Bouygues Plans Further Savings at Phone Unit Amid Price War

Bouygues SA, the French building and telecommunications company, reported earnings that beat analyst estimates and announced that it will increase savings at its phone unit as a price war weighs on sales.

Operating profit before one-time items and restructuring costs rose 5 percent to 1.34 billion euros ($1.84 billion), the Paris-based company said in a statement today. Analysts had estimated profit of 1.3 billion euros, according to the average of seven estimates compiled by Bloomberg. Revenue fell 1 percent to 33.3 billion euros.

“The upheaval in the telecoms market is having a negative impact on Bouygues’ performance,” Chief Executive Officer Martin Bouygues said in the statement. “However, the Group’s fundamentals remain intact, in particular the capacity to generate cash flows on a regular basis thanks to the diversified range of our business activities.”

Bouygues, which predicts proup sales in 2014 to be “close to the 2013 level,” is selling assets and cutting costs as its phone unit faces up to discount carrier Iliad SA and lower advertising revenue at its television operation. The company also booked a 1.4 billion-euro non-cash writedown on its 29 percent stake in Alstom SA, reflecting weaker sales prospects for power plants and equipment.

Bouygues proposed a dividend of 1.60 euros a share, unchanged from last year. It posted a net loss of 757 million euros in 2013 because of the Alstom writedown, following a profit of 633 million euros a year earlier.

Net debt rose to 4.4 billion euros from 4.2 billion euros, excluding Bouygues’s sale of a minority stake in tollroad company Cofiroute to Vinci SA for 780 million euros. Bouygues will book a capital gain of around 240 million euros after tax from that sale in 2014, the company said.

To boost savings, Bouygues Telecom, France’s third-largest mobile-phone company, already agreed this month to share part of its network with SFR, France’s second-largest phone operator.

“Bouygues Telecom is initially calling for slightly positive cash flow generation in 2014 and is stepping up its transformation plan, which should improve short- and medium-term visibility from the second quarter of 2014,” the company said.

Bouygues shares have risen 10 percent this year, giving it a market value of 9.65 billion euros.

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