Orange shrugs off French woes

MOBILE phones giant Orange tried to shrug off the woes of its parent France Telecom, as it moved into net profit for the first time before a huge writedown on the value of its stake in Italian operator Wind.

It also raised its earnings forecast for the year and cut its likely peak funding needs for the rollout of third-generation services.

Last night France Telecom's chief executive Michel Bon was forced to resign in the face of mounting losses, a e70bn (£44bn) debt mountain and an expected rights issue of up to e15bn.

The board of FT also voted to stop funding MobilCom, the German operator in which Orange had a 28% stake which it had already written off earlier this year. Orange chief executive Jean François Pontal said: 'Even considered alongside prospects for market consolidation we see no business case for investing further in MobilCom.'

Chief operating officer Graham Howe said: 'It is sad that Michel Bon has departed. He had the vision to inject their mobile assets into Orange and then to take the Orange brand across the group. As for MobilCom, we had the share stake but the financial obligations were never transferred from France Telecom to Orange so we should have no further liabilities.'

Orange, which added 2.5m customers to take its total to 41m in the six months to the end of June, saw its revenues rise by 14% to e8.1bn. Before the e1.1bn write-down in the value of its 26% stake in Wind to e3.2bn it made a net profit of e218m compared with a loss of e500m. Earnings before interest, tax, depreciation and amortisation (ebitda) rose by 41% to e2.3bn. For the full year Orange raised its ebitda target from e4.3bn to e4.7bn and said it expected peak funding to be e8bn rather than e10bn towards the end of 2003.

Howe said Orange had moved even closer to the point of becoming cashflow positive and said the move into profit so early would surprise analysts. He added that he did not expect that France Telecom would sell any more of its 85% holding in Orange immediately to reduce its own debts.

Orange was still on track to launch third-generation telephony next year, he said, but described the move as evolution rather than revolution, with customers already using services such as photo messaging and audio clips.

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