France Telecom is frequently depicted as a wooden giant, who can no longer sustain its own weight and is about to tumble and crush anyone resting in its shade. In just two years, the stock lost almost half of its worth and from values of $25 per share in 2008, it sank to new depths of less than $10. A record low was hit just a week ago and even though the stock rebounded in the next couple of days, investors are jittery and wonder whether there is any point in keeping their positions.
$9 per Share Is a Freebie
To say that France Telecom is not faring well would be an understatement but the reason for why the stock is at historic lows has a lot to do with its debt. Many perceive it as crushing and they don't like the economical context in France either, with these two factors leading to the massive worth of equity. The French government still has a share of 27%, and this means that even though the laws are not necessarily in the best interest of large companies this one might enjoy slight advantages.
Another thing that can't be overlooked is the fact that France Telecom has a 37% market share and including customers from beyond borders they serve roughly 230 million. The paradox is that while the stock is now inching closer to nine dollars per share the number of customers is increasing by 2.5% each year and there are some countries where the number is much higher. Simply put, binary options traders shouldn't miss out on the opportunity to buy call options if the stock eventually breaks the nine dollars line. At this value France Telecom is a freebie and the risks of it going even lower are remote.
France Telecom Is Here To Stay
There is no way for France to go bankrupt in the imminent future or for its 230 million customers to suddenly decide that France Telecom services are too expensive. Even though the prices are slightly above average, the company has its ways of retaining most of its customers and the number of those who depart is offset by new clients. Regardless of what happens in France, people will be still using mobile phones and there is no technology at the horizon to replace existing one overnight.
Some changes need to be done for the company to increase its profitability, and officially becoming Orange in July is not enough but it is one step into the right direction. France Telecom needs to make the most of its presence in the European Union, with the main concern being the potential elimination of roaming fees. This is one circumstance in which FTE stock could sink even further, but it is a highly unlikely scenario and right now the right thing to do is to buy call options because the stock is undersold.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.