Oct. 29 (Bloomberg) -- France Telecom SA, Europe’s third- largest phone company, said third-quarter profit slid 8 percent, in line with expectations, as companies and individuals cut spending amid the economic slump.

Earnings before interest, taxes, depreciation and amortization slipped to 4.56 billion euros ($6.71 billion), from 4.95 billion euros a year earlier, the company said in an e-mailed statement. Sales fell to 12.7 billion euros from 13.6 billion euros. Analysts had predicted sales of 12.8 billion euros, the average of eight estimates compiled by Bloomberg.

“They’re doing as well as they can possibly be expected to in a really difficult environment,” Will Draper, an analyst at Execution Ltd. in London, said by phone.

France Telecom, like its rivals Vodafone Group Plc and Deutsche Telekom AG, has been reorganizing operations to slash costs and stem a drop in profit as the economic slump prompts consumers and businesses to cut back on phone calls and data transfers. The Paris-based company has also struggled with a spate of suicides by employees -- 25 of whom took their own lives since early 2008 -- which unions blame on the company’s reorganization efforts.

The company has suspended its reorganization plan as a result. The suspension will have “no effect for 2009” financially, Chief Financial Officer Gervais Pellissier said on a conference call with journalists. Still, the company has made a provision for about 1 billion euros in costs associated with offering a part-time work program for older workers, which is being negotiated with unions, he said.

Margins

France Telecom fell 1.4 percent to 17.52 euros in Paris trading, giving the company a market value of about 46.4 billion euros. The stock has fallen 12 percent this year.

“Against a backdrop of difficult economic, social and regulatory conditions, the group is proving its ability to maintain its performance,” Chief Executive Officer Didier Lombard wrote in the statement. The company should be able to “rapidly take advantage of any improvement in the economic environment,” he said.

The company said its cost-saving plan will limit any decline in 2009 Ebitda margin, which slid 0.7 percentage point to 35.9 percent in the third quarter.

France Telecom confirmed its target of matching last year’s cash flow of 8 billion euros. Capital expenditure as a percentage of revenue will remain at less than 12 percent for 2009, the company said in the statement.

Revenue in France Telecom’s home market declined 1.6 percent to 5.88 billion euros, compared with a slide in the U.K. of 15.3 percent, to 1.28 billion euros. Sales in Spain fell 4.7 percent to about 1 billion euros.

“The surprising thing with revenue was how good France was,” Draper said.

Customer Increase

At Sept. 30, the company had 189.1 million customers, an increase of 6.6 percent from the same period last year.

Separately, France Telecom said it is pushing ahead with a merger of its U.K. mobile unit with Deutsche Telekom AG’s T. Mobile. The consolidation will create Britain’s largest mobile operator. Pellissier today said the companies have filed their merger project with the European Commission, and may reach a definitive agreement in early November.

The company is not planning major acquisitions, but is attentive to opportunities in emerging markets and for consolidation where the company is already present, he said.

Iliad Threat

In France, the company is preparing for the possible entry of broadband internet provider Iliad SA into the mobile-phone market, which is the “major risk” to its performance, Draper said. A government tender for a fourth operator closes today, with Iliad the sole confirmed bidder.

France’s Arcep telecommunications regulator said last week that it could fine France Telecom and Vivendi SA, which owns the SFR mobile brand, for not rolling out third- generation mobile networks fast enough. France Telecom is “ahead of SFR” in deploying its network, and is “continuing to invest,” Pellissier said.

“Operationally, we expect France Telecom to suffer less than peers in 2009,” Sanford Bernstein analysts including Robin Bienenstock wrote in a note to clients. The company has benefited from “relatively benign macroeconomic conditions, and the current lack of competition in the French market,” they wrote.

Deutsche Telekom and Telefonica SA are the two largest phone companies in Europe.

To contact the reporter on this story: Matthew Campbell in London at mcampbell39@bloomberg.net.

Last Updated: October 29, 2009 12:58 EDT