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France Telecom surges
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March 2, 2000: 7:17 a.m. ET
Earnings, Internet hints push shares to new peak; market value nears $200B
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LONDON (CNNfn) - Investors piled into France Telecom Thursday in the wake of the company's record full-year earnings and hints that it may float all or part of its Internet and cellular businesses.
Chairman Michel Bon said that the company may follow the example of European peers and spin off assets including Wanadoo, France's largest Internet service provider, and its Itineris cellular-phone arm.
France Telecom (PFTE) shares were suspended limit up and reopened more than 12 percent above their previous close at a record 196 euros, valuing the company at more than 200 billion euros ($196 billion) for the first time. The stock has gained 50 percent this year alone.
Bon's remarks came alongside the announcement of a 20.4 percent rise in 1999 net profit to 2.768 billion euros ($2.71 billion) from 2.3 billion a year earlier. The report, posted after the market closed Wednesday, showed profits grew almost twice as much as analysts expected, though higher-than-expected capital gains were partly responsible. Surging revenue from the mobile-phone business pushed sales up by 10.5 percent to 27.23 billion euros.
Bon said the company might offer shares in its Internet businesses and Itineris to finance acquisitions, noting that the surging valuations of ISPs, such as Spain's Terra Networks and Italy's Tiscali, put cash-based acquisitions out of its reach but raised the possibility of making purchases with highly-rated shares.
"This forces us to think about possibly listing on the bourse all or part of our Internet activities," Bon said.
 Spain's Telefónica sold 24.9 percent of Terra last year in an initial public offering and has seen the stock surge 10-fold. Deutsche Telekom shares have surged on its plans to float T-Online, Europe's largest ISP, alongside a possible offering of shares in its T-Mobil cellular arm.
France Telecom is targeting 2 million subscribers for Wanadoo by the end of the year and market shares of 10 to 15 percent in the ISP markets of other European countries. Bon also restated the company's interest in Orange, Britain's third-largest cellular operator, which is being sold by Mannesmann following the German firm's acquisition by Vodafone AirTouch (VOD).
Bon forecast continuing strong growth in 2000, with sales expected to rise at double-digit rates, as well as capital gains from the sale of non-core assets including its stakes in Deutsche Telekom (FDTE) and Sprint (FON: Research, Estimates).
The alliance between the French and German firms collapsed last year in the wake of the latter's failed merger attempt with Telecom Italia, a move that derailed its collaboration with France Telecom in the Italian market. The split hastened the collapse of Global One, an international business telecom alliance in which Sprint was the third partner.
Profit growth in 1999 reflected a large fall in financing charges and capital gains of 930 million euros, including the sale of the company's stake in French chipmaker STMicroelectronics (PSTM). Core earnings, before interest, tax and depreciation, rose 7.5 percent to 8.94 billion euros, France Telecom said.
The company reported a 50.9 percent jump in revenues from its cellular arm, and a 46.3 percent rise in the unit's operating earnings. Increased competition dampened income from fixed-line calls, however, keeping that division's earnings growth to 8.6 percent. International operations generated a 79.3 percent advance in operating profit, boosted by the inclusion of the company's stake in Telecom Argentina for the first time. 
-- from staff and wire reports
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