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July 5, 1993

FRANCE TELECOM WANTS MUCH CLOSER ALLIANCE WITH BUNDESPOST TELEKOM

By CBR Staff Writer

France Telecom is becoming more and more restive at the restrictions imposed on it by its status as a state-owned monopoly, and would like to counter the challenge posed by the British Telecommunications Plc-MCI Communications Corp by forging much closer ties with Deutsche Bundespost Telekom. Chairman Marcel Roulet told Le Monde that he would favour a change in the statutes of the phone company that would enable it to join forces with new shareholders, such as Telekom. A far-reaching long-term partnership between the two phone companies would be the best response to growing competitive challenges, he said, and the UK-US link-up was a major event that revealed two structural handicaps at France Telecom: its current statute limited its ability to develop strategic alliances and a heavy debt burden tied its hands financially. He said a change in the firm’s status, now being considered by Industry Minister Gerard Longuet, was both necessary and urgent, especially in light of planned liberalisation of European Community telecommunications in 1998. Reform should enable the company to seal strategic alliances and make sure that the state manages France Telecom well so that it can face up to the coming shock. Although he would like cross-shareholdings with Bundespost Telekom, he was opposed to the state giving up majority control of France Telecom, which is not on the government’s privatisation list, because of the strategic importance of the firm’s network.

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