* 2012 net profit down 41 pct at 633 mln eur
* 2012 sales up 3 pct at 33.5 bln eur
* Sees flat sales in 2013
* Says 2012 should mark profitability low point
* CEO says no talks over telecom tie-ups
(Adds details, CEO and trader comments)
By Elena Berton
PARIS, Feb 27 Bouygues reported a 41
percent drop in full-year profits on Wednesday as cut-throat
competition hit the French conglomerate's telecom business,
which is cutting costs to try to deliver a turnaround this year.
Telecoms is the third-biggest revenue driver for Bouygues
after construction and roadworks, but the business is battling a
price war in the French mobile market.
Bouygues Telecom and its rivals France Telecom and
Vivendi's SFR have all had to cut prices following the
arrival of low-cost competitor Iliad's Free Mobile
service a year ago.
Free Mobile has taken around 7 percent of the mobile telecom
market in France with its low-cost mobile offers.
Bouygues forecast stable group revenues this year and also
said margins should improve with the help of savings of 300
million euros ($392 million) at its mobile business on top of
151 million last year.
"In these conditions, 2012 should mark the low point in
Bouygues' group profitability," the company said.
Shares in Bouygues, which have lost 13 percent in the last
12 months, were the strongest performers on the French CAC 40
index at 1444 GMT, up more than 12 percent.
In the fourth quarter, Bouygues Telecom said it was able to
stem the loss of customers to cheaper rivals by adding 285,000
new mobile contract customers as well as 453,000 new customers
for its low-cost service B&YOU.
"Certain investors want to believe in a turnaround in the
situation this year," one Paris-based trader said. "The group
said 2012 would mark the low point of its profitability, and the
figures aren't as bad as one might have feared, even if telecoms
continues to weigh on the results," the trader said.
Bouygues full-year net profit dropped to 633 million euros,
down 437 million on 2011. Bouygues Telecom accounted for 345
million euros of the drop.
The company forecast that core profit at its telecom
business would stabilise this year, although sales are expected
to fall 7 percent.
Rival telecoms group Vivendi said on Tuesday that the
postpaid mobile customer base at its SFR mobile business was
stable at the end of last year compared with 2011.
But France Telecom said last week that it had seen no let-up
in the price war and that the pressure on prices would be worse
in 2013 than it had previously thought.
The fierce price competition has prompted media speculation
about potential consolidation in the French telecom sector.
But Vivendi has insisted SFR is not for sale. Bouygues Chief
Executive Martin Bouygues told reporters his group was not
discussing any potential tie-ups with competitors.
Bouygues is aiming to for flat sales overall in 2013, with
the expected decline at Bouygues Telecom offset by improving
business at its residential construction unit.
Sales rose 3 percent last year to 33.5 billion euros,
compared with a Thomson Reuters I/B/E/S analyst poll average of
The construction unit reported that sales rose 9 percent in
2012 after it secured large infrastructure contracts in Hong
Kong and Thailand.
Its order book at the end of December was 12 percent higher
than a year earlier at 17.1 billion euros.
Bouygues is paying an unchanged dividend of 1.6 euros a
share for last year.
($1 = 0.7649 euros)
(Additional reporting by Catherine Monin and Alexandre
Boksenbaum-Granier; Editing by James Regan and Jane Merriman)