Agence France Presse

London, May 29

British mobile telephone operator mmO2, formerly part of British Telecom, said on Wednesday it had slashed its annual pre-tax loss to 873 million pounds ($1.3 billion) from 3.5 billion the previous year.

Underlying profit, measured by earnings before interest, tax, depreciation and amortisation (EBITDA), stood at 433 million pounds in the year to March from a loss of 39 million the previous year.

But shares in the company plunged 8.3 per cent to 44.25 pence in early deals as the market fretted about anaemic growth in its key domestic market, where revenues rose just 1.8 per cent on the year to 2.8 billion pounds.

The results were the first from mmO2 as an independent entity. It was de-merged by BT in November as part of efforts by the former state-owned telecoms operator to rein in its soaring debts.

The chairman of mmO2, David Varney, said the wireless operator was focusing on improving the management of the business and building on its lead in the market for mobile data services.

'Our market environment remains challenging, with subscriber growth slowing and the market for mobile data services still in its early stage of development,' he said. But Varney added that mmO2 was well placed to benefit from the next stage of industry growth, which would be driven by increased demand for new mobile data services.

'We will continue to grow revenues and see further substantial improvement in our EBITDA margin,' he predicted. But analysts gave the results a lukewarm response.

'The UK remains a very competitive market and there are longer term concerns about how mmO2 can grow in this market,' said an analyst at UBS Warburg who declined to be named.

But WestLB Panmure analyst John Tysoe said that there had been some encouraging aspects to the results. 'The position in Germany looks better than we forecast and they are making the right sort of progress towards profitability,' he said. 'They are good figures. But this is the mood of the market and the mood is it does not like mobile,' he added.