France ready to sell big phone stake

France will sell a 4.53 billion ($7.9 billion) stake in France Telecom, the nation's biggest phone company, as soon as today as Prime Minister Dominique de Villepin's new Government goes ahead with asset sales to cut debt.

The Government would sell a holding of 6 per cent to 8 per cent of the Paris-based company's shares to institutional investors, a Finance Ministry spokeswoman said yesterday.

The sale would reduce the Government's stake in France Telecom to as low as 33 per cent.

De Villepin needs to raise funds to reduce the state's debt, which may reach 65 per cent of gross domestic product this year. The transaction may allay concern among investors that the rejection of the European Union referendum would slow state asset sales.

"It may mean the withdrawal of the Government in key industries isn't being put on the backburner," said Valerie Plagnol, a chief strategist at CIC Capital Markets in Paris.

Goldman Sachs Group will manage the France Telecom sale. The four other banks involved in the offering are BNP Paribas, Societe Generale, a venture between ABN Amro and Rothschild and Deutsche Bank.

The Government plans to sell at least 152 million France Telecom shares through a so-called accelerated book building. It might increase the sale to 198 million shares, the Government said.

The Government is aiming to reduce its public debt to 62 per cent of GDP by 2008 from a projected 65 per cent this year, its highest ever.

The state raised 5.1 billion last September by selling a 10.85 per cent stake in France Telecom.

De Villepin, 51, has not yet said whether he plans to sell shares in state-owned utilities Electricite de France and Gaz de France, sales the Government had planned for later this year.

France Telecom has a market value of 56.5 billion. Its shares fell 1.7 per cent to 22.88 on June 3. The stock has declined 6.1 per cent this year.

The Government could delay the initial public offering of Gaz de France as the rejection of the European constitution had put job creation and social welfare at the top of Government plans, a board member of the gas company said last week.

French Finance Minister Thierry Breton said on March 16 that he planned to sell shares in Gaz de France.

- BLOOMBERG