Sarkozy Plans 0.9% Tax On French Telecom Cos

PARIS -(Dow Jones)- President Nicolas Sarkozy Wednesday outlined plans to place an additional tax of 0.9% on the revenue of telecommunications operators in France to help fill the funding gap public television stations will face at the start of next year when a phased ban on advertising takes effect.

Sarkozy announced the tax Wednesday after a government commission formally presented him with a plan to reform public TV.

Private broadcasters, such as Television Francaise 1 SA and M6-Metropole Television will also be asked to contribute around 3% of their revenue, or EUR80 million a year, to make up the funding shortfall, Sarkozy said.

Beginning Jan. 1, 2009, advertising on public channels will be restricted to 6 a.m. until 8 p.m. and will be banned totally by December, 2011, Sarkozy said.

The new 0.9% surcharge, which equates to about EUR378 million a year, on telephone and Internet company revenues is above the 0.5% charge the commission had proposed a week ago.

The news is positive for TF1 and M6, as the charge they face is unchanged from the commission's proposal, but the ban on public-TV advertising will begin earlier than previously tabled, Citigroup analysts said in a note to investors.

The plans are not good news for telecom operators, but are likely to already be priced in by the market, the Citigroup analysts said.

TF1 shares closed up EUR0.62, or 5.9%, at EUR11.11 while M6 closed up EUR0.53, or 3.9%, at EUR14.23, outperforming the benchmark CAC 40 index, which ended the day up 1.4%.

Among the telecom operators, incumbent France Telecom SA's (FTE) shares closed up EUR0.27, or 1.5%, at EUR18.13 while shares in Vivendi, which owns 56% of operator SFR, closed up EUR0.34, or 1.4%, at EUR24.76.

Shares in Bouygues, which owns mobile operator Bouygues Telecom, but also has a controlling stake in TF1, closed up EUR1.32, or 3.2%, at EUR42.19.

The tax on telecom operators is "a counterproductive way to manage governmental priorities," said Yves Le Mouel, the general manager of the French Telecom Federation, which represents French telcos.

"It will lead operators to pass on a part of this tax to their clients," Le Mouel said, a move that will undermine the government's efforts to improve purchasing power.

The move will also hurt investment in super-fast, next-generation networks, according to Le Mouel. He said operators will continue their lobbying efforts up until the legislation is voted on in the autumn and will also look at possible legal challenges.

Private broadcasters are also unhappy at having to contribute to the financing of public television.

Executives from TF1, M6 and Vivendi's pay-TV operator Canal Plus met with Culture Minister Christine Albanel on Monday. In a statement, the broadcasters said it is "unacceptable" that the public sector will have guaranteed revenue from third parties without having to commit to cost cutting.

Sarkozy's comments confirmed a report earlier Wednesday in French business daily La Tribune.

-By Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738; jethro.mullen@dowjones.com
(A.H. Mooradian contributed to this article.)

(END) Dow Jones Newswires

Posted to the site on 25th June 2008