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Total Telecom: France Telecom sees competitive 2012, will lower dividend

Incumbent operator's full-year net profit misses expectations as turmoil in Egypt, Ivory Coast dents revenue.
22.02.12 | Interesting article at Total Telecom

France Telecom Wednesday posted a drop in its net profit for 2011 and said competitive pressures are likely to intensify as regulations becoming more stringent and taxes increase in its key markets.

It will adapt its dividend policy as a consequence but remains on track to meet its medium-term guidance, it added.

The owner of Orange brand also said it targets an operational cash flow of close to EUR8 billion in 2012.

The coming year is "already marked by a deterioration in macro-economic indicators, the expectation of increasingly stringent regulations, a higher tax burden, and more intense competitive pressures, particularly in France with the arrival of the fourth mobile operator in January 2012," it said.

In 2011, the group's operating cash flow stood at EUR9.31 billion from EUR10.13 billion in 2010.

Full-year net profit fell 20% to EUR3.89 billion, missing the expectations of analysts polled by Dow Jones Newswires who had an average forecast of EUR4.2 billion. The company attributed the drop to lower revenue, due to the Arab Spring events that dented sales in Egypt, the political turmoil in Ivory Coast, and the impact from regulatory measures and disposals.

Excluding disposals, the group's net profit in 2011 rose 0.5% to EUR3.83 billion from EUR3.81 billion a year earlier.

"We have decided to adapt our shareholder remuneration policy to ensure the financial strength of the group at all times," Chairman and Chief Executive Stephane Richard said.

The amounts allocated to the 2012 dividend will fall in a range of 40% to 45% of operating cash flow generated, while for 2011, the group will recommend the payment of a EUR1.40 dividend per share.

Chief Financial Officer Gervais Pellissier noted that January 2012 was "commercially more agitated than usual" due to the launch of Iliad SA's Free on Jan.10. In a separate statement, France Telecom noted that over the Jan.1-Feb.15 period, it registered the termination of 1.038 million mobile contracts while it gained 837,000 new contracts, representing a net loss of 201,000 subscribers or 0.7% of its total mobile customers in France.

In 2011, the group's earnings before interest, taxes, depreciation and amortization fell 3.6% to EUR15.08 billion, beating analysts expectations of