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Summit News

More pain in Spain for France Telecom

PARIS (Reuters) - France Telecom's FTE.PA finance chief sees no improvement yet in the stricken Spanish market but is less pessimistic about Britain and ruled out on Wednesday a purchase of struggling operator T-Mobile UK DTEGn.DE.

France Telecom CFO Gervais Pelissier attends the Reuters Technology summit in Paris May 20, 2009. REUTERS/John Schults

Asked about Spain, where France Telecom’s revenues dropped 4 percent last quarter, Gervais Pellissier said: “We think it will not improve. We think it could even worsen.”

The Spanish mobile market has been particularly tough due to the severity of the recession there. European competitors Vodafone VOD.L and Telefonica TEF.MC have suffered as well.

“My feeling is we are not yet at the end... and I think the situation will remain very difficult in Spain,” said Pellissier, speaking at the Reuters Global Technology Summit in Spain.

The British market, where five operators compete in a crowded market, would not be hit as hard as Spain, Pellissier added although it was hard to predict how it would evolve.

Asked about market talk that Deutsche Telekom DTEGn.DE was planning to divest its British wireless business T-Mobile UK, the CFO said: "My understanding is that they are not for sale." Asked whether he would be interested, he said, simply: "No."

Pellissier said he saw two problems in the British market: Too many networks and lack of clarity as to who would get the customers, should two players merge.

“We would be happy with consolidation but... the risk is the one who pays may not be the one who gets the proceeds.”

PROTECTIONISM

Unlike Spain and Britain, the French market showed continued resilience in the second quarter, he said.

France Telecom is also active in Africa and on Tuesday sweetened its bid for the 49 percent of Egyptian carrier ECMS EMOB.CA it does not already own to around 1.5 billion euros ($2 billion) from 1.3 billion.

ECMS is majority owned by Egyptian holding company Mobinil. The rest is split between telecoms operator Orascom ORTE.CA and other shareholders in free float.

Pellissier said there were a few opportunities in Africa. “The one which I think will come on the table is the third mobile license in Tunisia.”

Looking toward home, Pellissier said while he believed consolidation in Europe would happen, he did not see it on the horizon soon.

Compared with last year, when France Telecom sought unsuccessfully to acquire Nordic operator TeliaSonera TLSN.ST, he said the environment had become more difficult because financial markets lacked the stability to provide funding.

He expected that in the medium term there would be further deleveraging in the industry. “For the time being we stick with our ratio of 2009 net debt/EBITDA to be slightly below 2.”

Pellissier also said that currently the economic environment left managers with little time to focus on more than the operating business.

Some cause for worry, Pellissier said, were signs of increased protectionism and nationalism.

“See what has happened in Senegal... it’s symptomatic of what you may find in other countries,” Pellissier said.

Senegal is reported to have abandoned a planned share sale that would have handed majority ownership of state telecoms company Sonatel SNT.CI to France Telecom. Critics had attacked the deal as "colonial.

Pellissier said France Telecom was still interested in raising its stake in Sonatel, and had not heard directly from the Senegalese government that the sale had been pulled.

In Europe, he said that France Telecom would instead seek to enter more joint ventures and do business with local partners.

Editing by Hans Peters

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