France Telecom annual profits dip

Business has been tough in the group's UK market

Full-year profits dropped at France Telecom last year, despite a strong performance from its mobile phone business and foreign operations.

Annual earnings before interest, tax, depreciation and amortisation (EBITDA) fell to 18.5bn euros ($23.9bn; £12.3bn) in 2006 from 19bn euros in 2005.

The firm, which owns Orange, blamed the cost of setting up internet services and price pressures for the drop.

The fall came despite revenues rising 7.5% to 51.7bn euros.

Value of Orange

Profits at Europe's second largest phone company also suffered after the firm was forced to write down the value of its units in the UK and Poland by a total of 2.7bn euros.

Most of the write-down is linked to its Orange mobile phone operation in the UK, France Telecom said.

The company has been having a tough time of late, suffering from a slowdown in its French and Polish fixed line businesses as well as sluggish growth in its UK mobile phone market.

As a result, the company warned that it expected full-year net profit, taking into account the reduced value of Orange and other assets, would to fall by between 4bn and 4.2bn euros to 5.7bn euros.

It will release more detailed profit figures for 2006 on 6 March.