France Télécom customer numbers up, first half revenue down

France Télécom has more subscribers, but they're paying less for their services as the company's focus moves to Africa

France Télécom's revenue and net income for the first half both fell compared to a year earlier, even as subscriber numbers climbed 7 percent, it reported Thursday.

Nevertheless, the company hailed the results as "solid" in the face of difficult market conditions. The company also said it is seeking a buyer for its Swiss mobile network, and intends to use the proceeds to repurchase its own shares.

Revenue for the half year fell 1.3 percent to €22.57 billion (US$32.5 billion as of June 30, the last day of the period reported). France Télécom estimated that price regulation had dragged revenue down by €379 million, while changes in the value-added tax (VAT) regime had cost it another €76 million. Excluding these factors, revenue rose 0.3 percent, the company said.

Political unrest in Côte d'Ivoire and Egypt also hit revenue, although France Télécom is optimistic that it will bounce back in those countries in the second half

Net income fell to €1.95 billion for the half year, down from €3.73 billion a year earlier. France Télécom said €1.13 billion of that decline was a result of accounting changes following the creation in April last year of Everything Everywhere, a joint venture combining the U.K. mobile network of France Télécom subsidiary Orange with that of Deutsche Telekom subsidiary T-Mobile.

Subscriber numbers rose 7 percent year on year, to 217.3 million as of June 30. However, there was no corresponding revenue growth as most of this increase was in Africa, where average revenue per user (ARPU) is a quarter or less of that on France Télécom's European networks.

Over half of France Télécom's revenue still comes from its home market, although that may change as revenue there declined faster than the average, down 2.3 percent to €11.3 billion, and even fell after eliminating the impact of regulation.

The number of telephone lines sold direct to French customers declined by 1.5 million year on year, to 23.1 million on June 30, while the number sold wholesale to other operators rose 1.3 million to 10.9 million. The number of fiber-to-the-home Internet subscribers almost doubled year on year, to 73,000 -- but still represents a tiny fraction of France Télécom's 9.6 million Internet customers, 9.3 million of whom connect over DSL.

In France, the company still has three times as many customers on dial-up as on fiber, something that may change since it struck an agreement with rival Iliad this month to share the cost of fiber roll-out in less densely populated areas.

France Télécom has 26.66 million mobile customers in France, almost half a million more than a year earlier, of which 1.4 million are using 3G dongles to connect computers to the Internet. However, its subscriber growth didn't keep pace with the market as a whole: its share slipped to 41 percent from 42.4 percent a year earlier, a decline that can only continue next year when Iliad launches the country's fourth mobile network.

The brightest spot in France Télécom's results was Spain, where first-half revenue rose 4.1 percent year on year to €1.94 billion, compensating for the 4.3 percent drop in revenue in Poland, to €1.9 billion.

Revenue increases of 18 percent in Cameroon and 47 percent in Niger had little overall effect, as they started from a much smaller base. However, France Télécom is hoping to boost future revenue from African markets, still dependent on basic voice and text messaging services, through a partnership with Google to deliver Internet services via SMS.

Peter Sayer covers open source software, European intellectual property legislation and general technology breaking news for IDG News Service. Send comments and news tips to Peter at peter_sayer@idg.com.

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