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. Last Updated: 07/27/2016

France Telecom to Buy All Global One

PARIS -- Shares in France Telecom climbed Thursday as analysts hailed its purchase of business communications venture Global One, saying the French operator will now be able to strengthen its international presence.

France Telecom, the most heavily weighted stock in the French blue chip CAC-40 index, was up 4.30 percent at 133.4 euros at 1020 GMT, after 3.9 percent gain Wednesday.

The French operator said late Wednesday it was buying the 71 percent of the venture it does not own from Deutsche Telekom and U.S. telephone company Sprint Corp. for $3.88 billion in cash and $464 million of assumed debt.

"This is a good transaction because it allows France Telecom to participate in the data market at an international level," said Soci?t? G?n?rale analyst Stefan Sater, who raised his France Telecom recommendation to "buy" on the news.

The loss-making Global One venture provides international voice and data services to large companies in 65 countries including the United States.

However, its future was called into question last year following a row between France Telecom and Deutsche Telekom over the latter's surprise bid for Telecom Italia and the merger of Sprint with MCI WorldCom.

An analyst at a French brokerage said France Telecom was taking a foothold in one of the most promising telecoms sectors, adding that it should be easier to make Global One profitable with France Telecom as a single shareholder.

Sater said France Telecom had got Global One for "a good price," despite clauses initially restricting competition between the three former partners.

He said it left the French operator with the cash to pursue its international strategy, perhaps by linking with Britain's Cable & Wireless or Spain's Telefonica.

France Telecom is paying Deutsche $2.755 billion in cash for its 29 percent stake and repaying the German operator's debt of $188.5 million. Sprint, which owns 42 percent of the venture, is to get $1.127 billion in cash and $276 million in repaid debt.

CCF Securities analyst Pascal Mathieu said it valued Global One at 5.4 times 1999 sales, while Equant was trading at 14 times estimated 2000 turnover, Dutch operator KPN at 45 times and Colt Telecom at 28.5 times 2000 sales.

However, the analyst at the brokerage said it was not possible to value Global One at the same level as rivals such as Equant because it was unclear what would happen to Global One's client base after Deutsche Telekom and Sprint left.

SocGen's Sater said the telecoms network France Telecom contributed to Global One had improved since the joint venture was launched four years ago. This meant France Telecom would recover assets whose value had risen.

While Deutsche Telekom, whose share price rose 5 percent Thursday, is now under pressure to build quickly a similar international data platform.