PARIS, Mar 19: France Telecom said on Wednesday it made a record 14.9-billion-franc ($2.4 billion) net profit -- or 472 francs per second--in 1997, the year of its partial privatisation. But the world's fourth-largest operator in terms of sales reported operating profit below expectations and said its overall earnings outlook for 1998 was flat due to call rate cuts.
The company, which has had to face full European competition since the start of 1998, announced a first dividend of a net 6.50 francs per share. France Telecom's stock closed Wednesday at a record 354.60 francs, up 2.04 percent, but below an intraday high of 364.80 francs, before the results were released.
That compares with an issue price of 182 francs for private investors and 187 francs for institutionals. Chairman Michel Bon said he was "delighted for ourshareholders" about the share performance but said "the true measure of our success is our performance over the next three to five years or beyond."
The 1997 net attributable incomeof 14.863 billion francs, which compares with a 2.107-billion-franc profit after charges in 1996, was in line with analysts' expectations of a figure of about 15 billion francs.
But the operating profit, at 26.36 billion francs before a 1.1-billion-franc charge for the stock market listing, was below expectations of a figure close to the 1996 operating income of 30.29 billion francs. Resources director Pierre Dauvilliare said this was the result of start-up costs in international activities and the cost of new clients for the mobile communications division.
He said that while the group had made a 1.3-billion-franc capital gain on the sale of its stake in the Cofira mobile telecoms company, it also had some 3.5 billion to 4.0 billion francs in operational charges. This was mainly in mobile telecoms, at 1.5 billion francs.
There was a 150-million-franc provision for risks in Indonesia due to the Asian currency crisis; 500 million francs in costs to prepare the computer systems for the arrival of the euro;350 million francs for more early retirements as planned and another 200 million francs for the ending of its Bebop and Radiocom analog activities.
Bon said France Telecom also had carried 1.3 billion francs in losses for the Global One joint venture with Deutsche Telekom and Sprint of the US. He said the venture could break even in 2001/2002. The 1997 net income figure was close to the pro-forma 1996 figure of 14.5 billion francs without the special charges.
Sales were up by 3.6 percent to 156.7 billion francs withvolume in minutes up by 6.6 per cent. The extra calls, some 8 million minutes in time, were 25 per cent due to mobiles, with the rest being fixed telecom, including a 250 per cent rise in Internet traffic.
"Our strategy of encouraging greater volume of use is working, as planned, and it will initially cushion the impact on our revenues, and subsequently reverse the trend," Bon said.
"1998 will be the last year of tariff rebalancing," Bon said. "Given the full-year effect of the rate cuts weintroduced in March and October of last year, this rebalancing will impact on our revenues, despite continued growth in volumes, and we expect only a slight increase in sales," Bon said.
"Improved margins in our wireless business should offset lower margins from fixed-line telephony, flowing through to income performance comparable to the figures in the past two years," he said.
Bon said that a planned alliance with Deutsche Telekom, its main partner in building out Europe-wide operations, would be finalised before the end of the first-half of 1998 and would take the form of a capital increase.The group has said in the past it expected a share swap of between 5 per cent and 10 per cent.
Dauvillaire said the operating margin, as expressed in earnings before interest and tax (EBIT), was below forecasts at 26.4 billion francs. He said this was due to a significant rise in mobiles "leading to a sharp increase in new subscriber recruitment costs."
It was also due to high advertisement spending and becauseof the development of subsidiaries outside France, including Global One.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
