Bouygues Falls Most Since 2008 as Phone Profit Cut: Paris Mover

Bouygues SA, the French building, television and telecommunications company, fell the most in almost four years as the company cut its 2012 profit forecast for its phone division because of rising competition.

Bouygues slumped as much as 8.9 percent, the biggest intraday decline since Dec. 3, 2008. The stock was down 8.1 percent at 20.14 euros as of 1:17 p.m. in Paris.

“Bouygues Telecom is facing deep-seated changes in the mobile market,” Chief Executive Officer Martin Bouygues said at a press conference today.

The telecom unit’s earnings before interest, taxes, depreciation and amortization will be about 900 million euros ($1.13 billion) this year, excluding the cost of a restructuring plan which is estimated at 150 million euros, the Paris-based company said in a statement yesterday. Bouygues previously forecast an Ebitda drop at its phone unit of about 250 million euros from last year’s profit of 1.27 billion euros.

Bouygues Telecom, France’s third-largest mobile-phone operator, is cutting prices and introducing new services as it loses customers to Iliad SA, which started a mobile phone service in January. To mitigate the drop in revenue which is also due to a cut in so-called call-termination rates, Bouygues is shedding 556 jobs and paring marketing and distribution expenditure to save 300 million euros when the plan has its full impact from next year.

Asset Sales

Bouygues Telecom is also planning to sell some property assets and some or all of its roughly 2,300 antenna masts to reduce its debt which has been inflated by the acquisition of so-called fourth-generation licenses in recent months. The sale may be announced by the end of the year, Chief Financial Officer Philippe Marien told Bloomberg on the sidelines of a press conference today.

Bouygues reiterated a complaint that Iliad’s six-year roaming agreement to use the network of France Telecom SA is allowing the new entrant to win customers by offering cheaper prices while limiting its own network investment.

“A mobile network costs at least 10 billion euros in France, not one billion as announced” by Iliad, the CEO said. He said it would be a “disaster” if the roaming agreement persists, and that competition would “rebalance” if Iliad would have to invest “a lot more” than 1 billion euros.

Sharing Networks

Sharing phone networks with a rival only make sense in lowly-populated areas, Martin Bouygues also said. Sharing Bouygues’s full network with that of Vivendi SA’s SFR, France’s second largest operator, would lead to a “massive” writedown, Marien said.

Bouygues said first-half operating profit fell 37 percent from a year earlier to 476 million euros as it lost mobile-phone customers and programming costs at its broadcasting operations climbed.

The 2012 operating margins of its construction and real estate units may be close to those posted in the first half, the CEO said. Full-year profitability of Bouygues’s Colas unit may be little changed from 2011, provided that road works aren’t disturbed by unfavorable weather by the end of the year, the CFO said.

The company raised its 2012 sales forecast by 150 million euros to 32.8 billion euros to take into account acquisitions, Bouygues said. The company’s backlog for road and building construction rose to a record 28.6 billion euros at the end of June, up 13 percent from a year earlier.

Bouygues shares have declined 18 percent this year. That compares with a 9.6 percent drop in France Telecom, France’s largest phone company, and a gain of 2.3 percent in Vinci SA, France’s largest builder.

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