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. Last Updated: 07/27/2016

France Telecom Loses $11.9Bln, Chief Quits

PARIS -- France Telecom, buried in debt and hunting for new leadership after its chairman resigned, announced record losses Friday and the end of its costly funding for Mobilcom -- a move expected to push the German cellphone affiliate toward bankruptcy.

The worrisome state of the French telecommunication giant's finances prompted the government, France Telecom's majority shareholder, to announce that it would not let the company collapse. The government promised "to contribute in a very substantial reinforcement" of the company's capital.

France Telecom is "a symbol of our country's industrial and technological success," a Finance Ministry statement said. "If necessary, the government will take measures enabling the company to avoid all financing problems."

The pledge from the government, France Telecom's majority shareholder, not to let the firm collapse followed the resignation Thursday of company chairman Michel Bon after seven years at the helm.

The decision to end a costly foray into Germany's mobile phone sector threatened 5,000 jobs at indebted German affiliate Mobilcom and provoked dismay from the German government.

The French Finance Ministry said Bon's replacement, once chosen and appointed, would quickly present a rescue package to the France Telecom board.

Bon was the latest European telecom chief to have lost his job in an economic crunch hurting the industry. Ron Sommer quit July 16 as head of Deutsche Telekom, Europe's biggest telecommunications company. Sir Peter Bonfield resigned from British Telecommunications PLC in January.

France Telecom reported Friday a 12.18 billion euro ($11.9 billion) first-half net loss, its biggest since the former monopoly was partially privatized in 1997. The loss compared with a net profit of 1.95 billion euros in the first half of last year. Debts grew to a whopping 69.7 billion euros.

In a statement, Bon said the losses prompted him to quit.

Short-term, France Telecom's debt was not a problem, he said, because it would have 7 billion euros in unused credit facilities at the end of the year.

Finance Minister Francis Mer said a successor for Bon would be named by the end of the month or early next month. France Telecom said Bon would stay on as chairman until then.