Expensive ISPs

3 March 2003

The bulk of the value in France Telecom’s internet subsidiary comes from its directories business. But strip that out on the basis of recent deals, and the market appears to be radically overvaluing the rest of the group.

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Wanadoo, the internet subsidiary of France Telecom, has moved into profit a year earlier than expected. In its 2002 results, the company announced positive ebitda of E90m, E30m of net profit, and free cash flow of E114m, helped by asset sales. Total turnover grew an underlying 28% to E2.1bn. Wanadoo's directories arm made E289 of ebitda, while its ISP and portals arm made an ebitda loss of E166m.

For 2003, Wanadoo has set itself a target of tripling group ebitda.

Dutch incumbent KPN agreed in November to sell Telemedia, its Netherlands directories arm, to private equity buyers 3i and Veronis Sulher Stevenson. That followed similar deals in the US between Sprint Corp and R.H. Donnelly, and between Qwest Communications International and The Carlyle Group and Welsh, Carson, Anderson, and Stowe.

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