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. Last Updated: 07/27/2016

France Telecom Eyes $15Bln Share Issue

PARIS -- France Telecom said Monday it would go ahead with a 15 billion euro ($15.8 billion) rights issue, with the government underwriting nearly two-thirds of the total, as part of a plan to reduce its massive debt.

The company said it would raise 9 billion euros ($9.5 billion) by selling shares to the government and 6 billion euros from shareholders, who will get options to buy new shares at 14.50 euros each.

French financial daily Les Echos reported in its Monday edition that the green light for the cash call was given by French Finance Minister Francis Mer at the end of last week.

The French government holds a 56 percent stake in France Telecom, which is trying to trim its debt load of 68 billion euros by cutting costs, increasing cash flow and selling off assets.

The rights issue is seen priced at 14.50 euros, the paper said, compared to a closing Friday share price for France Telecom of 20.20 euros.

France Telecom, which ran up some 70 billion euros in debt during a late-1990s expansion spree, averted a cash crunch earlier this year after vowing to slash costs, boost cash flow, sell noncore assets and raise equity in a bid to nearly halve its debts by 2005.

Last month, France Telecom shareholders backed plans for the cash call. The French government holds a 56 percent stake in the operator and is expected to underwrite nearly two-thirds of the issue itself.

As speculation circulated Friday that France Telecom could proceed with the issue soon, the company said it had not yet made a decision about the timing of the capital increase. "No decision has been made yet," a spokesman said last week. "We still hold to three windows -- spring 2003, autumn or spring 2004."

Earlier this month, France Telecom posted a net loss of 20.7 billion euros for 2002, hit by huge asset writedowns linked to German affiliate MobilCom, telecoms carrier Equant and British cable group NTL.

Investors have been calling for a quick decision on the capital increase, fearful that the U.S.-led war in Iraq could hit the value of stock prices and make the rights issue more difficult to pull off.

(AP, Reuters)