France Telecom is one of the best players in the wireless markets in the world. It is dominating the fixed-line phone and wireless services segments in both France and Poland and it has been doing an excellent job operating in these markets and taking advantage of its position to generate stable cash flow and revenues over the years. Howver, the company has been struggling since Iliad entered aggresively in the French wireless market, which caused other companies to reduce their prices.
In this way, France Telecom has reduced its free cash flow forecast to around 7 billion euro for 2013, from 9 billion euro reported for 2011. The company tries to further reduce its costs, which is really difficult taking into account that it wants to do that without having to sacrifice its cash flow. The revenues are also expected to decline further in 2013, after decline in 2012, amid the pressure in France and a general weak economic environment in Europe.
Nevertheless, the company managed to reduce its debt over the past several years, which is a positive development that will help the company to stay afloat. The company also reduced its dividend for the last year, which was a positive move, taking into account that the large dividend put a lot of pressure on the Cash Flow.
The dividend cut is in line with the management decision to keep its leverate at around 2 times EBITDA, amid a weak economic situation and a lot of pressure from competitors.
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