France Télécom, one of the world's most heavily indebted companies, said earnings before interest, tax, depreciation...
and amortisation rose 21% to €14.9bn, just topping forecasts. Operating profit jumped 31% to €6.8bn.
But the state-controlled company, which is poised to announce a €15bn rescue cash call after accumulating €68bn of debt in an ambitious expansion spree during the bull market, booked a hefty €18.2bn of charges.
These included a €7.3bn hit for the liabilities of German affiliate MobilCom, €4.4bn related to its telecoms carrier Equant and a €1.7bn provision on its stake in British cable group NTL.
However, the French firm reconfirmed it would meet financial commitments until end 2004 and planned to turn negative free cashflow of €1.1bn to a positive €3.0bn-44.0bn in 2003 and €6bn euros for each of the following two years.
"These figures make you dizzy because they are absolutely remarkable," chief executive Thierry Breton told a news conference, noting that France Télécom had now twice run up the highest debts in French history.
"We had to turn a page [in our history], and that page has now been turned. I will, with France Télécom's staff, set off once again in search ... of growth, relying on our core businesses." There was no news on when France Télécom planned its equity issue, which is effectively two-thirds pre-sold. The French government owns 56% of the group and has said it would support the plan to revive its once-prized state asset.
But investors, who also overwhelmingly backed the plan at the French group's annual meeting last month, are calling for a prompt deal which might help avoid any stock market fallout from an increasingly likely US-led war in Iraq.
"Personally, I always think it's best to get these things out of the way rather than let them hang over a stock," said one fund manager with a neutral weighting in European telecoms.
"Perhaps FT has to first show it can deliver on some of its targets before it goes ahead, but ... if you need the money you need the money. Might as well get the thing out of the way."
France Télécom's shares seesawed but stood 1.21% firmer at €19.23 by 11:15 GMT. Stock in its mobile phone arm Orange, which also narrowly beat 2002 EBITDA forecasts, climbed 3.54% to €7.31 ahead of an analyst meeting. France Télécom's bonds were largely unchanged.
Orange, the largest mobile group in Britain and France by customer numbers, unveiled a 51% rise in core earnings, although hefty charges also pushed it into a deep net loss.
Orange, which ranks third in Europe behind Vodafone Group and Deutsche Telekom's T-Mobile, posted earnings before interest, tax, depreciation and amortisation (EBITDA) of €5.15bn for 2002.
But €5.17bn of exceptional charges, including a €3.04bn writedown of the value of Orange's 26% stake in Italy's Wind and a similar €1.32bn charge on its Dutch business Dutchtone, led to net losses of €4.54bn.
The heavy write-down of the stake in Wind, which is controlled by Italian power giant Enel, might allow France Télécom and Orange to book a profit on the asset if the business is listed later this year, analysts said.
Stripping out the charges, Orange reported its first full-year net profit of €633m for last year, an improvement of €1.5bn on 2001, and generated positive net cashflow in the fourth quarter of 2002.
The group, whose net debt fell by 6% to €5.9bn in 2002, said it would cut its previous capital expenditure forecasts for 2003 to 2005 by around €3bn to €7.0bn-€8.0bn. It said it had probably passed the point of peak funding.
"I have nothing but praise for Orange, the team and what it has achieved," new Chief Executive Solomon Trujillo, who took the helm just two days ago, said in a statement.
"I am arriving at a business with an impressive record, an impressive performance and an impressive potential. I intend to build on that to deliver even greater strength - both financial and strategic."
Trujillo took a low profile at the news conference, and officials said he might not be in a position to give anything but broad comments on the financials for a few months.
But analysts, some of whom are travelling from London to hear him speak at around 14:00 GMT, are keen for any hint on whether France Télécom 's debts may force him to run Orange more for short-term performance than long-term growth.
"We do not believe the market will view these results as spectacular, given ... uncertainties associated with its [Orange's] ambitious operating and capital expenditure targets," said Bear Stearns analyst Fanos Hira.
France Télécom shares have risen by about 15% so far this year after tumbling around 61% in 2002. But even with the gains, the stock remains about 90% below its peak in March 2000.