France Télécom ordered to pay back €1.1bn in aid

The European Commission has ordered France Télécom to pay back up to €1.1bn (£596m) in aid it received from the French...

The European Commission has ordered France Télécom to pay back up to €1.1bn (£596m) in aid it received from the French government.

The commission said that benefits that the firm received in the form of exemptions from local taxes represented illegal state aid and would have to be repaid with interest.

At the same time, it ruled that support granted in the form of an advance by shareholders also represented aid because it amounted to support from state finances that would not have been provided by a commercial investor. The value of this support was estimated at €9bn but the commission decided that the firm would not have to repay any of this amount.

The commission is still in discussions with the French government about how to calculate the value of the state and commissioner Mario Monti said that the final total could be between €800m and €1.1bn, plus interest.

France Télécom is expected to challenge the commission's decision to repay the money in the European Court of Justice.

After its investigation the commission found that France Télécom benefited from exemptions from local direct taxes between 1994 and 2002 worth between €800m and €1.1bn.

It also investigated a shareholder's advance made by a public investment company and found it had a significant effect on the company's financial situation that derived from public resources.

The advance represented a possible drain on French government finances and allowed it to obtain a credit line of €9bn. However, the commission decided against forcing the company to repay this money as well.

Simon Taylor writes for IDG News Service

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