France Tel shares up on relief probe not to unseat CEO
By Leila Abboud and Alexandre Boksenbaum-Granier
PARIS (Reuters) - France Telecom FTE.PA shares jumped on Monday after President Francois Hollande backed its CEO to keep his job despite being put under investigation for fraud during his time as a top government aide.
France Telecom, which is 27 percent owned by the state, climbed 4.2 percent to be the biggest gainer on France's blue-chip CAC 40 index .FCHI, amid a broader rally in European telecom stocks that were up 2 percent at 5:52 a.m. ET.
Investors were relieved that Europe's fourth-biggest telecom group by sales would not face a leadership vacuum as business in its key home market gets slammed by an 18-month old price war sparked by the arrival of low-cost mobile competitor Iliad (ILD.PA: Quote).
"If (Chief Executive Stephane) Richard had been forced out, the group could have suffered during a transition phase to a new boss," said a Paris-based trader who declined to be named.
Richard's contract is up in May 2014, however, so it remains to be seen whether the investigation will affect his chances of being retained for a second term as CEO.
Richard was a top aide in the finance ministry under former president Nicolas Sarkozy when his government in 2008 awarded tycoon Bernard Tapie 285 million euros ($373 million) in damages in a legal dispute with defunct bank Credit Lyonnais.
His future at France Telecom has been in doubt since magistrates last week said they were opening a formal investigation into his role in the award. Richard has denied wrongdoing and is appealing against the investigating judge's decision to put him under investigation.
BOARD MEETING Continued...