France Telecom 3rd quarter revenue falls 6.4 pct

PARIS - France Telecom SA said Thursday its profitability was squeezed in the third quarter as the impact of weak currencies and lower inter-operator fees caused its revenue to fall 6.4 percent.

The operator of France's leading mobile telecommunications operator Orange blamed new regulations in France, Britain, Poland and other key markets which lowered the fees operators pay one another to send calls over each others' networks for much of the decline.

Revenue fell to euro12.7 billion ($18.7 billion) in the July-September period from euro13.6 billion a year earlier.

The formerly state-owned operator, whose largest shareholder remains the French government, also blamed currency weakness in Britain and Poland for the slide in revenue.

Earnings before interest, tax, depreciation and amortization, or EBITDA, contracted 8 percent in the third quarter to euro4.6 billion, the company said in a statement.

That decline left France Telecom's EBITDA margin, a closely watched measure of the company's profitability, at 35.1 percent at the end of September, compared to 35.7 percent at the same time last year.

France Telecom has been slashing investment and cutting costs in a bid to offset the declining profitability. It said that these efforts will succeed in limiting the decline in profitability for the full year.

Shares in the company rose 13 percent during the third quarter, but are still down 10 percent so far this year, far underperforming the 14 percent gain on Paris' blue-chip CAC-40 index.

In a conference call with reporters, Chief Financial Officer Gervais Pellissier said the company doesn't expect the rate of decline in either revenue or EBITDA to worsen in the fourth quarter.

The company has come under fire in recent weeks because of a series of suicides by France Telecom employees, which unions blame on stress brought on by the company's restructuring. The former state-run company laid off some 22,000 people in 2006-2008.

In response, France Telecom announced this month it was putting all corporate restructuring on hold until at least the end of the year. The CEO of France Telecom has come under fire for his handling of the continued suicides, but has said he will not resign.

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