France Telecom raised its cash flow outlook for 2008 on Wednesday as it posted a 3.1 percent rise in annual underlying profits, driven by resilient sales growth and rigorous cost control.
The provider of mobile, Internet access and fixed-line telephone services generated earnings before interest, tax, depreciation and amortisation (EBITDA) of 19.1 billion euros ($28.29 billion). It compared with forecasts of 18.9 billion euros based on Reuters Estimates and 18.54 billion euros in 2006 on a historical basis.
France Telecom made 7.8 billion euros of organic cash flow in 2007 and is looking to generate more in 2008, raising its December forecast which was "at least 7.5 billion euros." "These are better than expected numbers and forecasts," said one Paris-based telecoms analyst who did not wish to be named.
The telecoms group, which also runs operations in Great Britain, Poland and Spain, said it did not expect to be able to beat market growth in its large markets.
"We think that in our big markets, it will be difficult for us to have growth that is better than the rest of the market," France Telecom Finance Director Gervais Pellissier said in a conference call with journalists.
France Telecom, which now trades mainly as Orange, its former mobile brand, proposed a dividend of 1.3 euros a share for 2007 and sees a higher payout for 2008. The group brought the ratio of net debt to EBITDA to 1.99 at the end of 2007, meeting its target of less than 2 a year early. Net debt as of December was 38 billion euros.
France Telecom sank into a financial abyss after the burst of the Internet bubble. In 2003, it had to raise 14.8 billion euros from the French state and investors to cut its net debt, which at 68 billion euros was among the biggest in Europe. The group said on Wednesday it had enough cash to continue targeting acquisitions in emerging markets and was eyeing businesses in Algeria and Vietnam.
Pellissier said the operator could also make bolt-on acquisitions in areas such as Internet advertising. Over the past five years, France's former telecoms monopoly has branched out into new areas such as Internet broadband, TV broadcasting and even film production. The new activities have helped make up for the erosion of fixed-line telecoms revenues which has been particularly strong in France and Poland as consumers have been switching to mobile and Internet-based communications.
"The Group's transformation is bearing fruit and therefore we are entering 2008 with strong fundamentals," France Telecom Chief Executive Didier Lombard said in a statement.
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