The sale will reduce the French government’s stake in the Paris-based carrier to between 33% and 35%. The move follows a similar move in September last year when it sold a 10.85% stake that brought 5.1bn euros ($6.26bn) for the state’s coffers.
The 152 million shares are being offered to financial institutions at 22.50 euros ($27.62) to 22.85 euros ($28.05). However, shares in the carrier fell 1.54% to 22.40 euros ($27.50) on the New York Stock Exchange as of 5.20pm BST on Monday.
The sell-off comes amid turmoil in the French political establishment, which has recently been rocked by the rejection of the planned European constitution, as well as spiraling unemployment, and economic uncertainty. Indeed, France has broken the euro zone’s budget deficit limit of 3% of Gross Domestic Product (GDP) for three straight years in a row.
Unemployment levels are also at a five-year high, with an estimated 10.2% of the workforce without a job, in a country with a population of 60.6 million people.
The country’s finance minister, Thierry Breton, is the former CEO of France Telecom, and came into the position after gathering a reputation as a turnaround specialist at the carrier. He is part of a newly formed government headed up by Prime Minister Dominique de Villepin, a former civil servant who is a political ally of President Jacques Chirac.
Just last week, the new government said that reducing unemployment was its top priority, but this raised concerns of a slowdown in the state’s debt-reduction efforts. There are supposed to be several privatization programs in the works, including the planned sale of stakes in state gas utility Gaz de France, power giant Electricite de France, and nuclear outfit Areva.
Meanwhile, France Telecom is set to unveil a new strategy at the end of June after three years of cost cutting has reduced debt levels to 49.9bn euros ($64.48bn).
The carrier came very close to collapse back in 2002 after posting one of the largest ever net losses in French corporate history. A disastrous acquisition spree had run up net debts of 68bn euros ($87.38bn).
At the time, the colossal figure earned France Telecom the unenviable reputation as being one of the heavily indebted companies in the world. The French government was forced to coordinate a rescue plan that included a combination of new management, massive job cuts, and illegal state funding.
The fallout from this rescue plan continues to this day. The French carrier and the French government are appealing against a European Commission order that France Telecom must repay the French state an amount estimated between 800m euros ($1.02bn) and 1.1bn euros ($1.41bn), plus interest.
