In an interview with the French business journal Le Revenue last week, France Télécom’s finance director Michel Combes said he expected the company’s profit margins to recover in 2007 and blamed the company’s recent profit warning on price cutting, IP telephony and competition in the hotly contested UK mobile market. Earlier this month FT warned that the tough trading market seen since the third quarter of 2005 would continue into the first half of 2006, undermining its efforts to improve sales and profitability. The French telco 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.
Mr Combes told the magazine that the drop in revenues related to the faster than expected take-up of internet phone services and the fact that revenues from its new products had not taken yet taken off. He added that rival operator Deutsche Telekom was redoubling its efforts in the UK mobile market generating increased pressure on its Orange mobile subsidiary, and that lower tariffs in Europe are expected to cut more than EUR700 million (USD846 million) off FT’s turnover during the course of the year. However, he remained confident that, ‘Probably as of 2007 and certainly in 2008 our margins should bounce back’.