Cash-strapped telecoms giant France Telecom has said it plans to buy the remaining 14pc of international mobile phone operator Orange for as much as €7.1bn in a stock swap that would help it to stabilise itself financially.
France Telecom said that buying out Orange minority shareholders will give the company access to the mobile operator’s cashflow and will allow it to resume dividend payments in 2004. Under the terms of the offer, France Telecom will give Orange shareholders an opportunity to tender 25 Orange shares for every 11 France Telecom shares.
The move is an attempt by France Telecom to right itself financially after one of the most devastating financial years in its history. Last year it posted one of the steepest losses in French history and is saddled with a debt of €49.3bn.
France Telecom says it will carry out a 10pc capital increase and plough its entire treasury stock into the proposed share swap that values the 14pc stake in Orange at between €6bn and €7.1bn.
France Telecom claims that the move will help it to improve cash management and lower financial charges. Under the proposed deal Orange would retain its board of directors and management team.
It is understood that France Telecom will have to wait until 9 September before stock market authorities will provide clearance for the deal. Market watchers believe the offer will provide to be a plumb deal for Orange shareholders, although it will mean a considerable loss of independence for the mobile network firm.
By John Kennedy
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