Shares in Colt Telecom nosedived 12 per cent yesterday after chief executive Jean-Yves Charlier said he was planning further cost savings for the second half in the face of "tough" trading conditions.
Colt, which has a major operation in Birmingham, said UK and German markets had knocked second-quarter sales which were unlikely to improve much in 2006 overall.
The European business telecoms provider, which earlier this year announced a big corporate revamp as it moved its base from London to Luxembourg, said that despite success at cutting costs, sales in the quarter to the end of June had dropped by 3.6 per cent to 450 million euros (£308.3 million).
"Market conditions remain tough, with price competition continuing to feature more prominently in some products and geographies than others," Mr Charlier said, adding that voice markets in Britain and Germany were "particularly difficult".
The firm, which is almost 60 per cent-owned by US fund manager Fidelity, has been battling falling prices and overcapacity in recent years as it competes against the likes of BT, Cable & Wireless and Thus in the savagely competitive business area.
Stiffening competition in Germany is also proving to be a challenge.
But Colt said that despite weakened sales, it managed to up core earnings by seven per cent for the three months after narrowing its pretax loss by 27 million euros to nine million euros. Colt, which provides telecoms services to its 20,000-kilometer fibre-optic network that connects 10,000 buildings throughout 13 European countries, said that it would try to cut costs even further and improve its mix of sales in a bid to rake in more cash.
Colt has already moved 15 per cent of its workforce to India to trim expenses and raised 440 million euros (£301.3 million) to repay debt.
It switched to Luxembourg to save money and be nearer its customers and for the first time yesterday posted its results in euros.
A new pan-European call centre in Barcelona, Spain, was also set up to streamline its business.
Shares closed down 38.5p at 126.5p