This excerpt taken from the FTE 6-K filed Jul 27, 2006.
(*) GOM recorded over the previous twelve months on an historical basis and restated to include the GOM from the Spanish mobile operator Amena over twelve sliding months at June 30, 2006.
The Gross Operating Margin (GOM) was 9.467 billion euros in the first half of this year, an increase of 1.8% on an historical basis, and related to the consolidation of Amena and, to a lesser extent, a favourable foreign exchange effect. On a comparable basis, the GOM decreased by 4.9% from the first half of 2005. Excluding the impact of a 200 million euro reserve reversal on business in Lebanon included in the GOM at June 30, 2005, the decrease in GOM on a comparable basis was 2.9%.
The Margin Rate (GOM/Revenues) was 36.6% at June 30, 2006, compared to 38.5% at June 30, 2005 excluding an exceptional reserve reversal for Lebanon, down 1.9 percentage points and in line with the objectives announced. This enables the Group to confirm its full-year guidance of a margin decrease between 100 and 200 basis points.
An analysis of the GOM shows an increase in expenses excluding personnel costs of 8.1% on a comparable basis (6.2% before the exceptional reserve reversal for Lebanon), primarily driven by the increase in commercial expenses, the increase in network costs (purchases and payments to other operators, maintenance, customer service platforms), and the cost of launching new products and services.
Net operating income totalled 5.334 billion euros at June 30, 2006, down from 6.479 billion euros at June 30, 2005, reflecting the sharp decrease in earnings from asset disposals and the increase in the provision for depreciation related to the consolidation of Amena.
Net income totalled 2.759 billion euros at June 30, 2006, compared with net income of 3.634 billion euros a year earlier. This change reflects the change in operating income, which was partially offset by the drop in financial costs and a decline in corporate income taxes.
Net income Group share totalled 2.346 billion euros at June 30, 2006, compared with 3.363 billion euros as of June 30, 2005. Minority interests totalled 413 million euros and primarily reflect the results of its principal publicly traded subsidiaries (TP SA, Mobistar and PagesJaunes Groupe).
Capital expenditures for tangible and intangible assets (CAPEX) totalled 3.055 billion euros at June 30, 2006 and amounted to 11.8% of revenues. On a comparable basis, they rose 3.5% compared with the first half of the previous year and 12.6% on an historical basis. The increase in CAPEX was driven by the very rapid growth of Livebox and Voice over IP services, particularly in France, and continued large investments in high-growth wireless markets.
The Groups Organic cash flow1 totalled 3.314 billion euros at June 30, 2006 compared with 3.005 billion at June 30 of last year. The 309-million-euro improvement between the two years is primarily related to the drop in net financial costs and in income taxes paid, which were partially offset by the higher CAPEX. This enables the Group to confirm its full-year guidance of an organic cash flow of 7 billion euros.
Net financial debt2 amounted to 47.234 billion euros at the end of the first half, down from 47.846 billion euros at December 31, 2005, a reduction of 612 million euros in the first half of 2006, after payment of dividends for France Telecom and its subsidiaries in the first half for a total amount of 3.1 billion euros. The ratio of Net Debt to Gross Operating Margin equalled 2.49 at June 30, 2006, compared with a ratio of 2.48 at December 31, 2005 (taking into account the Amena GOM over a period of 12 sliding months as of June 30, 2006).