Vivendi, Bouygues report weak earnings on telecoms setbacks

French industrial groups Bouygues and Vivendi have reported weak first-quarter results as their telecoms subsidiaries continue to struggle in the competitive French market.

Sales at Bouygues Telecom fell by 16%, to €1.15 billion ($1.48 billion), compared with the first quarter of 2012, while earnings before interest, tax, depreciation and amortization (EBITDA) were down by 28%, to €212 million.

Bouygues (Paris, France) swung to a net loss of €42 million from €35 million a year earlier on account of the telecoms setbacks.

French industrial groups Bouygues and Vivendi have reported weak first-quarter results as their telecoms subsidiaries continue to struggle in the competitive French market.

Sales at Bouygues Telecom fell by 16%, to €1.15 billion ($1.48 billion), compared with the first quarter of 2012, while earnings before interest, tax, depreciation and amortization (EBITDA) were down by 28%, to €212 million.

Bouygues (Paris, France) swung to a net loss of €42 million from €35 million a year earlier on account of the telecoms setbacks.

In a statement, Bouygues said the operator’s first-quarter results “suffered from a particularly unfavorable comparison” because the price war launched by new entrant Iliad (Paris, France) had had only a limited impact at this time last year.

Bouygues Telecom has been forced to respond to the Iliad threat by cutting prices and marketing a range of SIM-only and web-only plans and said it gained a total of 20,000 new mobile customers in the quarter.

The operator also managed to grow its base of broadband customers by 45,000 to give it 1.9 million overall.

Under pressure to boost margins, it is now aiming to secure savings of €400 million in 2013 as a result of cost-cutting initiatives launched last year, up from a previous target of €300 million.

Bouygues Telecom rival SFR – owned by Vivendi (Paris, France) – experienced similar pressure, reporting an 11.4% decline in revenues, to €2.6bn, that it blamed chiefly on “the impact of price cuts related to the competitive environment” while citing adverse regulation as a further problem.

Meanwhile, EBITDA slumped by 24.5%, to €702 million, in line with earlier guidance issued by Vivendi.

The setbacks were largely to blame for an 18.5% drop in Vivendi’s adjusted net income, to €672 million.

Like Bouygues Telecom, SFR has been launching new low-priced offers in response to the challenge from Iliad and flagged 257,000 net additions of contract customers during the quarter.

Some 81.2% of the operator’s customers are now on contracts, compared with 78.2% this time last year.

Nevertheless, the company has also been forced into cost-cutting action, launching a voluntary redundancy plan on April 11.

The cutbacks are intended to ensure SFR can continue to invest in high-speed networks – it aims to cover more than 30% of the French population with its 4G network by the end of the year.