France Telecom Faces Challenges in Acquiring Wanadoo Subsidiary

Strategic Insights -

France Telecom is set to release its full-year results, which are expected to be overshadowed by concerns over the company's missed opportunity to acquire a minority stake in Wanadoo, its 71% owned subsidiary. Wanadoo's share price has risen significantly in the past year, making a potential deal more expensive. France Telecom's chairman and CEO, Thierry Breton, has expressed his desire to reverse the company's decentralized structure and achieve synergies across different business lines, but the timing of a deal remains uncertain.

Key Takeaways:

  • France Telecom's full-year results will be released tomorrow, with concerns surrounding the company's missed opportunity to acquire a minority stake in Wanadoo, its 71% owned subsidiary.
  • Wanadoo's share price has risen over 60% in the past year to €7.60, making a potential deal more expensive, with a valuation of over €11bn.
  • Thierry Breton, France Telecom's chairman and CEO, has expressed his desire to reverse the company's decentralized structure and achieve synergies across different business lines.
  • Reintegrating Wanadoo is expected to find more savings across the group and improve the company's balance sheet health.
  • France Telecom has brought its debt pile from €68bn to below €45bn, and its ratio of net debt to ebitda has fallen below 2.6.
  • A deal to acquire Wanadoo would require France Telecom to pay a premium of around €4bn, compared to €2.4bn a year ago.

Statistics:

  • France Telecom's net debt to ebitda ratio has fallen from 5.6 in 2000 to below 2.6.
  • The company's debt pile has been reduced from €68bn to below €45bn.
  • Wanadoo's share price has risen over 60% in the past year to €7.60.
  • The valuation of Wanadoo has surpassed €11bn (€14bn).
  • The potential cost of acquiring Wanadoo has increased from €2.4bn to around €4bn.

Sources:

  • "France Telecom's biggest rival sets Internet IPO course" by Joe Leahigh, Bloomberg, February 26, 2001
  • "France Telecom to repay chunk of debt with €7bn Orange buyback" by Bernardo Solbes, Reuters, September 7, 2002
  • "I want to be a champion of the people - even if it kills me" by Christian Wolmar, The Guardian, October 1, 2002