Union anger over France Telecom plan

A government-commissioned report on the partial sell-off of France Telecom has recommended that a third of the state-owned telecoms group be opened up to outside investors. The recommendation is a compromise between the former conservative administration's planned privatisation and the Socialist's manifesto pledge to halt the sale of state-run assets.

Although it stops short of the previous government's planned 49 per cent sell-off, which would have raised between Fr35bn and Fr50bn francs (pounds 3.6bn to pounds 5.2bn), the submission of the report to the Prime Minister, Lionel Jospin, angered unions, which threatened massive strike action in retaliation.

Alain Gautheron, a senior official at the Communist-led CGT union, said yesterday: "We plan to address the staff and get in touch with comrades from other unions so we can set the stage for action by France Telecom staff that could go as far as a massive strike to let the government know this is not what we want."

Analysts said investors had been encouraged by the government's willingness to sell stakes in publicly owned companies, which is seen as a crucial step in preparing France Telecom for the liberalisation of Europe's telecommunications market in 1998. The previous government, ousted in June's general election, only planned to sell 35 per cent of France Telecom in the first instance.

However, some economists said that by maintaining control over France's large public sector, the government was storing up problems for itself in future years when increasing international competition in areas such as transport and telecommunications would force it to cut costs and staff.