Brussels, 30/01/2003 (Agence Europe) - The European Commission has launched a formal investigation into financial aid the French State is planning to grant its subsidiary in difficulty, France Telecom. It is a question of a shareholder's advance (the French State is the company's main shareholder, to the tune of 55%), in the form of a maximum credit line of 9 billion euro intended to help France Telecom repay its debts. On the same occasion, the Commission will examine the business tax scheme applicable to France Telecom. The aid being envisaged by France is interlocked in a complex financial operation, and the Commission wants to ensure that there are no elements of State aid.
In December 2002, the French authorities informed the Commission that they were planning to increase France Telecom's capital by means of a rights issue to which the State and private shareholders would subscribe in proportion to their current stakes. They then announced that a shareholder's advance in the form of a credit line not exceeding 9 billion euro would be granted ahead of their participation in the rights issue - and that the advance would carry interest at market rates. The Commission would like to ensure, on the one hand, that France Telecom will not receive more than it would have done under normal market conditions. On the other, it wants to see whether the behaviour of the State is that of a private investor. Yet, the French authorities have not sufficiently demonstrated that the return n the capital invested would have been acceptable to a private investor. The Commission stipulates that, according to the French Government itself, France Telecom is is such a financial state that, until the shareholder's advance was announced, it had been unable to raise capital on the market on appropriate terms. France Telecom being deeply in debt, France has not, moreover, provided the Commission with a sufficiently detailed recovery plan to demonstrate an acceptable return for a private investor. The Commission will also examine the business tax scheme applicable to France Telecom, following a complaint going back to 2001. It would seem, at first sight, that the scheme applicable to the company provides it with an advantage, in the sense that the amount paid is said to be less than what is due. This scheme too could comprise an element of State aid.