The Board of Directors of France Telecom (FTE), third-largest wireless operator in Europe, approved a joint bid for taking a stake in a renowned French newspaper publishing company, Le Monde, with two other interested parties: Spain’s media conglomerate PRISAand the owner of Nouvel Observateur magazine, Claude Perdriel.
French newspapers have been struggling in recent years due mainly to competition from free newspapers and news websites, as well as customers’ unwillingness to read newspapers. Le Monde is currently operating at a loss and is seeking to raise capital in order to meet losses and repay the mounting debts. It will sell a majority of its stake for €100 million ($124 million).
France Telecom, PRISA and Claude Perdriel came together to form an organization for preparing bids for a stake in Le Monde. The combination intends to buy a 34% stake in Le Monde and become its main shareholder.
France Telecom, which is 27% owned by the French government, is expected to invest in the range of €50 million to €60 million. The company is particularly interested in Le Monde’s online unit. Publishing company, Lagardere SCA, which owns a 7% stake in Le Monde, might sell its stake in Le Monde to France Telecom, raising the possibility of the French government to become an indirect owner of the newspaper.
Furthermore, France Telecom raised 52.3 billion yen ($575 million) from the sale of first Samurai bond to a European company, as the credit policy in Europe is much weaker than that of France and Germany.
We are currently recommending an Underperform rating for France Telecom. The company remains significantly challenged by the weak economic conditions and unfavorable regulatory measures across its key European markets, which continue to weigh on the top line. Going forward, revenue is expected to remain under pressure due to the prevailing economic, competitive and regulatory factors. France Telecom faces tough competition in its domestic fixed and mobile operations from Bouygues (EN), Telecom Italia spA (TI) and Vodafone Group Plc. (VOD).
However, the company has been generating respectable customer growth with respect to both wireless and ADSL broadband Internet businesses in France and UK Orange (Orange Plc acquired by France Telecom in 2000), which is the key growth driver for the company. In the long run, France Telecom may generate good business in its international mobile and broadband operations to grow revenues and compensate weak cash flow and revenue growth domestically.
Read the full analyst report on “FTE”
Read the full analyst report on “PRS.MC”
Read the full analyst report on “EN”
Read the full analyst report on “TI”
Read the full analyst report on “VOD”
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