European telcos hold up despite economy slowdown

By Tracy Rucinski and Astrid Wendlandt

MADRID/PARIS (Reuters) - Telefonica (TEF.MC) and France Telecom (FTE.PA) reported resilient earnings despite slowing economic growth and confirmed their full-year forecasts but BT Group (BT.L) shares slumped on doubts its targets were too ambitious.

Some analysts said fears that carriers would be hit badly by economic weakness were overdone but others noted that a slowdown in Spain affected results, although not as strongly as with Vodafone (VOD.L) which last week blamed Spain for a cut in its full-year outlook.

"Revenue trends were never going to be as weak as for Vodafone, but revenue guidance for Spain still appears at risk with macro indicators worsening," Credit Suisse analysts said about Telefonica.

France Telecom, facing concerns it might pursue diluting acquisitions after an abortive attempt to buy Swedish rival TeliaSonera (TLSN.ST), said it will pay its first ever interim dividend to underscore its financial solidity.

Finance Director Gervais Pellissier said the group, which trades mainly as Orange, planned no major acquisition for now.

Shares in BT slumped 12.5 percent on a host of divisional problems and as analysts questioned whether targets set by its previous chief executive were now too lofty.

"BT looks a bit sick," said one analyst.

BT shares were a drag on the DJ Stoxx telecoms index for European shares .SXKP that fell 0.7 percent by 12:04 p.m. British time.