France Télécom (FT) has warned that the tough trading market seen since the third quarter of 2005 will continue into the first half of the year, undermining its efforts to improve sales and profitability. The French telco has cut its sales guidance for 2005, saying turnover will most likely rise by 2%-3% on a pro forma basis, below the 3% target it announced last October. On the plus side, EBITDA is expected to beat FT’s target of EUR18.5 billion and ‘organic’ cash flow is forecast to come in ahead of the target laid out in the group’s NExT strategy plan of 2005. ‘The trends observed over the second half of 2005, less favourable that those expected when the NExT plan was announced in June 2005, are expected to continue in 2006, when pro forma sales are seen rising by just 2%’, the telco said in a statement.
FT is faced with stiff competition in both the fixed line and mobile markets. In response it is embarking on a restructuring exercise to simplify its brand portfolio and introduce new services to strengthen customer loyalty. However, such measures will impact on its profit line and investments will reduce its operating margin by 1%-2% next year.