France Telecom fourth quarter earnings slow on price war

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February 20, 2013 5:49 PM EST

France Telecom saw a slowdown in sales and profit in the fourth quarter because of a continued shakeout of its home market spurred by an aggressive low-cost mobile challenger.

Revenue in the fourth quarter fell 3.2 percent to 10.92 billion euros (9.45 billion pounds) on a comparable basis, hit by weakness in France and Poland, the company said on Wednesday.

Restated earnings before interest, tax, depreciation and amortisation (EBITDA) fell 8.8 percent to 3.13 billion euros for a margin of 28.7 percent versus 30.4 percent a year ago.

Europe's fourth-largest telecom operator by revenue also posted 7.97 billion euros in operating cash flow in 2012, just short of its 8 billion target.

It maintained an earlier goal of hitting operating cash flow above 7 billion euros this year, but acknowledged that the price war in France was not abating as it had hoped.

"We are less optimistic about the end of the price war in France now than we were a few months ago," said Chief Financial Officer Gervais Pellissier. "The pressure on prices will be worse in 2013 than we thought."

Pellissier added that the group nevertheless maintained its objective to return to growth of operating cash flow in 2014, but more by focusing on cost cuts than relying on the stabilisation of sales in France.

(Reporting by Leila Abboud; Editing by James Regan)

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