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Orange moves out of the red (kinda)

Rosy figures disguise parent's problems

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Orange has hit profitability for the first time since its flotation in 1991. Kinda. The headline figure it wants you to remember is the EBS (Earnings Before Bad Stuff). After Bad Stuff, in this case a hefty investment writedown, and the mobile telco is still swimming in the Red Ink Sea.

For the first six months of this year, the mobile operator made a net profit (before exceptional items) of €218 million (£137 million), compared to a net loss of €500 million (£315 million) in the first half of last year. Total revenues for Orange in the first half of this year were up up 13.8 per cent to €8.1 billion (£5.1 billion), as the margin on its GSM network revenues rose 5 percentage points to 31 per cent.

However, taking into account a €1.1 billion (£692 million) writedown in Orange's investment in Italian mobile operator Wind, the group made a loss of €862 million (£542 million).

Nonetheless the results provide some encouragement for Orange's debt-burdened parent company France Telecom, which made a loss of €12.2 billion (£7.67 billion) in the first half of this year. The company is sitting on a whopping debt burden of €70 billion (£44 billion), arising in no small part from France Telecom's acquisition of Orange.

Yesterday also marked the widely anticipated resignation of France Telecom chief executive Michel Bon. At the same time, France Telecom announced that it was pulling the plug on further investment in Mobilcom, the German mobile network in which it holds a large, but not controlling stake. The move is expected to force Mobilcom into insolvency. France Telecom is still expected to buy the business.

Graham Howe, deputy chief executive officer and chief operating officer, pledged that France Telecom's financial woes would not affect its 3G rollout plans.

"We are fully on track for our planned 3G launches," said Howe. "It is also increasingly clear that we are able to leverage our 2G networks to provide our customers with a '3G experience'."

Like mmO2, Orange plans to launch 3G services early next year with Vodafone and 3 (the Hutchinson Telecom) operation due to launch earlier, sometime at the back end of this year. ®

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