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France Telecom launches largest ever bond for £11.2bn

The French solution to telecoms troubles

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France Telecom has launched the largest ever corporate bond to help it out of its current quagmire. The bond is expected to raise £11.2 billion, which will help it deal with its £38 billion debt.

The size of the bond was double what was expected and beats the previous record, held by competing telecoms company Deutsche Telekom, of £10 billion.

The interesting thing about all this though is the sticky mess that Europe's three main telecoms companies have got themselves into and how they hope to get back out of it. The main three are, of course, British Telecom, France Telecom and Deutsche Telekom.

We've been socking it to BT, mostly thanks to its ignorance on top of its arrogance, but while it has stacked up debts of £30 billion, both France Telecom and Deutsche Telekom have managed more. And while BT's share price has slumped and its credit rating cut down, the other two have suffered even more.

It's all down to the battle for mobile phone companies and the ludicrous prices paid for 3G licences. However, despite BT being comparatively better off, it has made worse decisions. The question is: how do these companies get out of their holes?

France Telecom went for flotation of 15 per cent of Orange. It all went horribly wrong and its raised a fraction of what it was expecting but it needed the cash. This bond issue was all it had left. It's hoping that it would push it back a bit and open up its credit a bit more. As for BT, well, we haven't heard anything about a bond issue (yes, it had a big one last year) - it still seems to be sitting by its plan to float off different arms.

We think this is a good idea, even if it simply gets them out of the control of the tortoise-like BT culture. But unless the market picks up, BT may not get the money it needs and a bond issue will be the only way out. Who knows? Should be interesting.

Of course, there is also the possibility that foreign telecoms companies will arrive late to the feast, survey the bloated, sleeping CEOs of Europe's leading companies and proceed to burgle the house. ®

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