News - Conference Callings.net

France Telecom First-Half Net Rises 41% on Home, Tax

 August 02, 2007

France Telecom SA, Europe's third- largest phone company, said first-half profit unexpectedly rose 41 percent because of lower taxes and increased broadband Internet subscribers in its home market.

The shares had their biggest gain in nine months after the company said net income rose to 3.31 billion euros ($4.5 billion) from 2.35 billion euros a year earlier. Earnings had been expected to decline to 2.28 billion euros, based on the median estimate of 13 analysts surveyed by Bloomberg News.

Profit from residential phone lines and Internet access rose 7.1 percent, a second straight gain, as the company sold more high-speed connections and TV subscriptions to fend off competitors such as Iliad SA. The number of broadband clients jumped 23 percent, making up for a drop in fixed-line calls.

``These are good-quality numbers,'' said Emmanuel Soupre, who helps manage more than 24 billion euros at Neuflize Gestion in Paris, including France Telecom shares. ``It's progressing slowly but holding up better than expected.''

The shares rose as much as 64 cents, or 3.3 percent, to 20.30 euros, the biggest gain since October. They traded at 20.17 euros at 10:31 a.m. in Paris. Before today, France Telecom's shares had slipped 6.2 percent this year, compared with a 9.5 percent drop in Deutsche Telekom AG and a 7.1 percent rise for Telefonica SA, the two biggest European phone companies.

The company's tax bill decreased by 671 million euros in the quarter because of the recognition of deferred tax assets in France and as the U.K. changed the income-tax rate, France Telecom said in a statement.

Beating Estimates

France Telecom's first-half gross operating profit, a number comparable to earnings before interest, tax, depreciation and amortization, rose 1.7 percent to 9.42 billion euros. Analysts expected 9.33 billion euros, the survey showed.

``The growth of broadband Internet in France has compensated for the traditional'' telephone business, Chief Financial Officer Gervais Pellissier said in a conference call today. ``These results make us confident on reaching our targets.''

Operating profit, which excludes interest and taxes, rose 6.3 percent to 5.46 billion euros.

Sales rose 2.1 percent to 25.9 billion euros, more than the 1.7 percent increase expected by analysts. Gains for the mobile business compensated for little-changed revenue in the company's residential business. Net debt rose 0.2 percent from the end of last year to 42.1 billion euros.

The company repeated its forecast for a ``near stabilization'' of its gross operating margin this year, as well as organic cash flow generation of 6.8 billion euros.

News Source : http://www.bloomberg.com