France Telecom $11.6B Aid to Get Review, Bouygues Wins

The European Union’s highest court overturned a decision that backed a proposed 9 billion-euro ($11.6 billion) government loan to France Telecom SA, handing a victory to competitor Bouygues SA.

Today’s ruling that the government aid must be reexamined by the lower EU court also responds to a challenge by the European Commission, the EU’s executive authority, which said in 2004 that the French loan was unlawful. Bouygues, the owner of France’s third-largest mobile-phone company, and the Brussels-based commission sought to annul the lower court’s ruling that France’s support when France Telecom was near bankruptcy didn’t qualify as state aid.

“Although the loan was not implemented by France Telecom, it conferred an advantage granted through state resources that could potentially have burdened the state budget,” the EU Court of Justice in Luxembourg said in a statement today. The decision sends the case back to the EU General Court for review.

France Telecom is the country’s largest phone company. The former state monopoly is fighting increased competition from Bouygues and Vivendi SA’s SFR. The fight has intensified in France as Iliad SA has become France’s fourth mobile-phone operation, persuading customers to switch with steep price cuts.

“This ruling annuls a decision by the EU General Court, but doesn’t question the commission’s decision not to impose any recovery of any aid,” France Telecom said in an e-mailed statement. The company “remains confident on the substance of the case.”

The press office of Bouygues Telecom didn’t have an immediate comment.

The EU General Court, the bloc’s second-highest, ruled in 2010 that, while statements by the French government in 2002 that it would support France Telecom “conferred a financial advantage,” the comments didn’t commit any state resources.

The cases are: C-399/10 P, Bouygues and Bouygues Telecom v. Commission; C-401/10 P, Commission v. France and Others.

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