FT facing EU accusations over ‘phantom’ subsidy

12 May 2004

The European Commission (EC) is ready to accuse France Télécom (FT) of profiting from unlawful state subsidies in 2002, despite the fact that the EUR9 billion (USD10.7 billion) credit facility supposedly put forward by the French government is now known never to have existed. According to the Financial Times, the EC will allege that government assurances over FT’s future were tantamount to state aid, although the telco will counter that Brussels is overstepping the mark by focusing on what it sees as a case of ‘psychological state aid’. Nonetheless, the Commission believes it has a strong case and will use legal precedent to support its argument that French courts placed a monetary value on government officials’ public gestures of support. The Competition Commissioner Mario Monti is basing his case on previous legal action in France where courts ordered compensation for creditors of bankrupt companies in instances where local government officials failed to honour previous assurances about the firms involved. Monti believes the French courts recognise that a statement of support can be interpreted as a ‘concrete subsidy’. The dispute dates to a period in 2002 in which FT’s debt spiralled out of control to EUR70 billion while its market value plummeted to just EUR10 billion.

France, Orange Group