The European Court of First Instance has rejected the appeal of the French State and France Telecom concerning litigation on professional tax prior to 2003. The court upheld an August 2004 European Commission decision that the difference between the business tax paid by France Telecom and that which should have been paid during 1994-2002 constituted state aid incompatible with the common market. The exact amount to be recovered was put in the range of EUR 798 million to EUR 1.14 billion in capital, to which had to be added interest. The Commission then won an action before the court of justice against France on the ground that it had failed to implement its decision. France Telecom states that it will now transfer EUR 1.016 billion to the French State, with no impact on its net debt, as it had placed the relevant amount in an escrow account in 2007 and 2008. This amount, net of tax will be accounted for in France Telecom's 2009 profit and loss accounts. The group said the decision did not impact its dividend policy that will remain based on organic cash flow excluding exceptional elements. It will examine options available to it following this decision.
