RealTime IT News

France Telecom Buys Back Shares From Vodafone

London, ENGLAND -- France Telecom announced Wednesday it will pay US $10.7 billion for the 9.87 percent of its equity currently held by Vodafone Group.

The re-purchase of shares forms part of the complex transaction between France Telecom and Vodafone during the French telco's acquisition of Orange in May 2000.

For Vodafone, which has been on another spending spree recently -- increasing its stake in Japan Telecom to 25 percent -- the funds will help to further reduce its level of debt.

France Telecom had agreed last August to buy 58.2 million of the shares at a price 50 percent higher than today's market price. Towards the end of March it will pay only slightly less per share for the remaining equity. In mid-March it will also pay back a US $2 billion loan to Vodafone.

The deal with France Telecom appears to be a very good one for Vodafone, which in tough times is reaping the benefits of remaining relatively buoyant in comparison to other large operators.

According to the Financial Times, Vodafone Chief Executive Chris Gent once insisted: "I am not a shark" -- but his deal-making capacity appears to prove otherwise.

By contrast, France Telecom Chief Executive Michel Bon has endured a difficult few months, the failure of the Orange flotation having repercussions throughout the company -- and throughout the European market for high tech stocks.

France Telecom, which owns 17 percent of French computer group Bull, still hopes to halve its debt burden within three years. It now stands at around US $55 billion.

To reduce debt, France Telecom is expected to embark on an asset sale, perhaps beginning with its stakes in either semiconductor maker STMicroelectronics or information technology services company Sema.