France Telecom missed consensus but had decent results, particularly in contrast to Deutsche Telekom’s miss earlier in the week. Mobile and TV services within France were the strong points; emerging market numbers and Eastern Europe were off.
Two interesting points: The company reiterated its full-year guidance and it indicated its capex-to-sales ratio was about 12%. This is well below the average of the industry in normal times. We’ve noticed that EU providers are being more sanguine regarding capex than those in many other markets, including the U.S.. We believe this to be in part because recovery there is not likely to come as quickly as in the U.S., and because of the threat of regulatory intervention on things like roaming rates and even access sharing that would likely lower profits.
The pan-EU regulatory program that creates this risk reached a compromise solution on file sharing and will now be sent to the member countries for ratification.