Shares in Wanadoo rose on Wednesday after the European internet service provider sliced its net loss by 60% through higher sales and better cost control.

It beat analysts' expectations by posting a net loss of 39m euros ($38.7m; �24.7m) for the six months to 30 June.

Wanadoo, which is controlled by debt-laden France Telecom, also confirmed that it expects to make a core profit in 2002 for the first time since it was floated on the Paris stock market.

In early trading in Paris, Wanadoo's shares climbed 2.3%.

Bag of interests

Wanadoo owns a slew of ISPs, internet portals and e-commerce businesses in France, Britain and Spain, having grown through acquisition, including Freeserve in the UK and eresMas in Spain.

Chairman and chief executive Nicholas Dufourcq said the first half results reflected a strong performance.

He said Wanadoo would spend the rest of this year focusing on integrating eresMas, which has pitched it into the number two slot among European ISPs, second only to German firm T-Online.

He added that there were no plans to open merger talks with Italian ISP firm Tiscali.

Wanadoo said its operating income was nearing break-even level.

Its operating loss for the first half of 2002 shrank to 4m euros, compared to 92m euros in the same six months of last year.

Strong sales growth

Sales rose 33% to 918m euros, showing improvements in both the group's divisions.

Revenue soared 89% in the Internet Access businesses. A strong performance at commercial directory service Pages Jaunes helped boost sales for the Internet Directories division by 45%.

"This revenue performance flowed through to improved profitability thanks to efficient management of costs across all group businesses," said Mr Dufourcq.

Gross margins strengthened to 50.9% from 43.5% and the firm said it had hit a goal of 28m euros for its core profits a year ahead of schedule, calculated on earnings before interest, tax, depreciation and amortisation (EBITDA).

This was comfortably ahead of analysts' forecasts of core profits of 23m euros.

"It must be very frustrating to be an ISP board member right now," said Kai Kaufmann, an analyst at Dresdner Kleinwort Wasserstein.

"The operational progress for companies like Wanadoo and T-Online continues to improve but it's not reflected in the share price," he said.

Wanadoo's shares have fallen in value by 15% since the start of the year.

Wanadoo ended the first half of the year with 6.83 million internet subscribers.

Like other ISPs, it is developing a market for always-on broadband services, for which it hopes to have more than one million customers by the end of 2002.