), the third-largest wireless operator in Europe, expects Average
Revenue per User (ARPU) to decrease in the range of 12-13% in
fiscal 2013, mainly attributable to stiff competition that exists
in the French telecom market.
France Telecom has reported its financial results for full
fiscal 2012, where revenue fell 2.7% year over year to €43.52
billion ($55.96 billion). ARPU for the reported fiscal dropped
10% as compared with last year. Rollout of attractive 3G plans by
Paris-based broadband service provider, Iliad SA, has resulted in
such lackluster performance from FTE.
Iliad SA made its debut in the beginning of 2012 with service
plans costing as low as $2.6 per month. So, to counter such
threats and retain subscribers, FTE slashed its service rates,
resulting in declining revenues. In response to that, Iliad
further reduced its service rates, thus triggering more
subscriber loss for FTE.
Moreover, the French market is dominated by big players like
), which constitute more than half of the market revenue and
profit. This has resulted in France Telecom's reducing market
share and lower margins and profit.
Like its European peers, France Telecom also contends with
increasing regulatory pressure which has been affecting the
company's revenues. Reduction in mobile termination rates (fees
operators charge each other to connect calls) in key markets such
as UK and Spain, remains one of the key reasons for the declining
revenue across these markets.
In order to drive growth in the domestic segment, France
Telecom is shedding its underperforming European assets due to
the weak economic conditions and unfavorable regulatory measures
that continue to hamper its top line. The company sold its Swiss
mobile subsidiary, Orange Communication, to the London buyout
firm, Apax Partners in February 2012. The company divested its
stakes in the Orange Austria unit to the Hong Kong-based
Hutchison Whampoa Ltd, for cash proceedings of €70 million.
Currently, France Telecom carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Related stock in the telecom sector is
), which carries a Zacks Rank #3 (Hold).
FRANCE TELE-ADR (FTE): Free Stock Analysis
TELEFONICA S.A. (TEF): Free Stock Analysis
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VODAFONE GP PLC (VOD): Free Stock Analysis
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