France Télécom reports dip in Q2 revenue

France Télécom SA (FT) reported Tuesday a dip in revenue for its second quarter, hurt by the euro's strong value against the dollar and the British pound.

Operating income for the first half of the year rose sharply, however, thanks to lower costs and an increased number of customers at its mobile and Internet units, Europe's second largest phone company said in a statement. FT didn't provide figures for its second-quarter operating income.

Revenue for the second quarter fell 3.3 percent to €11.5 billion (US$13.2 billion as of June 30, the last day of the period being reported) from €11.9 billion for the same period a year earlier, FT said. Based on constant exchange rates, second-quarter revenue increased 4.4 percent, the operator said.

Half-year revenue was up 1.7 percent to €22.9 billion, compared to €22.5 billion for the same period in 2002. The primary contributors to this revenue growth were FT's wireless subsidiary, Orange SA, and its Internet unit, Wanadoo SA.

Orange reported on Tuesday a 6.9 percent increase in half-year revenue to €8.6 billion, from €8.1 billion for the same period the year before, while revenue at Wanadoo rose 34 percent to €1.2 billion, from €918 million.

Half-year operating income at Orange, which owns networks in several countries including the group's core French and U.K. markets, soared 67.7 percent to €2.1 billion from €1.3 billion the year before. The group's customer base grew 1.3 million to 45.6 million in the first half of 2003.

Wanadoo, which operates in Spain and the Netherlands in addition to France and the U.K., reported first-half operating income of €60 million, compared to a loss of €4 million in the year-earlier period. Excluding a fine levied by the European Commission, operating income before depreciation and amortization was €119 million for the first half of 2003, compared with €28 million a year earlier.

Earlier this month, the Commission levied a €10.35 million fine on the French Internet service provider, after finding it guilty of stifling competition in the market for high-speed Internet access.

At the end of June, Wanadoo had 8.8 million customers in Europe, of whom 1.8 million were broadband cable or ADSL (Asymmetric Digital Subscriber Line) users.

In contrast to Wanadoo's solid results, Equant NV, the FT subsidiary providing network services to enterprises, saw second-quarter revenue remain virtually flat from the year earlier at $744 million. The unit reported a first-half loss of $155 million, compared to a loss of $220 million the year before.

Despite Equant's loss, as well as continued weak demand for fixed-line services, which represent around three-quarters of FT's revenue, the French telecommunications company was able to show strong growth in operating income. For the first half, operating income increased 46 percent to €4.7 billion, from €3.2 billion a year earlier. Before depreciation and amortization, first-half operating income was up 23.5 percent to €8.5 billion, from €6.9 billion in the first half of 2002.

The French group's capital expenditure for the first-half of 2003, including the acquisition of tangible and intangible assets but excluding licenses for GSM (Global System for Mobile Communications) and 3G (third-generation) networks, fell 32.9 percent to €2.2 billion, from €3.2 billion for the same period a year earlier.

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