France Telecom cuts forecast as Poland goes mobile

France Telecom on Thursday cut its sales growth forecast for the year, blaming an erosion in the customer base of its Polish residential business. In mid-afternoon trading, the partly state-owned French group's shares had dipped 5 per cent to €22.02

In its scheduled third-quarter sales announcement, France Telecom had said that it was expecting "nearly 3 per cent" pro forma sales growth in 2005. It had previously been targeting an increase of between 3 and 5 per cent.

In many markets, traditional fixed-line connections have been under attack from services that allow people to make cheap telephone calls through the internet, such as Skype.

In Poland, however, France Telecom said customers had been shunning traditional fixed-line connections to rely on their mobile telephones instead. Like-for-like sales at its Polish residential business fell 7.9 per cent in the third quarter as a consequence.

In contrast, like-for-like sales for its mobile division in Poland grew by 13.1 per cent – but this was not enough to compensate for the decline in fixed-line revenue, France Telecom said.

The French company, owner of the Orange mobile telephone brand, also said that it would reshuffle its assets in Poland. It is selling its 34 per cent stake in Centertel, Poland's second-biggest mobile telephone operator, to TPSA for 4.88bn zlotys (€1.2bn).

France Telecom will retain a controlling 47.5 per cent stake in TPSA. Michel Combes, the France Telecom executive in charge of "financial balance and value creation", said the move would simplify the structure of TPSA.

Overall, France Telecom's group sales rose 3.8 per cent to €12.3bn in the third quarter. It confirmed that it was on track to meet its full-year target of more than €18.5bn gross operating profit, having posted €4.862bn in the third quarter.

Although growth was strong in the French mobile telephone division, the France Telecom arm aimed at business clients saw sales fall 7.4 per cent.

Mr Combes said France Telecom wanted to distance itself from "multiple rumours in the Anglo-Saxon press" about possible acquisitions. The French group has been touted as a possible buyer for the UK's Cable & Wireless.

On Thursday, however, it said there was "no need for any major acquisitions in Europe" to implement its new three-year strategy. It is not thought to be interested in C&W. However, the French group said that it would consider deal opportunities "in countries with high growth potential".

(Source: FT.com/MSNBC)