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France Telecom Plans to Cut 17,000 Jobs

Posted on: Tuesday, 14 February 2006, 18:00 CST

PARIS - France Telecom SA, Europe's second biggest telecommunications company, said Tuesday that its profit rose 89 percent in 2005 largely due to one-time gains but also announced it would cut 17,000 jobs, or 8.5 percent of its work force, over three years to reduce costs.

Capping a tumultuous year, France Telecom said its profit rose to 5.71 billion euros ($6.79 billion) last year from 3.02 billion euros in 2004.

That figure topped analyst expectations of 5.19 billion euros ($6.17 billion), but included 1.4 billion euros ($1.67 billion) in one-time gains. The company did not break out its quarterly results.

Earnings before interest, taxes, depreciation, and amortization rose 2.8 percent to 18.42 billion euros ($21.9 billion), while sales rose 6.2 percent to 49.04 billion euros ($58.3 billion) due to the acquisition of Spanish operator Amena and other assets.

That earnings figure fell slightly short of analyst expectations, while the sales figure topped forecasts.

The statement comes after a year of management turmoil and declining share prices for one of the world's largest providers of high-speed Internet and mobile phone services. France Telecom trails only Deutsche Telekom among Europe's largest telecommunications companies.

In the first half of the year, the manager who had brought France Telecom back from the brink of insolvency - Thierry Breton - left to join France's Finance Ministry.

The company's shares have lost 10 percent of their value already in 2006, and have fallen 23 percent in the past 12 months. Its shares rose 3 percent to close at 19.16 euros ($22.80) Tuesday on Euronext.

In a conference call with reporters, Chief Financial Officer Gervais Pellissier said the company would cut 17,000 jobs from its work force of 200,000 people. Almost all of those cuts - 16,000 - would come in France.

Analysts said the overall financial results were not disappointing but warned that the company is still in transition.

The company plans to integrate mobile and fixed-line services in an effort to keep its clients and prevent cheaper, more flexible telecom companies from eroding its profits.

France Telecom said it would maintain its dividend proposal of 1 euro ($1.19) per share for 2005 earnings, and would raise that to 1.20 euros ($1.43) per share in 2006.

That proposal is "very good news," said analyst Jean-Michel Salvador of Fideuram-Wargny. "I don't think (market concerns) will cease, but they'll be assuaged. This will help the stock regain some color."

Source: Associated Press/AP Online

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