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Mixed success for European telecoms

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Author: WildC@rd

All three face pressures as customers turn to mobile- and Internet-based networks, and due to heightened regulatory restrictions. France Telecom (FTE :) (FR:013330: news, chart, profile) said first-half net income fell 30% to 2.35 billion euros ($2.97 billion), while sales rose 9.3% to 25.86 billion euros. First-half comparable sales rose 1.4%, though the company didn't back its earlier goal of 2% organic sales growth, in effect its third warning in the last 12 months. The telecom group blamed the profit fall on fewer earnings from asset disposals and increased depreciation at the acquired Spanish mobile operator Amena. Fixed-line comparable revenue dipped 2.3% as an increase of 39% in broadband users didn't compensate for declining French and Polish fixed-line revenue. France Telecom dropped 2.2% in Paris. Heading into the results, France Telecom has dropped over 20% in 2006. Also see Europe Markets. The company, which recently integrated its mobile, broadband and nascent television service arms under the Orange brand, didn't see much sales growth on the mobile revenue side, either. Orange France saw 2% comparable sales growth, as 4.4% growth in its subscriber base and increased average revenue per user was offset by a forced decline in termination fees, or the fees charges when connecting calls from landlines to wireless networks. See more technology coverage. Orange France competes against Vivendi-held (FR:012777: news, chart, profile) SFR and Bouygues (FR:012050: news, chart, profile) . SFR, which also released revenue figures on Thursday, posted comparable-sales growth of 1.7% during the quarter. Orange U.K. performed about the same with 2.2% comparable sales growth. In the U.K., it takes on Deutsche TelekomT-Mobile, Vodafone Group(UK:VOD: news, chart, profile) , Telefonica's (TEF ) O2 and Hutchison Whampoa's 3. "With its third warning in 12 months, negative sentiment toward the stock is likely to continue in the medium term," said Jonathan Dann, an analyst at Bear Stearns, in a note to clients. Telefonica profit climbs Telefonica didn't have the same problems, with its second-quarter profit up 41% to 1.3 billion euros. Revenue jumped 47% to 13.22 billion euros after Telefonica bought Britain's O2 and the Czech Republic's Cesky Telecom. The acquisitions haven't come cheap, though; net debt swelled 22.17 billion euros higher to 54.92 billion euros. On Wednesday, Telefonica's mostly held Telefoncia Moviles arm reported a 21% profit improvement from Latin American growth and surprisingly strong Spanish margins. Read story. As with France Telecom, voice revenue declined. In Spain, voice revenue dropped 5.8%, in part on the effect of Easter timing. Telefonica rose 0.5% in Madrid. See more global markets coverage. "In contrast to some other companies in the industry, Telefonica continues to consistently deliver on expectations," said Morgan Stanley analyst Luis Prota. BT profit climbs BT Group (BT :) (UK:BT.A: news, chart, profile) , meanwhile, produced a 24% profit improvement in its fiscal first quarter. Profit rose to 464 million pounds, with revenue up 2.8% to 4.86 billion pounds. BT has been relying on broadband and IT services revenue to compensate for the shortfall from voice traffic, which slipped 4%. BT's broadband offering competes with rivals including Carphone Warehouse (UK:CPW: news, chart, profile) , Europe's largest mobile-phone retailer that has made a move into broadband, and will soon go against an offering from BSkyB (UK:BSY: news, chart, profile) , the U.K. satellite television provider. UBS called BT's 22.3% market share in broadband additions "solid," given the competition. BT also is preparing a television service to compete against BSkyB and NTL Inc. (NTLI : , ) . That service is due to be rolled out in the autumn. BT slipped 0.4% in London. Also see London Markets. Deutsche Telekom, (DE:555750: news, chart, profile) , Europe's second-largest fixed-line telecommunications provider by market capitalization, will release its results on Aug. 10.
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