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France Telecom is likely to have to pay back €1bn in illegal subsidies it received from the French government, following an 18-month investigation by Mario Monti, the EC Competition Commissioner.

The allegations against France Telecom come in two parts:

  • That the French government offered favourable tax rates, worth as much as €1bn, to unfairly favour the company between 1994 and 2002.
  • That either the French government offered the telco a line of credit, or that comments from the government to suggest such credit amounted to favourable treatment.

Originally, the Commission investigated a €9bn line of credit - but could not prove it existed. It is now looking at whether comments by French government ministers in themselves offered illegal support. A decision in the case is expected before the Commission's August break. ®

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