Bizarre blackout on France Telecom


THE rights issue from France Telecom is one of the biggest events to hit Europe's stock markets this year. Whether or not it succeeds will affect sentiment in the telecoms sector for months so it will be of more than passing interest for the substantial number of British investors in the company - either those who owe their involvement to being past shareholders of Orange or, more likely, those who are institutional investors in one of Europe's leading businesses, and those who hold the shares of rival phone companies.

But when you read the Press release issued in France you find that it says (in French) the document is not for circulation in the UK, or strictly speaking 'le Royaumeuni'. The company says it has been advised by its lawyers that it cannot issue the document in this country and cannot answer questions on the issue from the British Press or analysts either here or in Paris. That rules out the London Evening Standard and the Financial Times.

But France Telecom is advised that it can give information to and answer questions from the Wall Street Journal - because it is an American paper (notwithstanding the fact that its European edition circulates extensively in Britain).

According to France Telecom, the reason for this bizarre secrecy - which makes a mockery of efforts to create a single European market in financial services - is Britain's Financial Services Authority. This blackout on information is done in the name of investor protection.

It appears that the rights issue in the UK will be carried out as a private placing. That means the company can talk on a one-to-one basis to investors who might buy the new stock, but it cannot talk to anyone else. What makes this even more fatuous is that those who are not on the placing list will not be allowed to buy the shares. So all this performance is to deny information to people who are not going to be allowed to buy the shares anyway.

You couldn't make it up.

Smoke, mirrors and fog of war

CHANCELLOR Gordon Brown hinted though his aides a few weeks ago that the Budget had to be delayed into April because by then the Gulf War would be out of the way and the global economic picture would look much clearer. But reading between the lines of the weekend Press there are hints that he is changing his tune.

The recurring theme of the economics columns was that the war might well cost significantly more than he anticipated, which suggests that this is now the line being peddled by the Treasury 'off the record'.

This is extremely hard to believe, given the limited nature of the British involvement so far, and it smacks of an excuse. It is likely, therefore, that the Budget has been delayed not so that the economic picture becomes clearer but so that it becomes significantly more cloudy. In short, the Chancellor will use the fog of war to conceal his own misjudgments.

He will have to revise massively upwards the amount of money he needs to borrow to pay for the spending on the health service. He may well have to revise downwards the amount of tax the increasingly soggy economy is expected to produce. He may well have to trim his forecast for economic growth for the rest of this year and possibly next amid signs that consumer spending is slowing rapidly. He may have to scrape around for a few extra billions for new taxes or changed allowances on old ones.

He will have to explain why all his forecasts are wrong, why all his sums do not add up and how his whole strategy is unravelling. That would be a challenge for any Chancellor in normal times, but these are not normal times.

This perennially lucky politician will blame the war from costing too much, blame the stock market for falling too much, blame the continental Europeans for dragging their feet too much, and blame everyone except himself for expecting too much. What is worse, he will probably get away with it.

Brown study

AS HE puts the finishing touches to his Budget speech Gordon Brown could do worse than call for a report from his Chief Secretary to the Treasury Paul Boateng, who should be attending tomorrow night's second annual dinner of the British Venture Capital Association.

President Michael Queen's theme will be that a healthy economy has four ingredients - population growth, productivity growth, fair taxation and an efficient public sector. He will make it clear he thinks the Government is going backwards on each. There is no plan to attract to these shores the brightest and best to compensate for our own ageing population.

Efforts to improve productivity have been sabotaged by the Government's much greater talent for making stupid, expensive and time-consuming regulations which stifle growth and the desire of entrepreneurs to innovate and expand. Fairness in taxation has become the equivalent of Orwellian doublespeak - when this Government says it is going to do something fair it is invariably a cloak for a move of stupefying unfairness - the proposed pensions cap being just the latest example.

Finally, Gordon Brown alone among 60m people believes his NHS programme will be well spent. The rest of us believe efficiency in the public sector is impossible as long as it is in the hands of administrators with no commercial experience. But Brown's arrogance means the entire country is going to be crippled by higher tax and borrowing to finance a public sector which does not know how to spend wisely.

Queen's second wish is to flag up the fact that Europe appears to be going backwards. The bold drive to make it the world's most efficient economy by 2010, espoused at the Lisbon summit, has run out of momentum. Liberalising initiatives are bogged down and economic nationalism is reasserting itself.

The solution, Queen says, is for Britain to press on regardless, freeing up its own economy to lead by example. But whether that would be enough to persuade Europe to free up is surely highly unlikely given the recent plunge in transatlantic relations and the Continent's unease with the downside of globalisation which is every day more apparent.

Different game

IT WILL be interesting to see if the departure of Terry Venables from the manager's chair at Leeds United raises any fuss in Parliament or among shareholders on the lines that his £1.5m pay-off is a reward for failure - though he was there only eight months and the club has not been in such dire trouble for years. Presumably not. Politicians seem to believe that it is only businessmen who deserve to have their contracts torn up and ignored when they fall out with their boards, not footballers or their managers.

Bizarre blackout on France Telecom

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