Franc Telecom report has statistics worth noting:
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March 17, 1999 15:12
France Telecom Reports Accelerated Growth for 1998 in Fully Competitive Markets
PARIS, France--(BUSINESS WIRE)--March 17, 1999--
Consolidated operating revenues rose 5.2 percent to FRF 161.7
billion (24.6 billion euros) over the year Net income amounted to FRF 15.1 billion (2.3 billion euros) in
1998, in line with forecasts.
- Accelerated growth in 1998 was led by excellent performance from
wireless telecommunications in France--France Telecom's Itineris
GSM cellular service showed an operating profit for the first
time--and by ongoing expansion in international markets.
- France Telecom confirms its position as a leading Internet
company.
France Telecom's consolidated operating revenues were FRF 161.7 billion(1) in 1998 (24.6 billion euros), compared with FRF 153.6 billion(1) in 1997. This represents an increase of 5.2 percent, compared with a 2.4 percent rise the previous year. Excluding the effect of changes in consolidation and exchange rate fluctuations, consolidated revenues grew 4.2 percent in 1998 after a 1.3 percent rise in 1997.
Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) for the year were in line with forecasts, amounting to FRF 58.6 billion (8.9 billion euros). This is a 1.5 percent increase in comparison with 1997 (FRF 57.8 billion).
Consolidated operating income before non-recurring special items was FRF 28.0 billion (4.3 billion euros) for 1998 a 4.9 percent increase as compared with the previous year (FRF 26.7 billion).
Consolidated net income after minority interests for the year amounted to FRF 15.1 billion (2.3 billion euros), also in line with forecasts. This represents a 1.5 percent increase in comparison with net income of FRF 14.9 billion in 1997.
France Telecom's Board of Directors will propose a net dividend of one euro to the Annual General Meeting of Shareholders on May 20. This is a slight increase over the 1997 dividend of FRF 6.50. The dividend will be paid in euros.
1 As of January 1, 1998, France Telecom changed the method of
accounting revenues derived from calls from fixed-line telephones
to mobile phones and paging services provided by competing
operators. Revenues from these calls are now shown net of amounts
paid to such operators to carry the traffic on their networks.
Data for the previous two years has been restated on a pro forma
basis to facilitate comparison.
A successful strategy
These results confirm the success of the growth strategy pursued by France Telecom over the past three years. This strategy is based on stimulating overall market growth through a series of significant cuts in domestic and international call rates, coupled with the introduction of increasingly attractive new service packages. Total domestic traffic volume (fixed and wireless) grew at an annual rate of 9.2 percent in 1998, significantly higher than the 6.6 percent growth rate for 1997. Competition generated about one-third of this increase, through fixed and mobile interconnection traffic. The remainder came largely from the expansion of wireless telephone services and Internet access traffic. Conventional voice traffic also increased, albeit to a lesser extent.
This strategy of stimulating traffic and new uses benefited:
- customers who can call more at lower rates and enjoy access to an
expanding array of services
- France Telecom who has consolidated its leadership and is
pursuing its development in a broader and more diversified market
- competition: nearly 60 licenses have been issued to fixed
telephony operators in France. As of December 1998 these
competing operators had a 5.1 percent share of the long-distance
market (domestic and international), compared with 1.7 percent
only six months earlier.
Explosive growth in Internet traffic has confirmed France Telecom's position as a leading Internet company. Internet-related traffic volume has multiplied by four in one year, whereas France Telecom's Wanadoo Internet access service--which had nearly half a million subscribers at the end of 1998--has doubled its market share in one year (36 percent at year-end 1998, compared with 17 percent in December 1997).
Wireless and International: dual growth drivers
Wireless telecommunications services continued to experience a fast-paced growth in 1998 in a fiercely competitive market. The current penetration rate of 19.2 percent is nearly double the 1997 rate.
France Telecom witnessed spectacular growth in its domestic and international wireless activities and confirmed its leadership in the French wireless market:
- Revenues from wireless telecommunications services were FRF 24.5
billion (3.7 billion euros) in 1998, compared with FRF 17.1
billion in 1997, a 55.5 percent increase, excluding the effect of
changes in consolidation and exchange rate fluctuations. Wireless
services now account for 15.2 percent of consolidated revenues,
compared with 11.1 percent in 1997.
- The Itineris GSM cellular service had 5.45 million subscribers at
year-end (a 2.45 million increase over 1998, compared with an
increase of 1.7 million in 1997). France Telecom benefited from
competition in both the consumer segment, with its Ola and
Mobicarte services, and in the business segment, with its Flotte
Entreprises service.
- The international subscriber base of France Telecom's wireless
services increased to nearly 1.6 million customers, compared with
700,000 at the end of 1997.
Consolidated revenues from international businesses rose 39.3 percent, excluding the effect of changes in consolidation and exchange rate fluctuations, to FRF 15 billion (2.3 billion euros), against 10.7 billion francs in 1997. This growth was fueled by several factors:
- accelerated growth in international wireless telecommunications
services
- the launch of a significant number of new services in 1998,
primarily in Europe (Denmark, the Netherlands, Spain and, in
partnership with Deutsche Telekom, Switzerland and the U.K.)
- investments in operations in developing markets, including in
particular a controlling interest in Sonatel in Senegal and the
acquisition of the El Salvadorian operator (CTE).
As a result of spectacular growth in certain other particularly dynamic businesses and lower national and international rates, the contribution of fixed-line telephony to total revenues of France Telecom declined for the second consecutive year (57.9 percent, compared with 63.3 percent in 1997). Revenues from fixed-line telephony--which continues to be the Group's largest business--were FRF 93.6 billion (14.3 billion euros) for 1998, compared with FRF 97.2 billion in 1997. This year-to-year decline of 3.7 percent results from the following factors:
- the full impact during the first nine months of 1998 of the rate
cuts for domestic and international calls introduced in March and
October 1997
- stimulation of conventional voice services thanks to the
introduction of a series of discount plans (Primaliste, Avantage,
Modulance). A total of 4.6 million customers signed up for these
tariff options by year-end 1998, compared with 2.4 million a year
earlier.
Excluding the effect of changes in consolidation and exchange rate fluctuations, revenues from leased line and data transmission activities increased 14.5 percent in 1998 to FRF 15.7 billion (2.4 billion euros).
Revenues from information services were FRF 8.2 billion (1.2 billion euros), compared with FRF 6.9 billion in 1997. This increase of nearly 19 percent reflects the consolidation as of July 1 of the activities of the Oda group. Excluding this acquisition, business from this segment grew by 4.7 percent.
Broadcasting and cable television generated revenues of FRF 8.1 billion (1.2 billion euros), compared with FRF 7 billion in 1997. This 16.2 percent increase came primarily from the consolidation of new businesses, most notably the Dutch cable operator Casema BV.
The 1.5 percent increase in EBITDA to FRF 58.6 billion (8.9 billion euros) for 1998 in comparison with 1997 primarily results from the following factors:
- the favorable impact of growth in revenues
- a marked improvement in the profitability of wireless services in
France compared with 1997, due among other factors to a reduction
of about 20 percent in per unit subscriber acquisition costs
- international businesses made a positive contribution to EBITDA
for the first time, thanks in particular to income streams from
newly consolidated activities (Casema in the Netherlands, Sonatel
in Senegal and CTE in El Salvador), as well as to the marked
increase of the EBITDA of certain international wireless
subsidiaries, such as MobilRom in Romania and Globtel in
Slovakia.
Consolidated operating income before non-recurring special items increased by 4.9 percent during 1998 to FRF 28.0 billion (4.3 billion euros). In addition to the factors behind the increase in EBITDA, operating income also improved due to a decrease in amortizations as the pace of investments in wireless infrastructure slowed.
Consolidated net income after minority interests amounted to FRF 15.1 billion (2.3 billion euros) in 1998, a modest year-to-year increase of 1.5 percent.
Growing investments in international development and efficient debt management
Capital expenditures amounted to FRF 30.6 billion (4.7 billion euros) in 1998, compared with FRF 29.9 billion in 1997. The relatively limited 2.2 percent overall increase results from contrasted evolutions:
- Investments in France, which account for nearly 73 percent of
total capital expenditures, declined by 12 percent due to the
significant drop in investments related to wireless
infrastructure (the buildout program in France has been
completed).
- There was a substantial 85 percent increase in capital
expenditures outside of France as wireless network rollouts were
pursued in Europe, particularly in Denmark and the Netherlands
and Romania. New entities outside France were also added to the
Group.
Financial investments increased 133 percent in 1998 to FRF 13.5 billion (2.1 billion euros), compared with FRF 5.8 billion in 1997. This increase is principally due to the following transactions:
- The acquisition of a 2 percent stake in Deutsche Telekom for
approximately FRF 8.2 billion (1.25 billion euros). France
Telecom has cemented its alliance with Deutsche Telekom through a
cross-shareholding representing two percent of the partners'
respective equity.
- Acquisition in July 1998 of 100 percent of Oda, the company in
charge of promoting advertising in France Telecom directories.
Net debt was reduced by FRF 15.3 billion (2.3 billion euros) in 1998 to FRF 85.7 billion (13.1 billion euros) at year-end. Most of this decrease came during the second half of the year. The net debt-to-equity ratio therefore decreased from 108 percent in 1997 to 77 percent in 1998.
The increase in share capital carried out simultaneously with the sale by the French State of a second tranche of France Telecom shares in November 1998 raised nearly FRF 9.6 billion (1.5 billion euros). A portion of the proceeds from this capital increase was used to finance the acquisition of the stake in Deutsche Telekom.
1999: continued growth, new markets, year of the Internet
France Telecom intends to proactively pursue its growth strategy in 1999, focusing in particular on the high-potential wireless and Internet sectors, as well as international development. This strategy aims to achieve the following objectives:
- Stimulate global market growth through continued development of
new services--wireless, Internet and fixed/mobile
convergence--and introduce new rate options
- Increase the Group's leadership in the French wireless market by
further consolidating the number one position of the Itineris
service. Itineris has sustained its momentum, growing its
subscriber base to almost 6 million to date. The Group expects
more than 7.5 million subscribers by year-end 1999
- Consolidate international operations with a continued focus on
Europe, working in partnership with Deutsche Telekom and Global
One
- Strengthen France Telecom's position as a leading Internet
company through a marketing policy promoting an array of
solutions tailored to each customer segment and by offering more
convenient services. France Telecom expects its Wanadoo Internet
access service to reach the one-million-customer milestone by the
end of 1999, a realistic target given that the number of
subscribers has now topped 600,000.
1998 Consolidated Financial Highlights
(in billions) at Dec. at Dec. 31, at Dec. %
31, 1997 1998 31, 1998 Change
(in FRF) (in FRF) (in euros) 1998/1997
Restated(1)
Consolidated 153.6 161.7 24.6 5.2
operating revenues
of which 10.7(2) 15.0 2.3 40.2
international
revenues
EBITDA 57.8 58.6 8.9 1.5
Operating income 26.7 28.0 4.3 4.9
before
non-recurring
special items
Operating income 25.3 25.5 3.9 1.0
Net income 14.9 15.1 2.3 1.5
Net debt 101.0 85.7 13.1 (15.1)
Capital 29.9 30.6 4.7 2.2
expenditures
Financial 5.8 13.5 2.1 133
investments
Net debt-to-equity 108% 77% (31
ratio points)
Headcount
(average 165,042 169,099 2.5
equivalent
in full-time
employees)
1 As of January 1, 1998, France Telecom changed the method of
accounting for revenues for calls from fixed-line telephones to
mobile phones and paging services provided by competing
operators. Revenues from these calls are now shown net of amounts
paid to such operators to carry the traffic on their networks.
Data for the previous years has been restated on a pro forma
basis to facilitate comparison.
2 International revenues now include foreign subsidiaries, as well
as international holding subsidiaries based in France and French
subsidiaries with ongoing activities abroad.
France Telecom
Breakdown of 1998 Consolidated Revenues by Activity(1)
----------------------------------------------------------------------
Share Share
(in millions) at of at of at % Change
December total December total December 1998/97
31, 1997 97 31, 1998 98 31, 1998
restated revenues (in FRF) revenues(in euros)
(in FRF) (%) (%)
Fixed-line 97,162 63.3 93,584 57.9 14,267 (3.7)
telephony
Mobile 17,073 11.1 24,528 15.2 3,739 43.7
communications
Leased-line and 13,595 8.9 15,736 9.7 2,399 15.7
data transmission
Equipment sales 7,905 5.1 7,718 4.8 1,177 (2.4)
and rentals
Information 6,877 4.5 8,176 5.0 1,246 18.9
services
Broadcasting and 6,966 4.5 8,096 5.0 1,234 16.2
cable television
Other revenues 4,046 2.6 3,840 2.4 585 (5.1)
Total 153,624 100 161,678 100 24,648 5.2%
1 As of January 1, 1998, France Telecom changed the method of
accounting for revenues for calls from fixed-line telephones to
mobile phones and paging services provided by competing
operators. Revenues from these calls are now shown net of amounts
paid to such operators to carry the traffic on their networks.
Data for the previous years has been restated on a pro forma
basis to facilitate comparison.
----------------------------------------------------------------------
Revenue Analysis by Business Segment(1)
-------------------------------------------------------------------------
Business Key figures 1997 1998 1998 % Change
Segments(2) (FRF in (FRF) (FRF) (euros) 1998/97
millions, except restated
headcount)
-------------------------------------------------------------------------
Domestic mobile Revenues 11,207 17,516 2,670 56
businesses
EBITDA 1,511 4,272 651 183
% of total 13% 24% 24%
revenues
Consolidated (950) 1,905 290 n.m.
operating income
before special
items
-------------------------------------------------------------------------
Domestic fixed Revenues 139,460 138,311 21,085 1
telephony and
other services
EBITDA 56,837 53,780 8,199 (5)
% of total 41% 39% 39%
revenues
Consolidated 30,064 28,643 4,367 (5)
operating income
before special
items
----------------------------------------------------------------------
International Revenues 12,015 15,923 2,427 33
businesses
EBITDA (578) 581 89
% of total (5%) 4% 4%
revenues
Consolidated (2,403) (2,528) (385) 5
operating income
before special
items
Capital 4,410 8,159 1,244 85
expenditures
1 Starting with its 1998 financial statements, France Telecom
provides a breakdown of its accounts by operating segment.
Financial data is reported for three segments: "domestic mobile
businesses" (GSM cellular in France); international businesses
(foreign subsidiaries or French subsidiaries with ongoing
international operations); and "domestic fixed telephony and
other services" (fixed telephony, data transmission and
information services).
2 The revenue figures for business segments may differ with the
breakdown by activities which contribute to consolidated
revenues. These minor differences result from inter-segment
revenues and primarily concern remuneration for calls by
fixed-line subscribers to Itineris mobile subscribers and fixed
network interconnection fees.
----------------------------------------------------------------------
1998 Operating Highlights
(At December 31, 1998)
-----------------------------------------------------------------------
Fixed telephony 1996 1997 1998
- Central office lines (in millions, 33.2 33.7 34.0
including Numeris ISDN equivalents)
- Payphones 211,000 226,000 241,000
- Of which card-operated payphones (%) 83% 88% 93%
- Discount rate plan subscribers (in 0.9 2.4 4.6
millions)
- "CLASS" premium service subscribers (in 4.1 4.3 5.0
millions)
------------------------------------------------------------------------
Business communications
- Numeris ISDN B channels 1,608 2,128 2,805
(in thousands)
- Data transmission traffic (Transpac
network)
(billions of characters per year)
- X.25 and Frame Relay 71,000 105,000 216,000
- Dedicated Internet traffic 31,000 115,000 464,000
------------------------------------------------------------------------
Wireless ("Itineris" GSM service) 1,328 3,000 5,450
(thousands of customers)
------------------------------------------------------------------------
Paging ("Expresso" and "Tatoo" services)
676,000 1,416,000 1,695,000
(total customers)
------------------------------------------------------------------------
Internet and multimedia
("Wanadoo" service) 18,000 106,000 495,000
(total customers)
-------------------------------------------------------------------------
Broadcasting and cable TV
- Subscribers to cable
networks in France 663,000 705,000 754,000
- Subscribers to cable
networks outside France - - 1,093,000
--------------------------------------------------------------------------
CONTACT: France Telecom Press Office
Tel: (33 1) 44 44 93 93
Fax: (33 1) 44 44 80 34
francetelecom.fr
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