registration document France Telecom 2009 - Orange.com

financial information concerning the issuer’s assets and liabilities, financial position and profits and losses
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NOTES TO THE ANNUAL FINANCIAL STATEMENTS OF FRANCE TELECOM S.A.
State aid
Three proceedings are currently pending before the European
competition authorities concerning alleged State aid in favor of
France Telecom :
■ t he fi rst procedure follows an investigation opened in January
2003 by the European Commission concerning the special
French business tax (taxe professionelle) regime resulting
from France Telecom ’s historical legal status established by
the French law of July 2, 1990, and to which the company
was subject from 1991 to 2002. In its August 2, 2004
decision, the European Commission stated that this regime
was incompatible with the European Union Treaty and
ordered the French State to recover from France Telecom
an amount of aid that it estimated to be between 798 million
euros and 1,140 million euros plus interest.
In January 2005, France Telecom lodged an appeal against
this decision with the General Court of the European Union .
For its part, the French State had fi led an equivalent appeal
in October, 2004. On November 30, 2009, the General Court
of the European Union rejected these appeals. On February
10, 2010, France Telecom fi led an appeal with the European
Court of Justice (ECJ) which the French government indicated
that it intended to support.
Pursuant to the 2004 decision of the European Commission
and pending the General Court of the European Union
decision, France Telecom had placed in an escrow account
in 2007 and 2008 the total amount of 964 million euros.
Following the General Court of the European Union decision,
France Telecom recorded a charge of the same amount in its
2009 fi nancial statements. In addition, pursuant to the escrow
agreement, on January 7, 2010, France Telecom transferred
to the French State the amount in escrow together with
53 million euros of interest on the amount as of November
30, 2009 and not recognized as income, representing a total
amount of 1,017 million euros;
■ t he second procedure also follows an investigation opened
by the European Commission in January 2003, relating
to the fi nancial measures announced by the French State
on December 4, 2002. On that date, the French State
announced that it was prepared to extend a shareholder’s
loan to France Telecom in advance of its participation in a
capital increase alongside private investors. This shareholder’s
loan was never actually put in place. In 2004, the European
Commission found that these fi nancial measures were
incompatible with the common market but did not require any
repayment of State aid. The French State and France Telecom
but also Bouygues Telecom and the French association of
network operators and telecommunications services (AFORS
Telecom) lodged appeals against the Commission’s decision
before the General Court of the European Union . The hearings
before the General Court of the European Union occurred on
April 22, 2009 and its decision is expected during the fi rst
half of 2010. The General Court of the European Union might
conclude that the fi nancial measures constitute a State aid
which is reimbursable and ask the European Commission to
rule consistently with this position. However, France Telecom
believes that the participation of the French State, in its
capacity as a majority shareholder, in the company’s action
plan was consistent with the conduct of an informed private
investor and contained no element of State aid;
■ o n May 20, 2008, the European Commission announced
that it had launched a formal investigation into the pension
plan for French civil servants employed by France Telecom .
This step follows a complaint from Bouygues Telecom in
2002.
The objective and effect of the pension plan implemented
by the French law of July 26, 1996 was to bring the
financing of the pension plan for French civil servants
employed by France Telecom into line with pension
plans applicable to employees of France Telecom ’s
competitors. As part of the new regime established by the
1996 law, France Telecom made an exceptional payment
of 5.7 billion euros to the French State in 1997 and, since
then, has made annual contributions in full discharge of
its liabilities.
France Telecom believes that the sole effect of the pension
plan system established in 1996 is to release the company
from a structural disadvantage and that this reform contains
no element of State aid. The company made observations as
a third party interested in the proceedings.
Broadband, High Capacity Broadband
and Contents
■ In July 2003, following a sector inquiry on the conditions for
unbundling the local loop and providing access to broadband
Internet services in the European Union member states, the
European Commission ordered Wanadoo to pay a fi ne of
10.35 million euros for abuse of a dominant position between
March 2001 and October 2002. On January 30, 2007, the
General Court of the European Union upheld this decision
and on April 2, 2009, the ECJ dismissed France Telecom ’s
appeal. The decision of the European Commission thus
became fi nal.
This decision of the European Commission and decisions
from the French Competition Authority condemning similar
practices of France Telecom on the broadband access
market served as a basis for several legal actions, which are
currently pending before the Paris Commercial Court, from
competitors claiming compensation for the damages they
allegedly suffered because of these practices:
■ Free, which brought an action against France Telecom
in December 2006, accuses France Telecom of having
implemented a strategy that, between 2000 and 2002,
prevented it from deploying ADSL and recruiting potential
new customers to its narrowband Internet customer
base, and which, from 2003 to 2005, hampered its
development in this market. Free has asked the court
to order France Telecom to pay a provisional sum of
500 million euros. In May 2008, in support of its claims,
Free fi led an economic report which speaks of theoretical
damages of 1.9 billion euros. In December 2008,
France Telecom produced an expert economic and
fi nancial assessment which concluded that Free incurred
no loss. France Telecom believes that Free has been able
to take full advantage of the development and dynamism
of the French broadband market.
■ Numericâble fi led a lawsuit against France Telecom on
November 9, 2009. Numericâble submitted an economic
report which values its prejudice at a minimum of 157 million
2009 REGISTRATION DOCUMENT / FRANCE TELECOM
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