting on high speed wireless services and acquisitions.

France Telecom is striving to prune back its debt to between 37 billion and 47 billion by 2003.

Its stocks rose 1.8 percent to 40.20 in early Paris trading on Tuesday. It stock plunged more than 60 percent from a high of 101.60 hit on January 19, 2001. France Telecom hit a low of 27 on September 27.

The Paris-based company spent more than $50 billion on acquiring wireless unit Orange, data network operator Equant and Internet service provider Freeserve. It is now straining with debts of more than 65 billion ($73 billion) said first-half profit dropped 49 percent as interest costs soared.

"Out three main subsidiaries – Orange, Wanadoo and Equant – all boosted their market shares in 2001 while improving their margins," said chairman Michel Bon.

He said the company expected double-digit sales growth in 2002 for the fourth year running, as it sells broadband services in the fixed and wireless markets.

Orange, the biggest mobile phone operator in France and the UK, which was consolidated from September 2000, contributed 14.77 billion to France Telecom's annual revenues, compared with 8.65 billion in the year earlier.

Its annual sales rose 25 percent to 15.087 billion, narrowly beating analysts' forecasts, but said revenues per customer had fallen in Britain and France. Europe's third biggest mobile phone company said its customer base had risen 29 percent to 39.3 million in 2001.

Orange shares edged up 0.2 percent to 9.02 in early trading as investors weighed up the crucial revenue per users figures.

Mobile phone penetration is reaching saturation point in Europe, and all eyes are focused on operators increasing average revenues per user (ARPU). That is getting subscribers to use their phones more.

Annual ARPU in France fell to 392 from 426 euros in 2000, and in Britain, it slid to £246 from £280. But the company said ARPU in Britain over the last two quarters suggested that UK customer revenues may be on the upturn.

"As our analysis in the past has indicated, if we were to reduce our ARPU by 5 percent it would result in a valuation of  7.13 per share, which is 21.1 percent lower than current trading," analysts at Bear Stearns wrote in a note to investors. "Today's results provide downside rather than upside risk to forecasts, in our view."

Bear Stearns has a "neutral" rating on the stocks with a price target of 9.58.