The sell-off was originally planned for June by the previous conservative administration but was abandoned, along with other planned privatisations, by the new socialist government under the Prime Minister, Lionel Jospin.
Dominique Strauss-Kahn, the Finance Minister, said yesterday that the government intended to sell around 20 per cent of France Telecom to private and institutional investors.
He said ministers also wanted Deutsche Telekom to own a further 7.5 per cent stake in the company after the sale. France Telecom would buy a similar sized stake in the German carrier. The two phone groups already collaborate in the Global One alliance with Sprint, the US long-distance operator.
In addition, France Telecom's employees would own around 3 per cent, bringing the total stake released by the government to more than 30 per cent. Mr Strauss-Kahn insisted the sale was not the same as a privatisation. "This is an opening of the capital. Privatisation means selling more than 50 per cent."
The syndicate of banks and brokers created under the previous plans, which could have seen up to 49 per cent of France Telecom sold, was still in place in the hope that the sale would ultimately receive the go-ahead.
Analysts said the government needed to raise funds to help reduce its borrowings.
On Friday it was confirmed that Air France will not be privatised, prompting Christian Blanc, the airline's chairman, to hand in his resignation.