France Telecom Financial Goals For the Next 5 Years

Operator mulls minority stake sales in bid to save €3 billion by 2015.

France Telecom Tuesday said it could sell minority stakes in assets where the group has no operational role and aims to make gross savings of at least EUR3 billion by 2015, as the group seeks to pave the way back to sustainable growth in a struggling telecom industry. France Telecom also said it aims for its dividend to remain stable from 2013 after reaffirming its commitment to paying EUR1.4 per share for 2011 and 2012. The objectives are part of the five-year strategic and financial targets the company laid out Tuesday at its first and long-awaited investor day since Chief Executive Stephane Richard took the helm last year. Richard has been focused on boosting worker morale after a series of suicides rocked Europe's third-largest telecommunications operator. Now he has set out a five year plan to win over investors and soothe their concerns over tough competition in its domestic market and high costs. Still, at 0738 GMT, France Telecom shares were trading down 0.6% at EUR15.69, the biggest loser in a higher Paris market, as some analysts called the group's long-term targets "ambitious" and said the short-term goals were "disappointing." During the first phase of the plan, between 2011 and 2013, France Telecom aims to invest heavily in its networks while also stabilizing earnings before interest, taxes, depreciation and amortization, or Ebitda, through cost savings and an improvement in its French business. The company is aiming for 2013 Ebitda to be above the 2011 level. According to a company consensus, France Telecom is expected to post Ebitda of EUR15.19 billion this year. France Telecom, along with most major European operators, is suffering as revenues stagnate while regulation and competition intensify, chiefly in mature European markets. Meanwhile, operators are under pressure to upgrade mobile networks to cope with booming demand for Internet-connected phones. In France, which accounts for more than half of the company's revenue and profit, France Telecom has been facing tough competition as operators are preparing for the arrival of fourth mobile operator Iliad SA's Free Mobile next year. In this tough environment, operators are being forced to cut costs but France Telecom has faced the additional challenge of not being able to cut its workforce in France following the recent wave of suicides which led to a social crisis at the company. Still, France Telecoms aims to make EUR3 billion in savings by 2015 through improving IT systems, expanding network sharing with other operators, pooling service platforms, and optimizing synergies, with EUR2 billion saved by the end of 2013. A large part of savings will stem from the recently signed deal to form a joint venture with rival Deutsche Telekom AG to buy telecom and network equipment together. Richard told the Wall Street Journal last month that he wants to extend cooperation with Deutsche Telekom and other operators, notably in the area of network sharing. Between 2011 and 2013, the telecoms giant also aims to invest around EUR18.5 billion in improving and expanding its networks across the world. During the second phase of the plan, in 2014 and 2015, France Telecom hopes to benefit from the investments and cost savings made in the previous year to reach a compound annual growth rate of 2.7% for revenue and 3.4% for Ebitda. Over 2011 and 2013, revenue is seen growing at a compound annual rate of 0.6%. "We view this as difficult to achieve in light of the uncertain macro environment over the next period," Citigroup said. Regarding the group's recently launched asset review, France Telecom said that over the long-term, it doesn't want to remain a minority shareholder in assets where the group has no operational role. It said it would consider making additional shareholder returns if it makes a significant divestment.