France Telecom report ‘rebuffs’ state aid probe

Date: 25/03/04

By Peter Chapman

FRANCE Telecom has presented a report which it claims rebuffs European Commission concerns over alleged state aid that the EU executive says helped the once- stricken telephone operator to stave off bankruptcy.

Mario Monti announced a probe last January into an offer by the French government to grant a credit line worth up to €9 billion to cover its debts.

Monti's experts believe the offer helped buoy investor confidence in France Telecom, enabling it to emerge as one of the strongest telephone companies in Europe after successful forays into bond and share markets. However, France Telecom board member Frank Dangeard unveiled the results of a report by three experts, former Commission competition official Claus-Dieter Ehlermann, a former European Court of Justice judge, Yves Galmot, and Sir John Bond, boss of global banking giant HSBC, all surmising that the Commission's case is flawed.

The trio said the EU executive would not be able to win a legal challenge if it demanded France Telecom pay back any of the alleged aid.

They said that the French state had acted as a normal investor by trying to boost confidence in a company it owned. The company's fortunes had, in fact, been most affected by moves to get rid of the former board of directors including President Michel Bon, who was replaced by Thierry Breton, they added.

Dangeard said the report was set to help his company's reputation on financial markets as the investigation intensifies, although he said it was part of the 'due diligence' process listed companies must undertake to ensure investors have information about potential balance-sheet blips. The Commission's inquiry, which also covers special tax treatment for France Telecom, is expected to run for many months.