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FranceTel to present refinancing


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PARIS, France (Reuters) -- France Telecom Chairman Thierry Breton is expected to present a massive refinancing and restructuring plan to his board on Wednesday as he strives to set the debt-laden operator on the road to recovery.

Investors have been waiting for months for the plan, which could include a nine billion euro cash prop from the government, a rights issue, asset sales, cost cuts and as many as 20,000 job losses.

The French government signalled on Tuesday it was ready to take on billions of euros in additional debt to repair France Telecom's balance sheet, which is buckling under 70 billion euros ($69.93 billion) in debt.

Breton, who has worked on the refinancing since replacing Michel Bon at the company's helm on on October 2, will present his proposals to the board at a 1630 GMT meeting.

Union sources cited in French newspapers on Wednesday said the plan would include major internal reshuffling, including the departure of mobile unit Orange's Chief Executive Jean-Francois Pontal.

The dilemma facing Breton, who is famous for bringing ailing electronics firm Thomson Multimedia back from the brink, is how to sell enough assets and cut enough costs to ease the pressure on his group's debt ratings, without leaving it so paralysed that a market recovery will pass it by.

CASH INJECTION

With its debt mountain and a market capitalisation that has shrunk to a tenth of what it was in March 2000, France Telecom needs an instant cash injection of some 15 billion euros, analysts say.

The French government is expected to lend it around nine billion euros indirectly by setting up a state-owned company that would own the government's 55 percent stake and borrow from a state bank to pump funds into France Telecom.

A report on Tuesday said France Telecom was considering buying out minority shareholders in Orange, but analysts downplayed that possibility.

Orange is behind a good chunk of the investments that saddled France Telecom with such towering debts just as the telecoms market slumped.

But the cellphone unit promises lucrative long-term profits, which might tempt its parent to add to its 88 percent stake so it can gain full access to cash-flow, have more management control and reduce taxes by further integrating Orange's French and British operations.

So far investors seem to put their faith in Breton. France Telecom shares have more than doubled since he was appointed, although they are still down over 60 percent on the year.

Employees are more wary. Thousands joined a strike last week amid worries the government might trim its stake, making their jobs more vulnerable to the ups and downs of the stock market.

To his credit, 47-year-old Breton has managed to wrap up France Telecom's tiresome and long-running battle with estranged German mobile partner MobilCom ahead of the December 4 board meeting.

France Telecom, which owns 28.5 percent of MobilCom, completed a deal late on Sunday to take on 6.1 billion euros of the German firm's debt, following their divorce deal on November 22. The debts will be turned into perpetual securities redeemable into new France Telecom shares.

France Telecom is due to hold a news conference at 0845 GMT on Thursday to unveil the plan presented to the board.



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