| Bon: Responsible act
Paris, Sept. 13: Michel Bon resigned as chief executive of France Telecom on Thursday as the company’s board cut off financing for the company’s money-losing German wireless affiliate, MobilCom, to try to lighten a crushing $ 70 billion debt load.
The company also reported—a day early—that it lost 12.2 billion euros, or $ 11.9 billion, in the first half. That compares with a profit of 1.95 billion euros in the first half of last year. France Telecom began to hemorrhage money in the second half of last year and ended 2001 with a record annual loss. “The significance of these losses led me to offer my resignation to the government, which accepted it,” Bon said in a statement.
Despite the worsening finances of the company, the 21-member board—which includes 10 directors from the French government, which owns 55 per cent of the company, and seven directors representing employees—put off a decision on whether to raise cash by asking shareholders to buy $ 15 billion in new stock.
Postponing the capital increase means that the government is spared for the moment the task of raising as much as $ 8 billion—its portion of the rights issue—when it is already struggling with an economic slowdown that has shrunk tax revenue and increased outlays for unemployment benefits.
The proposed sale of new shares had raised a hue and cry among small French investors. More than 1.5 million small French investors, including 90 per cent of the company’s employees, hold France Telecom stock. Labour unions, which are very powerful in France, had protested the loss of value that the fresh issue of shares would have brought.
While the France Telecom board pleased the French government, however, it angered German officials. They had been in talks with France throughout the week about how to soften the increasingly likely collapse of MobilCom, which would jeopardise up to 6,000 jobs in northern Germany less than two weeks before national elections that centre on rising unemployment.
France Telecom’s already battered shares fell 3.71 per cent in European trading, to close at 10.63 euros. The stock has lost more than 75 per cent of its value since January.
Finding a successor to Bon, 59, will be difficult, yet in the French industrial culture not impossible. France Telecom, with $ 43 billion of revenue, ranks among the nation’s industrial jewels. A combination of political pressure and financial enticement will likely make it possible to find a candidate. French newspapers said on Thursday that Bon would be replaced by Thierry Breton, the chief executive of Thomson Multimedia, but the government denied the reports.
Prime Minister Jean-Pierre Raffarin is particularly eager to turn around France Telecom because his government envisages selling off stakes in other state companies to replenish the Treasury. Given the turmoil at France Telecom, he will find it much harder to persuade small French shareholders to invest in other privatized enterprises.