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Monday, 1 July, 2002, 17:38 GMT 18:38 UK
Nationalisation talk lifts France Telecom
France Telecom chairman Michel Bon
Michel Bon blames speculators for the stock's weakness
Trading in France Telecom shares has been suspended after an error by a Finance Ministry spokesman raised hopes that the government would nationalise the indebted telecoms firm.

The suspension was triggered by a 20% surge in the company's share price to 11.35 euros (7.32; $11.21)

The surge occurred despite adamant denials by the ministry that nationalisation was being considered.

Re-nationalisation "is neither the official position nor an unofficial position," a Finance Ministry spokesman said.

"It's not on the agenda. At this stage the state does not envisage a re-nationalisation," the spokesman said.

Rising shares

Earlier during the day, the stock was trading up 27%.

Quite simply, many analysts did not believe that the French government would rule out the option of nationalisation.

"A re-nationalisation would make a lot of sense for the government from a financial perspective.

"It's a realistic scenario but it becomes much more likely at lower share prices," said Dresdner Kleinwort Wasserstein in a research note.

"We expect many options to be explored, of which this is undoubtedly one," said Nomura analyst, Mark James.

"The government may offer to buy France Telecom shares; it may not. And if it does, what price will it offer?," asked Nomura analyst Mark James.

Sharp falls

The French government owns 55.5% of France Telecom after its partial privatisation in 1997.

Concern over the telecoms company's debts of 61bn euros caused its share value to crash to fresh lows last week.

The stock has fallen 75% since the start of this year.

Last week, France Telecom's chairman, Michel Bon, said the stock has been under attack from speculators.

"The government might have denied [re-nationalisation plans] now, but they still managed to ramp up the share price, it all seems very strange," said one trader.

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