France Telecom will have to repay up to 1.1bn euros ($1.4bn; £735m) of state aid it received by not having to pay some tax bills between 1994 and 2002.
Will France Telecom appeal against the decision?
The European Commission ruled the firm should repay the money as the aid was incompatible with competition rules.
Its decision brings to an end a year long investigation into the company.
However, France Telecom will not have to repay the 9bn euros in state credit the French government gave the firm during its 2003 financial crisis.
Although the Commission said the 9bn euros also constituted a form of state aid, it added that it was not the first time such a practice had taken place, and "therefore (we) will not order the recovery of this aid".
"This decision shows that to be effective and equitable, state aid control must tackle the different, sometimes creative methods which a state uses to support companies with aid incompatible with European competition rules," said EU Competition Commissioner Mario Monti in a statement.
France Telecom will have to pay back between 800m and 1.1bn euros.
The company has yet to comment on the verdict but last week denied that it had received any state aid and vowed to appeal against any decision against it.