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France Telecom and KPN Telecom this time

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France Telecom and KPN Telecom are issuing bonds to cut massive debt.

France Telecom has gone for a record-breaking £2.2 billion convertible bond offer, taking advantage of what it says are "favourable market conditions" and bringing its convertible debt up to £3.9 billion. KPN Telecom has gone for a £3.1 billion rights issue.

Both deals have hit the companies' share price - France Telecom was down seven per cent and KPN Telecom down 17 per cent. A similar thing happened when British Telecom resolved to cut its debt in June with a £5.9 billion rights issue.

The two companies are among the most indebted in the world, thanks to the huge cost of 3G licences and the slump in the telecoms market - France Telecom owes just over £40 billion and KPN just under £14 billion.

And they join just about every major European telco in having to come up with debt reduction policies as operating losses and credit downgrades make the cost of holding debt even harsher. ®

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