Orange IPO threatens France Telecom expansion

Hans Snook, CEO at Orange, revised the valuation of the company, claiming it will sell 13 per cent of its stock at between E11.5 and E13.5 (£7.36 and £8.64) per share.

Money raised from the IPO is expected to be used to pay off existing debts and help fund France Telecom's French UMTS bid and global expansion. If an insufficient amount is raised, the telco will have to retrench in its expansion plans.

Nigel Deighton, analyst at Gartner Group, claimed the telco could be forced to concentrate on the professional market.

"Voice services are slowing down and the move is towards data services - France Telecom will have to move up the value chain and focus on enterprise solutions," Deighton said. "This is a nail-biting day for them. It is an excellent organisation, but does have a large debt level and it has been making a lot of global acquisitions that need financial support."

Annoula Peppas, senior consultant at Schema, agreed, claiming the recent downturn for telcos on the stock market would seriously dampen Orange's entry price.

Peppas said: "There is a general trend to value telcos lower and lower as investors and banks get cold feet. Confidence is very low in this sector as the market is more cautious. There has been a lot of hype and talk. WAP did not take off as expected and it has dampened enthusiasm for the market."

Current turbulence in the market has caused many companies to postpone IPOs, she said, but France Telecom does not have the luxury of that option.

"The investment market is hard on telcos at the moment. It is clear that, given the company's responsibilities, it does not have the choice to postpone."

However, France Telecom said the IPO will return confidence to the market.

A spokeswoman said: "The market has been decreasing but after this IPO it will soon pick up. We do not expect the decrease to last long, we expect to kick start the market again."