Better margins boost France Telecom 2007

France Telecom SA said Wednesday that 2007 net profit rose 52 percent on better margins and lower taxes, with its mobile phone businesses fueling sales.

Net profit increased to 6.3 billion euros ($9.25 billion) from 4.14 billion euros a year earlier, above an average forecast of 5.53 billion euros from eight analysts polled by Dow Jones Newswires.

The 2006 figure was dented by a 2.8 billion euros goodwill write-down, but the rise in profit was attributed also to lower taxes and financial charges and improving margins.

France Telecom confirmed its guidance for 2008 and said it would pay a dividend of 1.30 euros ($1.91) per share for 2007, subject to approval at its annual shareholders meeting.

Shares fell 1.8 percent to close at 22.60 euros ($33.33) Wednesday.

France's dominant telecommunications operator, through its Orange mobile arm, is the country's sole vendor of the Apple iPhone, which has registered higher than expected sales since its release in November. The company did not mention iPhone revenue in its 2007 earnings statement.

Revenue rose to 52.96 billion euros ($77.79 billion) from 51.7 billion euros in 2006, helped by growth in France Telecom's mobile phone operations across Europe, Africa and the Middle East. The figure was in line with analysts' expectations. Fourth-quarter sales were up 2.1 percent at 13.5 billion euros ($19.8 billion).

France Telecom did not give a breakdown of earnings on a quarterly or half-yearly basis.

Revenue at France Telecom's mobile operations rose 5 percent to 29.12 billion euros ($42.77 billion), the strongest growth coming from Poland and other markets outside of Western Europe. The mobile phone business saw earnings before interest and other financial items rise 3 percent to 9.98 billion euros ($14.66 billion).

The company's fixed line and Internet operations posted a 0.8 percent rise in revenue to 22.67 billion euros ($33.3 billion). France Telecom continued to enjoy strong growth in broadband, while fixed-line customer losses slowed during 2007, Chief Financial Officer Gervais Pellissier.

Pellissier told a conference call that the company still expects its main markets to grow by 2 percent to 3 percent per year over the coming years even though the macroeconomic outlook "isn't as favorable as we might have imagined."

Analyst Mark James of Collins Stewart said the results, along with those of Britain's Vodafone Group PLC and Royal KPN NV of the Netherlands, demonstrate the economic resilience of the telecommunications sector.

"We don't expect telcos to be immune, but so far other sectors have been hit far harder," James said.