France Telecom sale disappoints government

7th June 2005, Comments 0 comments

PARIS, June 7 (AFP) - Attempts by the French government to sell off a little over six percent of the capital of France Telecom have been less than a success, analysts said Tuesday, with the average share price below that sought.

PARIS, June 7 (AFP) - Attempts by the French government to sell off a little over six percent of the capital of France Telecom have been less than a success, analysts said Tuesday, with the average share price below that sought.  

Dealers said demand Monday was poor, with one commenting that "between 50 and 60 percent of the shares were successfully placed with end-investors, leaving the banks with the rest on their hands to manage."  

Another Paris-based dealer said: "The placement couldn't have gone worse .... not all the stock managed to get placed".  

The government claimed that the 152 million shares sold would bring in "about" EUR 3.4 billion euros.  

"At the end of this operation the state will hold directly or indirectly 34.9 percent of the capital of France Telecom", the finance ministry said.   

The new centre-right government, reorganised after French voters rejected the European constitution nine days ago, has given itself 100 days to make a significant impact on high unemployment but is constrained in its room to manoeuvre by high public budget deficits that breach EU and eurozone rules.  

It is also burdened by high public debt.  

In announcing the sale unexpectedly late Sunday, the ministry said that the state intended to remain a significant shareholder in France Telecom in the medium term. But it also signalled that if demand were strong on Monday, it was ready to sell up to 198 million shares or eight percent of the group.  

But dealers said it had been hard to sell the 6.2 percent on offer. Analysts calculated that the average price paid had been EUR 22.37, beneath the range of EUR 22.50 to EUR 22.85 in which they were expected to trade.  

The finance ministry contested the calculation saying the average share price had fallen within the range targeted by the state.  

But it refused to give either the average price or the exact total raised in the sell off.    In September, the state had sold 10.85 percent of the company in the space of a day for EUR 5.1 billion.  

Market experts said that the sale had been subdued because the price range indicated by the government for such a large amount of stock was not sufficiently attractive relative to the last quoted price of EUR 22.88 at the close of trading on Friday.  

Experts at Global equities commented: "The price range of between EUR 22.50 – EUR 22.85 a share seems rather ambitious and the small discount relative to EUR 22.88 on Friday was not enough to build up orders quickly."  

The sale also occurred at a time when investor confidence in telecommunications operators has been undermined by recent profit warnings,       

Dexia Securities analyst Francois Travaille said: "This was not the case in September when the previous sale occurred and even though that operation had been expected by investors for a long time."  

The sale also occurred before the company presents a strategic plan for 2005-08 on June 29.   Global Equities commented that "some people in the market would have preferred to know the strategic plans of the new management before turning over their cash."   

But the ministry has said that the state had issued an undertaking not to sell any stock up to last Saturday. If it had waited before selling stock after this date, there was a risk that the market, while waiting for the state to put a large amount of stock on sale, would have depressed the share price.  

However, Global Equities said that it regarded the shares as "fundamentally" attractive, saying that they were worth EUR 31.6.  

France Telecom shares ended the day Tuesday up 1.74 percent at EUR 22.80.

© AFP

Subject: French News

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