Paris, 3 May 2011
France Telecom-Orange reports solid first quarter results, in line with its guidance for 2011, despite intensified pressures in certain markets
Group customers totalled 215.9 million at 31 March 2011, a 7.0% year-on-year increase on a comparable basis, led by 25% mobile growth in Africa and the Middle East.
Consolidated revenues increased 0.4% to 11.228 billion euros, excluding the impact of regulatory measures, with mobile services performing well in France (+5.9%), Spain (+7.0%) and Poland (+4.5%), driven by the success of smartphones and segmented offers.
Rapid growth continued in emerging markets, despite difficult conditions in Egypt and Côte d'Ivoire.
Restated EBITDA was 3.734 billion euros in the first quarter of 2011. The EBITDA margin was 33.3%, down 1.3 percentage points versus the first quarter of 2010, notably due to the unfavourable impact of the partial pass-through of the VAT increase starting 1 January 2011.
CAPEX was equal to 9.6% of revenues, representing 1.081 billion euros in investments, in line with the target CAPEX rate of about 13% for the year.
First quarter results are in line with the Group's guidance for 2011. The Group renews its commitment to paying a dividend of 1.40 euros per share for 2011 and 2012.
Commenting on the operating results for the first quarter of 2011, the Chairman and CEO of France Telecom-Orange, Stéphane Richard, said:
"The Group's operating and financial performance for the first quarter is strong, despite intensified competition in France and exceptional political conditions in certain emerging countries.
"In France, the Group successfully overcame increased market turbulence and regulatory changes - most notably following the increase in VAT - with significant gains in the ADSL market thanks to the success of the Open quadruple play offer. The Group was also able to address difficult conditions in Egypt, Côte d'Ivoire and Tunisia. The Group performed very well in Spain, with revenues growing 4%, as well as in the continually improving Enterprise market.
"These solid first-quarter results are in line with our financial objectives for the whole of 2011, and sit squarely with the implementation of our Conquest 2015 plan as well as the creation of a new social contract in France."
In millions of euros
| 1st quarter|
| 1st quarter|
| 1st quarter|
| impact of|
| impact of|
|Revenues||11 228||11 382||10 959||-1.4||0.4||2.5||0.4||3.4|
|France||5 623||5 767||5 774||-2.5||-0.6||-2.6||-||-0.1|
|Rest of World||2 136||2 153||1 778||-0.8||1.7||20.2||0.5||20.6|
|Enterprise||1 784||1 803||1 770||-1.0||-1.0||0.8||1.4||0.4|
| International Carriers and|
|Restated consolidated EBITDA*||3 734||3 936||3 784||-5.1||-3.8||-1.3||-||4.1|
|in % of revenues||33.3%||34.6%||34.5%||-1.3 pts.||-1.4 pts.||-1.3 pts.|
|CAPEX (excluding GSM and UMTS licences)||1 081||938||874||15.3||23.8||0.1||7.2|
|in % of revenues||9.6%||8.2%||8.0%||1.4 pts.||1.7 pts.|
|Restated EBITDA* - CAPEX||2 653||2 998||2 910||-11.5||-8.9|
* EBITDA is restated to reflect the impact of the additional provision related to the Part Time for Seniors Plan of 19 million euros in the first quarter of 2011 and 17 million euros in the first quarter of 2010.
Changes to the consolidation perimeter are mainly related to the full consolidation of the Egyptian operator Mobinil in July 2010 and the acquisition of KPN Belgium Business by Mobistar, which has been consolidated since June 2010.
Exchange rate variations: the favourable movements of the Swiss franc, the Polish zloty and the US dollar were partially offset by the depreciation of the Egyptian pound.
The financial data and comparable basis data provided in this press release are unaudited.
More information is available on France Telecom's websites:
comments on key Group figures
First quarter 2011 revenues for the France Telecom Group grew 0.4% year on year on a comparable basis, excluding the impact of regulatory measures (-194 million euros). Mobile services remained particularly buoyant, both in the main European markets and in emerging markets (except for Egypt, Côte d'Ivoire and Romania). At the same time, service operations in the Enterprise segment recovered significantly.
The main regional trends, excluding the impact of regulatory measures, were:
in France, mobile revenues increased 5.9%, despite the VAT increase not being passed on to customers; the success of smartphones and the Open quadruple play offers accelerated growth in data services. The share of new ADSL customers for the quarter was estimated at about 20%;
in Spain, mobile growth accelerated, reaching 7.0% in the first quarter of 2011. This was driven by the success of segmented offers and strong growth in data services. Fixed services also improved, with ADSL sales growing 4.1%;
in Poland, mobile revenues increased 4.5%, driven by customer growth. The ADSL customer base also grew for the third consecutive quarter;
in the Rest of World segment, excluding Egypt, growth remained strong in Africa and the Middle East, at 5.8%, led in particular by new operations and Cameroon. In Europe, revenues rose 1.2%, despite the decline in Romania; and
the Enterprise segment continued to improve for the fourth consecutive quarter, with the slowdown limited to 1.0% in the first quarter of 2011.
customer base growth
In mobile services, the Group had a total of 156.7 million customers at 31 March 2011 (excluding MVNOs), with year-on-year growth of 10.1% on a comparable basis and 13.9 million net additions. This growth was largely in Africa and the Middle East, which together accounted for 65.5 million customers at 31 March 2011, a 25% year-on-year increase on a comparable basis with 12.1 million net additions.
Digital TV (IPTV and satellite) grew sharply to 4.4 million subscribers in Europe at 31 March 2011, a 29% increase with 967,000 net additions, mostly in France and Poland.
Restated EBITDA was 3.734 billion euros in the first quarter of 2011, versus 3.936 billion euros in the first quarter of 2010 on a comparable basis. The EBITDA-to-revenues ratio was 33.3%, down 1.3-percentage points year-on-year.
Of this decrease in EBITDA margin, 0.5 percentage points are attributable to the negative impact of the partial pass-through to customers of the VAT increase instituted in France on 1 January 2011 (estimated impact of -70 million euros in the first quarter of 2011), while 0.2 percentage points are due to the worsened situation in Egypt.
The EBITDA margin was also marked by higher commercial expenses linked to the success of smartphones and an increase in commercial acts (retention and acquisition), particularly in France and Spain. In all, the ratio of commercial expenses was 14.8%, a 1.8 percentage-point increase versus the first quarter of 2010.
The trends for other ratios of operating expenses to revenues, on a comparable basis, were as follows:
the ratio of service fees and inter-operator costs was 13.3%, a 0.4-percentage point improvement year on year. A decrease in call termination fees and roaming rates (a favourable impact of 140 million euros) was partially offset by the growth in traffic with other operators;
the ratio of labour expenses (restated) was 19.7%, compared with 19.5% in the first quarter of 2010. The average number of full time equivalent employees was 163,813 in the first quarter of 2011, compared with 164,291 a year earlier; and
the ratio of all other expenses was 19.0% in the first quarter of 2011, versus 19.2% in the first quarter of 2010. The improvement is tied, among other things, to the decrease in restructuring costs and to the recapture of provisions related to the Orange Sport and Orange cinema series TV subsidiaries (59 million euros).
capital expenditure on property, plant and equipment and intangible assets (CAPEX)
Capital expenditure on property, plant and equipment and intangible assets rose to 1.081 billion euros in the first quarter of 2011, a 15.3% increase on a comparable basis. The ratio of CAPEX to revenues was 9.6%, versus 8.2% a year earlier when Europe experienced particularly severe weather conditions, especially in Poland.
Investments in networks, which represent about half of all CAPEX, increased 11%, in particular due to:
growth of optical fibre (FTTH) in France;
continued deployment of mobile networks, most notably HSPA+ (Evolved High Speed Packet Access) in Poland and network extensions in Mali and Niger; and
submarine cable programmes in Africa (ACE) and in the Indian Ocean (LION2).
Investments in information systems, which represent nearly a quarter of all CAPEX, also increased significantly due to transformation projects in France, Poland, Belgium and in the Enterprise segment.
In addition, considerable investment in customer equipment for fixed broadband services continued, led by the success of the Open offers and the Livebox and TV decoder replacement programmes.
review by business segment
Total revenues in France were 5.623 billion euros in the first quarter of 2011, down 2.5% on a comparable basis from a year earlier. Excluding the impact of regulatory measures (-110 million euros), revenues declined 0.6%.
Personal Communication Services revenues rose 2.0% on a comparable basis to 2.676 billion euros. Excluding the impact of regulatory measures (-98 million euros), growth was strong at 5.9%, despite the fact that the VAT increase instituted on 1 January 2011 was not passed-through to customers (estimated impact of -33 million euros in the first quarter).
This growth primarily reflects the success of smartphones and of the Open quadruple play offers, which reached 509,000 subscribers at 31 March 2011. The appeal of the Origami offers and the segmented offers strategy helped limit the impact of the VAT increase, which for several weeks gave some subscribers the opportunity to terminate their contracts with no penalty. In all, the number of contracts increased 4.5% year on year and represented 70.9% of the total customer base at 31 March 2011.
Data services added to this growth, both from SMS revenues and non-messaging services. Data services represented 35.9% of network revenues in the first quarter of 2011, an increase of 5.5 percentage points in one year. Hosted MVNOs continued their significant growth, with 3.066 million customers at 31 March 2011, up 22.7%year on year.
Home Communication Services revenues decreased 4.9% on a comparable basis to 3.236 billion euros. Excluding the impact of regulatory measures (-33 million euros), revenues fell 3.9%, mainly reflecting the 13.6% drop in traditional telephone services revenues (subscriber lines and communications).
Revenues from Internet services rose just 1.4%, due in particular to the fact that the VAT increase was not passed-through in the month of January (impact of about -13 million euros in the first quarter). The Group's share of new ADSL subscribers (89,000) was estimated at about 20% of the market in the first quarter of 2011, and new triple play offers, segmented along the lines of the mobile service offers, have been marketed since mid-April. In all, the broadband customer base grew 4.1% year on year, with 9.308 million broadband customers at 31 March 2011. Digital TV services continued to grow strongly, up 28% year on year to 3.711 million customers at 31 March 2011.
Revenues from Carrier Services fell 0.3% on a comparable basis. Excluding the impact of regulatory measures (-24 million euros), revenues rose 1.9% due to the increasing number of telephone lines sold to other carriers (+15.1% year on year), for a total of 10.612 million lines at 31 March 2011.
Total revenues in Spain rose 4.0% on a comparable basis to 959 million euros. Excluding the impact of regulatory measures (-22 million euros), revenues grew 6.5%, compared with a 3.1% increase in the fourth quarter of 2010.
Personal Communication Services revenues rose 4.0% on a comparable basis to 789 million euros and 7.0% excluding the impact from regulatory measures (-22 million euros).
This growth confirms the success of segmented offers, with the contract customer base growing 7.5% year on year to 7.25 million customers at 31 March 2011. Contracts represented 60.1% of the total customer base at 31 March 2011, up 1.7 percentage points in one year.
Revenues from non-SMS data services grew rapidly thanks to the success of smartphones and of the Internet Everywhere service, which had a total of 702,000 customers at 31 March 2011 (+70% year on year). The hosted MVNO customer base also rose sharply, up 55% year on year to 1.287 million customers at 31 March 2011.
Total revenues in Poland declined 3.7% on a comparable basis to 946 million euros. Excluding the impact of regulatory measures (-10 million euros), revenues fell 2.7% in the first quarter of 2011.
Personal Communication Services revenues rose 2.2% on a comparable basis to 471 million euros and, excluding the impact of regulatory measures (-10 million euros), climbed 4.5%. This trend reflects year-on-year growth of 4.7% in the total customer base (excluding MVNOs) which reached 14.42 million customers at 31 March 2011.
Home Communication Services revenues declined 7.8% on a comparable basis to 540 million euros due to the downward trend in traditional telephony. At the same time, the steady improvement in the number of broadband services customers was sustained for the third consecutive quarter, reaching 2.297 million customers at 31 March 2011, up 1.5% year on year. The number of digital TV customers (ADSL and satellite) grew steeply to 577,000 customers at 31 March 2011, up 38% year on year.
Rest of World
The Rest of World segment reported total revenues of 2.136 billion euros, up 20.2% on an historical basis, mainly due to changes in the consolidation perimeter, in particular with the full consolidation of the Egyptian carrier Mobinil as of 13 July 2010. On a comparable basis and excluding the impact of regulatory measures (-52 million euros), revenues grew 1.7% in the first quarter of 2011:
in Africa and the Middle East, revenues rose 1.0% excluding the impact of regulatory measures, hit by the deterioration in Egypt (-7.5%). Excluding Egypt, growth remained strong at +5.8%, led by new operations in Africa (+23.8%), Cameroon and Mali, while Côte d'Ivoire reported a downturn of 1.4%;
in Europe, revenues rose 1.2% excluding the impact of regulatory measures. All countries in the region continue to grow except for Romania, which reported a decline of 6.3% in the first quarter of 2011, and Switzerland, where revenues remained stable year on year;
revenues in the Dominican Republic continued to improve, climbing 4.7% in the first quarter of 2011. The customer base grew 2.8% year on year in the quarter, led by a 14.5% increase in contract customers.
In the Rest of World segment, mobile services had a total of 90.1 million customers at 31 March 2011, a net year-on-year increase of 16.8 million customers, including 4.4 million customers attributable to Meditel in Morocco. Net additions of 2.0 million customers were reported for the first quarter of 2011 (excluding Meditel), primarily in Senegal, Cameroon, Mali, Côte d'Ivoire and new operations in Africa.
Enterprise segment revenues reached 1.784 billion euros, a slight year-on-year decrease on a comparable basis (-1.0%), versus a 3.5% downturn in the fourth quarter of 2010.
This improvement is linked to good performance in services generated by integration services, project management, consulting and service platforms. In all, Extended Business Services grew 6.8% in the first quarter of 2011.
Advanced Business Network Services grew 1.1%, led by high bandwidth services and the rapid growth of VoIP. IPVPN services sales stabilised in the first quarter of 2011, following the continued erosion of revenues observed in 2010.
Other Business Services revenues grew 11.8%, led by network equipment sales and broadcast services, which rose 4.7% in the quarter.
Fixed telephony and traditional data services continued their downward trend, declining 10.4% in the first quarter of 2011, after falling 14.5% in the fourth quarter of 2010. Fixed telephony continued to be marked by the migration towards voice over IP solutions, the streamlining of corporate networks, and intensified competition; the downturn in traditional data services continued at a pace comparable to that of previous quarters.
schedule of upcoming events
31 May 2011: Investor Day
28 July 2011: first half 2011 results
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| financial communication contacts: +33 1 44 44 04 32|
(analysts and investors)
This press release contains forward-looking statements about France Telecom's business. Although France Telecom believes these statements are based on reasonable assumptions, the actual occurrence of the forecasted developments is subject to numerous risks and uncertainties, including matters not yet known to us or not currently considered material by us, and there can be no assurance that anticipated events will occur or that the objectives set out will actually be achieved. Important factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements include, among other factors, overall trends in the economy in general and in France Telecom's markets, the effectiveness of the "Conquests 2015" industrial project and of other strategic, operating and financial initiatives, France Telecom's ability to adapt to the ongoing transformation of the telecommunications industry, regulatory developments and constraints, as well as the outcome of legal proceedings and the risks and uncertainties related to international operations and exchange rate fluctuations. More detailed information on the potential risks that could affect France Telecom's financial results can be found in the Registration Document filed with the French Autorité des marchés financiers and in the annual report on Form 20-F filed with the U.S. Securities and Exchange Commission. Except to the extent required by law, in particular Articles 223-1 et seq. of the General regulation of the Autorité des marches financiers, France Telecom does not undertake any obligation to update forward-looking statements.
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Source: FRANCE TELECOM via Thomson Reuters ONE