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Orange, T-Mobile JV Losing Customers; France Tel Says 2011 Outlook Stable

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When France Telecom’s Orange and Deutsche Telekom’s T-Mobile merged forces to become Everything Everywhere in the UK, the promise was for scale and the cost benefits that come with that. The formula must be working for the companies — two weeks ago they announced they would extend the collaboration into other markets. But the brand looks like it has yet to resonate with customers in the UK, judging by today’s earnings results from France Telecom.

Overall, Everything Everywhere lost 191,000 customers in Q4 2010 compared to the same quarter a year ago. Within that figure, it gained 974,000 contract customers (which tend to be higher value and more loyal in the longer term), but lost over one million prepay customers in the process. It also lost 126,000 customers in its small broadband operation, bring the current total to 770,000 subscribers.

Smartphones are on the rise at the operator. They now account for 82 percent of all contract-based connections, a huge increase on the 50 percent figure for same quarter a year ago.

Everything Everywhere was the first operator to launch subsidised iPads in the UK, bundling a reduced-price tablet with two-year data subscriptions. The offer was launched just before the holiday shopping season, and the company expected huge take up, but this reportedly never materialized. The company did not reveal any sales figures in the current results.

Yet while the rest of France Telecom (NYSE: FTE) and the rest of the mobile world is seeing a boom in mobile data use, Everything Everywhere’s operation says that non-voice percent of ARPUs actually declined slightly, down 0.3 percent to 26.2 percent.

Overall, France Telecom’s revenues were up by about 1.5 percent to €45.5 billion ($62.7 billion). Net income was €4.9 billion ($6.7 billion) in 2010, an increase of 28 percent.

In its home market, France Telecom says that mobile data represented 31 percent of total mobile revenues in 2010, versus to 26.4 percent in 2009. That was partly driven by the huge boost in smartphone and dongle usage on the network. The number of 3G broadband customers was up by a massive 23.5 percent compared to 2009, to 9.4 billion.

It said that revenues in France were up by 0.8 percent for the year, with mobile services, data services and handset sales driving growth. But it also faced tough competition which resulted in lowered prices and reduced margins, down by 1.6 percent to 37.8 percent for the year (with a company-wide margin decline of 0.9 percent to 34.4 percent.) The company currently has a 36 percent share of the France’s broadband market and a 46.6 percent share of its mobile market.

But price competition doesn’t look like it will go away any time soon, so France Telecom is also trying to take a different approach by focussing on services over the network to boost revenues longer term. The company has been offering music bundles with Deezer, and plans to do the same with video bundles from Dailymotion — it took an $80 million, 49 percent stake in Dailymotion last month and also has a minority stake in Deezer.