LONDON: European telecommunications companies took a beating Thursday after France Telecom warned that sales growth would be worse than expected this year.
However, broader markets on the Continent were steady after gains outside the hard-hit telecom sector and as the European Central Bank left interest rates on hold.
Germany's DAX 30 gained 0.2 percent at 5,542, the French CAC 40 index closed virtually flat at 4,890, while the U.K.'s FTSE 100 index gained 0.06 percent at 5,735.
Gains from other sectors such as oil companies BP and Royal Dutch Shell and resource stocks cushioned losses.
Oil stocks gained as front-dated crude breached $65 a barrel once more.
France Telecom slid more than 8 percent in Paris after saying it expects to report comparable revenue growth of 2 percent in 2006, compared with a previous forecast of between 3 percent and 5 percent.
The company said second-half 2005 trends, which were less favorable than it expected when it announced a restructuring in the middle of last year, are now expected to continue into 2006.
Morgan Stanley cut its rating to equal-weight from overweight and Goldman Sachs also downgraded France Telecom to in-line from outperform.
Peers Deutsche Telekom lost 2.5 percent, KPN eased 2 percent, BT Group lost 1.1 percent, while Vodafone Group shed 1.7 percent.
Deutsche Telekom said it was maintaining its earnings targets for 2005 and 2006.
"It is becoming clear to us that 2006 is unlikely to be a vintage year for the European large-cap (telecom) incumbents.
Deutsche Telekom, Vodafone, and now France Telecom, have all had to admit that maintaining any semblance of growth is going to come at the cost of margins,'' said Chris Alliot at Nomura Securities.
Food retailers stood out, with Netherlands-based Ahold gaining 3.5 percent, France's Carrefour dropping 2.3 percent and Britain's J Sainsbury falling 3.2 percent after detailing sales.
UBS cut its rating on Carrefour to reduce from neutral, noting the French supermarket group's fourth-quarter organic growth of 3.2 percent was below its forecast of 4.5 percent.
Shire Pharmaceuticals surged 7 percent in London amid hopes it's close to settling ongoing patent litigation for its attention deficit hyperactivity disorder treatment, Adderall XR.
"It is certainly not unreasonable to assume that there is an increasing likelihood that Shire and one or more of its generic challengers, most notably Barr Laboratories and Impax Laboratories, will settle, given the acceleration in brand-generic agreements during the past few months,'' said Deutsche Bank analysts in a note to clients.
Danish telecom TDC gained 1.2 percent in Copenhagen after private-equity group the Nordic Telephone Co. reduced the level of acceptances needed for its US$12 billion bid and extended the deadline for shareholders to accept.
Lloyds TSB gained 1.2 percent after Merrill Lynch upgraded it to buy from neutral. It expects the bank to surprise the market with better-than-expected results in 2006. - AP