France Telecom to buy back shares in Orange

Following the wishes of its boss, Thierry Breton, France Telecom has announced it intends to get hold of the 13.72 per cent of Orange's capital that it doesn't currently own, through an exchange of shares. A similar operation for its ISP, Wanadoo, is not, however, on the cards.

The action will mean that the mobile operator's shareholders will be able to acquire stocks in the telco through an exchange of 11 France Telecom shares for 25 in Orange, which means an Orange share is valued at around €9.9 and brings the price of the buyout to more than €6bn.

A statement from the telco said: "In the event that France Telecom holds more than 95 per cent of Orange's capital and voting rights, France Telecom can financially integrate Orange's results."

Thierry Breton, however, said "Orange will continue to be run as a separate business", or more precisely, it "will continue to keep its board of directors, its management, its business culture, its brand and its operational processes."

The opening of the offer is planned for 12 September and will be financed by 95 million stocks held in automatic control and by the issue of 218 new shares.

The CGT – France's equivalent of the TUC – sees the move as "a new stage in the journey towards the state's capital dropping under 50 per cent." In July, the government unveiled a planned new law that would permit it to give up its majority stake in France Telecom.

Francis Mer, the economy, finance and industry minister, said in a statement "when the share exchange offer takes place, the state will still hold, directly or indirectly, a majority share in France Telecom's capital" and said that he was in favour of the move.

The anti-globalisation group, Sud PTT, is concerned about a "similar ulterior strategic operation, for example, a buy back of the minority shares in Wanadoo". The boss of France Telecom, however, said there were no such plans afoot, but didn't completely rule out bringing Wanadoo back into the France Telecom fold.

For the first quarter of 2003, France Telecom registered a net result of €2.52bn, compared with losses of €12.1bn in the same period last year. For its part, Orange posted a turnover of €8.5bn, a rise of 6.9 per cent.

Christophe Guillemin writes for ZDNet France, translated by Jo Best.