France Tel. posts 8.3bn euro loss

March 21, 2002 Posted: 9:16 AM EST

Embattled Chief Executive Michel Bon

PARIS, France (CNN) - France Telecom, burdened with debts of 61 billion euros ($53.7 billion), posted on Thursday its first loss since floating in 1997.

Europe's second largest phone company made a loss in 2001 of 8.3 billion euros, after slashing the value of businesses it bought during the telecom boom.

Paris-based France Telecom (PFTE), like its European rivals, has seen its stocks crumble under the pressure of debts accumulated through betting on high-speed wireless services and acquisitions.

"Acquisitions were made at the height of the stock-market euphoria and against a background of increasing consolidation in the telecommunications sector. Since then, the speculative bubble in technology stocks burst," said the company.

"France Telecom was not left totally unscathed," said Chief Executive Michel Bon.

France's dominant phone company spent more than $50 billion on acquiring wireless unit Orange, data network operator Equant and Internet service provider Freeserve.

Its stock plunged more than 60 percent from a high of 101.60 euros hit on January 19, 2001. France Telecom hit a low of 27 on September 27. In afternoon Paris trading on Tuesday its shares rose 2.9 percent to 33.75 euros.

France Telecom sliced the value of its UK cable TV company NTL and Germany's fifth-largest mobile-phone company MobilCom by 10.2 billion euros.

It vowed to sell businesses, including its stake in Italian mobile phone business Wind, to raise 8 billion euros to cut its debt, which stood at 60.7 billion euros at the end of 2001, down from 65 billion euros on June 30.

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

France Telecom, which has been criticised for its lack of control over Italian and German assets, may be able to raise between 4 billion euros and 5 billion euros from the sale of its 26.6 percent Wind stake. It also wrote down the value of MobilCom to zero.

Orange Chief Executive Jean- François Pontal told CNN that the company could not agree with Enel, Wind's biggest shareholder, its desire to roll outs it Orange brand in Italy.

Pontal also said the board of MobilCom, in which France Telecom has a 28.5 percent stake, was asked to reduce its expenditure on new mobile phone networks and possibly share facilities with rival wireless operators.

France Telecom said there would be no resolution of its row with MobilCom until an audit ordered by the French group has been completed.

MobilCom founder and Chief Executive Gerhard Schmid said his company was "paralysed'' by the dispute and was losing customers.

Excluding exceptionals, France Telecom made a net profit of 1.9 billion euros, as earnings before interest, tax, depreciation and amortisation (EBITDA) -- a measure of profitability for a debt laden company -- climbed to 12.3 billion euros.

Operating profit came in at 5.2 billion euros, up from 4.86 billion in 2000, as earnings rolled in from the group's mobile arm Orange, Europe's number two cellphone operator.

"The positives are good operating results, especially at Orange which is now driving growth at France Telecom, and the lower-than-expected net debt,'' CLSE analyst Paul Mount told Reuters.

"But there are also two big issues overhanging the stock: the fact that the MobilCom issue has not been resolved and the fact that their debt-cutting goal still looks tough in these poor market conditions,'' he added.

Shares in Orange topped the leader board on the Paris stock exchange in afternoon trading on Tuesday, risng 4 percent to 8.02 euros.

France Telecom said it was still on track to cut net debt to 3.0 to 3.5 times EBITDA by the end of 2003.

"We expect double-digit growth in our revenues and faster growth in our EBITDA and operating income, as our newer businesses gradually become mature," said Bon.

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