France Telecom may opt for Orange
By Peter Thal Larsen-Financial Times
France Telecom is interested in buying Orange, the UK mobile phone operator, if its takeover by Mannesmann, the German engineering and telecoms group, falls through.
France Telecom has contacted Vodafone Airtouch, the world's largest mobile phone operator, to express its interest in Orange. Vodafone is currently examining the possibility of mounting a hostile takeover of Mannesmann.
If Vodafone does decide to bid for Mannesmann it will immediately have to find another owner for Orange because it is a direct competitor to Vodafone in the UK.
Discussions between France Telecom and Vodafone are thought to be at a relatively early stage - and it is unlikely that the French group would be willing to pay the same price for Orange as that proposed by Mannesmann.
The value of Mannesmann's offer, a mixture of cash and shares, has fallen in recent weeks as investors worried about the effects of the deal on Mannesmann's earnings and the credit-rating of its bonds.
Based on Friday's closing share prices, Mannesmann's offer values Orange at about œ19.6bn ($32bn), or œ16.30 per share.
The value of the offer was supported by Mannesmann's share price, which rose 8 per cent on Friday on rumours that Vodafone was planning a bid. Orange shares closed at 15.65p - their highest level since Mannesmann announced its offer.
Advisers to Vodafone appear to be considering two possibilities. The first would be to launch a hostile bid for the whole of Mannesmann, with a separate agreement to sell Orange to France Telecom for a fixed price.
An alternative would be to encourage France Telecom to make a direct offer for Orange at the same time as Vodafone launched its bid, in the hope that UK authorities would then allow Mannesmann's bid to be withdrawn.
At the moment, Vodafone appears to have no way of preventing Mannesmann from completing its takeover of Orange. The German group does not need shareholder approval to issue extra equity.
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