FRANCE: FRANCE TELECOM AIMS TO HAVE A NEW BOSS IN PLACE BY EARLY NEXT MONTH TO OVERSEE RADICAL REFINANCING

Record ID: 550421

  • Title: FRANCE: FRANCE TELECOM AIMS TO HAVE A NEW BOSS IN PLACE BY EARLY NEXT MONTH TO OVERSEE RADICAL REFINANCING
  • Date: 14th September 2002
  • Summary: PARIS, FRANCE (FILE 2001) (REUTERS) SLV FORMER FRANCE TELECOM CEO MICHEL BON SURROUNDED BY JOURNALISTS (SOUNDBITE) (English) MICHEL BON, FORMER FRANCE TELECOM CEO, SAYING: "Well, this will of course improve France Telecom's debt position because the shares of France Telecom that we are buying back from Vodaphone then will be floated in the market in the second half, or more probably next year, and this will of course reduce debt. We expect that the total debt of France Telecom could be in the range of 30 billion euros by the end of next year."
  • Embargoed: 29th September 2002 13:00
  • Keywords:
  • Location: PARIS, FRANCE
  • Country: France
  • Topics: Business,Communications,Economy
  • Reuters ID: LVACWZC5APGDUBDBKJG0M54C222W
  • Story Text: France Telecom aims to have a new boss in place by early next month to oversee a radical refinancing after the debt-laden group severed ties with German partner Mobilcom and ousted chairman Michel Bon.
    French Finance Minister Francis Mer said on Friday it would take roughly three weeks to find a successor to former chairman, Michel Bon, and that a rescue plan for the company would be put in place thereafter.
    "The problem is to construct a solution with the new management, the new chairman ... who will replace Michel Bon at the end of this month or the beginning of October," Mer told RTL radio in an interview.
    "With the new management, we should create the conditions to establish France Telecom's financial credibility in the markets."
    At a news conference held by mobile group Orange, a part of France Telecom, spokesman Bruno Janet told journalists that Bon had resigned due to fist half losses incurred by the company, despite the best operational results in France Telecom's history.
    "He [Bon] presented results that were paradoxical, these being the best operational results in our history, which were however accompanied with provisions and consequently with losses for the first half year, specially due to the Mobilcom affair. Those are the reasons why Michel submitted his resignation, which was accepted by the administrative council." he said.
    The Chief Executive of Orange, Jean Francois Pontal told reporters that Oranges performance validated Bon's decision to bring Orange into France Telecom. Pontal went onto explain why France Telecom was pulling out of Germany's Mobilcom.
    "There was no economical rational for a taking of control of Mobilcom by Orange. Thus, Orange has decided not to do it, which is a good managerial decision, and France Telecom has consequently decided to put an end to its financial support of Mobilcom during yesterday's administrative coincil."
    The leading candidate to replace Bon is Thierry Breton, head of French consumer electronics group Thomson Multimedia, who would face the daunting task of extricating France Telecom from the current mess.
    Investors were disappointed that more details on government plans to ease France Telecom's massive 70 billion euros ($68.4 billion) debt burden were not forthcoming after Thursday night's board meeting. The state retains a 55 percent stake in the country's dominant telecoms group.
    Bon, who oversaw an ambitious acquisition spree that turned the company into a major European player but also left it burdened by one of the largest debt mountains of any company in the world, tendered his resignation to the French government late on Thursday.
    The company also unveiled a massive 12.2 billion euro loss for the first half of this year and said its debt had ballooned to 69.7 billion euros by end-June. That compares to Bon's prediction last year that France Telecom would only hit thirty billion euros last year.
    "Well, this will of course improve France Telecom's debt position because the shares of France Telecom that we are buying back from Vodaphone then will be floated in the market in the second half, or more probably next year, and this will of course reduce debt. We expect that the total debt of France Telecom could be in the range of 30 billion euros by the end of next year." Bon said in 2001.
    The ousted Bon said in a statement that the government would only boost the firm's shareholder equity when market conditions were favourable, suggesting any capital increase could be preceded by a government loan or state-backed bond to give France Telecom some breathing space.
    The French government said on Thursday it would take every measure to prevent the group from running into funding problems, including contributing to a "substantial" capital strengthening.
    One crucial step in that direction was a decision by the board to stop financially supporting loss-making MobilCom, a decision which puts 5,000 jobs on the line as the German mobile operator is likely to slide fast into insolvency.
    The dumping of MobilCom, in which France Telecom holds a
    5 percent stake, is likely to cause friction with Germany, coming just over a week before a general election in which incumbent Chancellor Gerhard Schroeder faces a tough battle to cling on to power.
    MobilCom shares tumbled 56 percent at the start of trading on Friday as former CEO and lead shareholder Gerhard Schmid condemned France Telecom's decision to pull the plug as illegal.
    Bon said on Friday that he took full responsibility for the disastrous decision to invest in MobilCom. Ultimately, that decision may have sealed his fate.
    The France Telecom chief is the latest casualty of a global telecoms slump. The roll-call of chief executives felled by over-ambitious expansion strategies include BT's Peter Bonfield, KPN's Paul Smits, Sonera's Kaj-Erik Relander, and Deutsche Telekom's Ron Sommer.
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