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When the French government sold some shares in France Telecom earlier this month, the response was underwhelming. The state picked up €3.4bn ($4.1bn) rather than the €4.5bn envisaged under the best-case scenario.
This week Didier Lombard, France Telecom's avuncular chairman and chief executive, will attempt to show that the former national monopoly is a more attractive investment than this laboured share sale suggested.
Tomorrow, he will lay out a new three-year strategy for the group, which has a market capitalisation of about €55bn and is internationally familiar as the owner of Orange, the mobile phone operator, and Wanadoo, the internet service provider.
The group is in a much stronger position than in December 2002, when its last three-year plan was announced by Thierry Breton, now France's finance minister.
Mr Breton had inherited a group creaking under €100bn of spending.
His prescription involved a record €15bn rights issue and a massive debt reduction programme.
Borrowings have indeed been slashed. At France Telecom's annual meeting in April in his first big set-piece since succeeding his friend in February Mr Lombard highlighted that debt had been cut by €28bn between 2002 and 2004, nearly 40 per cent.
But after having seen their group put on an even keel once again, France Telecom's 200,000 employees need something a little more inspiring going forward.
“Reducing debt is not a long-term priority to motivate people,” observes one of Mr Lombard's peers.
Mr Lombard also needs to decide what to do with France Telecom's prodigious cash flow. Mike Jeremy, an analyst at ING Wholesale Banking, estimates that it will produce about €24bn of cash between 2005 and 2008, after capital expenditure but before dividends and debt reduction.
Investors want to know how much of this will be used to boost the dividend. Yet Mr Lombard's hands are still tied by debt. One of the unfortunate effects of the transition to the new IFRS accounting standard earlier this year was to boost 2004 net debt by €6bn to just under €50bn.
This did not alarm the stock market, which had been well warned about the largely cosmetic change, but it does mean that acquisitions are unlikely to play a large part in the new strategy.
That said, the fact that the government now holds only 34.9 per cent of France Telecom's equity means shares are now a viable acquisition currency should an unmissable opportunity arise.
The essence of Mr Lombard's strategy is expected to be about making the best of existing assets, primarily through exploiting the convergence between various forms of media and communication.
A friend of Bill Gates, and with a long career straddling research and industrial strategy in both the public and private sector, he is certainly well placed to speak about technology.
Mr Lombard's favourite piece of hardware right now is the Livebox, a unit that plugs into the telephone socket to give users fast wireless internet access, but which also acts as a conduit for voice calls and digital television supplied down an ordinary telephone line.
The competitive threats to France Telecom range from the growth of “virtual” mobile telephone networks renting space on its infrastructure, to the continuing pressure on all fixed-line businesses.
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