A rosy glow suddenly surrounds debt-laden incumbent France Telecom SA after reports that the French government will provide it with 7bn euros ($6.9bn) of aid while the company itself confirmed that it expects to shed 20,000 jobs over the next three years.
But the company denied reports from union sources quoted in Le Figaro that it was planning to cut its workforce by up to 45,000 employees. The union’s 45,000 figure was based on the number of staff approaching 55, the age at which they may take early retirement.
Union sources said massive job cuts would be catastrophic and would lead to strikes. A high proportion of France Telecom’s staff enjoy the security of civil service status and unions said it was possible a further 20,000 to 25,000 employees could be transferred by the government to other state institutions like mail service La Poste.
Shares in France Telecom climbed 8.7% on evidence that new chief Thierry Breton is finally getting to grips with the company’s debt crisis and is taking action to improve its future performance. Business daily Les Echos reported that France Telecom has a three-step rescue plan involving the 9bn euro state loan, a 5bn euro ($4.9bn) bond issue in early 2003, and a capital increase. France Telecom confirmed that an audit promised by Breton would be presented to the board on December 4 and announced on December 5.
To get round EU regulations on state funding, France is likely to set up a new public entity to take over its 54.5% stake in France Telecom. This entity could provide interim finance until the company is ready to launch a rights issue to make a major inroad into its 70bn euro ($69.3m) debt pile.