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France Telecom on Thursday said there would be no job cuts at Amena, the Spanish mobile operator that it is buying, as it formally launched what chief executive Didier Lombard described as its latest “industrial project”.
Speaking in Madrid, Mr Lombard said the acquisition, which values Spain's third wireless operator at €10.6bn ($12.8bn), would be earnings-accretive after 12 months. He identified €1.1bn in cost savings after 2008, drawn mainly from economies of scale in purchasing, operational improvements and savings in network and IT costs.
The Orange brand will replace Amena and the business merged with Wanadoo, France Telecom's existing fixed-line operation in Spain. Combined, the new company 80 per cent controlled by the French group will represent Spain's largest integrated telecommunications group behind Telefónica, the former state monopoly.
Amena's existing shareholders will hold the remaining 20 per cent, and end up with €3bn in France Telecom shares they can sell after October 26 next year. The French company has guaranteed a 4 per cent return on the shares. Luis Alberto Salazar-Simpson, Amena chairman, will head the new group, and management will remain “mainly Spanish”, according to Mr Lombard. There would be no job cuts. “This doesn't tend to happen in a young, growing company,” he said.
In a related deal, the cable assets of Auna, Amena's parent company, will be sold to Ono, another local fixed-line and cable operator, for €2.2bn. Banco Santander, Unión Fenosa and Endesa which control 83 per cent of the parent say they stand eventually to realise €2.5bn in capital gains from the entire deal.
On Thursday's details came as France Telecom announced first-half sales of €23.7bn, up from €22.7bn for the same period of 2004. It said growth accelerated in the second quarter of 2005, fuelling the 4.5 per cent increase. Net profit rose from €1bn to €3.4bn, partly swelled by more than €1bn of disposals this year and a €534m goodwill impairment charge taken last year. Net debt fell from €49.8m at the end of 2004 to €46.3m at the halfway point of 2005. The shares closed up 1.7 per cent at €25.18.
The second quarter was marked by a stabilisation of France Telecom's traditional French fixed-line business, which has come under pressure from internet-based telephony and other competitive factors.