France Telecom’s new CEO sent a message of continuity to markets by pledging to keep cash flow targets and a prudent stance on acquisitions this year, as he named a new management team composed largely of insiders.
Europe’s third-largest telecom operator posted in-line revenues and operating profits for 2009, and predicted that sales would be stable this year.
Net income was dragged down by charges linked to resolving a suicide crisis that rocked the company last year and ushered in Stephane Richard as the new CEO a year earlier than expected.
“We can see that our business is generally stabilising, even in the countries hardest hit by the economic slowdown like the UK and Spain,” said CFO Gervais Pellissier in an interview with French radio.
Revenues for 2009 were down 1.9 percent to 50.95 billion euros ($69.02bn) on a comparable basis. Revenues were 45.94 billion euros, excluding the business in the UK, which is in the process of being merged with Deutsche Telekom’s T-Mobile UK unit.
As a result, France Telecom will from now on report results on an excluding UK basis.
Earnings before interest, tax depreciation and amortization was down 3.7 percent to 17.25 billion euros, and 16.33 billion excluding the UK.
Net income of three billion euros was dragged down by a roughly 570 million charge for a part-time work scheme for older workers created after a series of worker suicides rocked the group last autumn.
The group generated 8.35 billion euros in free cash flow last year.
Richard, who takes over officially on March 1, also announced a new team of 15 top managers. He mostly promoted insiders at the group, such as long-time executive Jean-Philippe Vanot to deputy CEO for quality, while bringing in three new faces with political backgrounds, including the former Culture Minister Christine Albanel and the CEO of the state-funded news agency Agence France Presse Pierre Louette.
Richard lined up outsider Bruno Mettling to succeed the current head of human resources, a very sensitive post given the tensions in France over the series of worker suicides.
Richard confirmed the group’s main medium-term targets of generating eight billion euros in free cash flow this year and next, and committing to pay out a dividend generous relative to peers.
He also said he would not embark on large M&A deals, preferring a policy of “selective acquisitions aimed primarily at emerging markets” such as the Middle East and Africa.
Stephane Beyazian, analyst at Raymond James Euro Equities, said the group’s fourth-quarter performance was slightly better than expected. “There are two good surprises: Spain and the United Kingdom that bounced back in the fourth quarter,” he said. “Yet the situation is not improving in France, and isn’t likely to with the arrival of fourth mobile operator Free Mobile to the market.”