Orange cuts IPO price as investors get cold feet

The mobile company's parent France Telecom said today that pressure from investors had forced the share price down from E11.5-13.5 to E9.5-11 (£7.3-8.6 and £6-7).

Jean-Louis Vinciguerra, chief financial officer at France Telecom, said: "We could have maintained the price level but we've had a clear signal over the last couple of days that the big investors would be more comfortable in buying shares at a lower price. They are using Vodafone as a benchmark, clearly they want a discount and we want a higher proportion of institutional investors."

He denied that the price drop was a sign of desperation and dismissed suggestions that poor market conditions could cause Orange to abandon the IPO.

"We have not considered abandoning the IPO. It is important to be successful and after discussions with the investors to propose a fair price. To abandon the IPO would be more difficult," he said.

Orange now has the potential to raise E10-11bn (£6.4bn to £7bn), valuing the company at between E45.6bn and E52.8bn ( £29.1bn to £33.7bn).

Previous estimates had put it in the E55.2 to E64.8bn (£35bn to £41.3bn) range.

Nigel Deighton, analyst at the Gartner Group, said: "This is the first major mobile IPO since the mobile bubble burst so it is not surprising that the share price is now well below the anticipated price. These developments indicate that the investors are calling into question the real viability of the company's investments, especially in UMTS."

The share price reduction comes only days after France Telecom issued exchangeable notes to tempt the bond market to invest in Orange.

A source close to the deal said: "The bond market, frankly, is in better shape than the equity market. France Telecom has decided to go to both markets rather than one hoping that the enthusiasm from bonds spills into equity."

He claimed the change in the Orange share price was a reflection of the volatility in the equity market and would encourage investors.