An unexpected profit warning from France Telecom has sent shock waves through the European telecommunications sector and caused a steep fall in the value of the the company’s shares. France Telecom said revenue growth was 2% to 3% last year. That is less than its latest revised forecast in October of about 3% growth. France Telecom’s shares finished the day down by 8%.
It is Europe’s second-biggest fixed-line phone company, with forecast turnover for last year of 48.5 billion euros, second to Deutsche Telecom and ahead of the operators in Spain, Italy and the Netherlands. The warning of lower sales growth and tighter margins this year underlined the problems facing fixed-line and mobile phone providers across Europe from new technologies, increased competition and regulatory cuts in prices.
The share value of the French firm’s larger rival Deutsche Telekom suffered collateral damage – it fell 2.5% – even though the Germans reiterated their sales and earnings forecasts for 2005 and 2006. Deutsche Telekom is predicting a 5% sales increase this year and next. In the UK, British Telecom and Vodafone Group declined to comment as did KPN in the Netherlands.