France Telecom May Buy Orange for $45 Billion

France Telecom could announce an agreement by Tuesday to buy Orange, Britain’s third-largest mobile phone company, for as much as $45 billion, people familiar with the companies said. France Telecom, which has been in exclusive talks with Orange’s owner, Vodafone AirTouch, might pay about two-thirds of the price in cash, assume about $9 billion of debt and pay the remainder in stock, the sources said. Buying Orange would get France Telecom a universal mobile telecommunications system, or UMTS, license to offer fast Internet access on mobile phones. A month ago, FT quit an auction of British permits when bidding topped $35 billion. Orange would also fill a gap in the company’s European network, analysts said. “France Telecom needs Orange to put to rest recent doubts about its European strategy,” said Eric Burkel, a Handelsbanken Markets analyst. “Orange will not only give FT a mobile presence in the U.K., it will allow it to use the U.K. as their UMTS laboratory.”

UMTS is a so-called third-generation mobile-phone technology that will let hand-held devices including mobile phones and palm-size computers peruse the Internet with speeds approaching desktop computers. France Telecom, which last week was arranging a $30-billion loan to pay for Orange, was picked in part because it could pay more cash than the other bidders--Sonera Oyj, Finland’s largest telephone operator, and Holland’s Yal KPN mobile unit, sources said. The French company also plans to raise about $1.9 billion in June by selling most of its stake in the Mexican telephone company Telefonos de Mexico, and Telmex plans to purchase the remaining stake for $600 million, the companies said. Analysts said France Telecom could also sell shares in its mobile phone division if it succeeds in buying Orange, a move that could value the wireless operation at the state-controlled phone company at about $145 billion. A Vodafone spokesman declined to comment. France Telecom officials could not be reached.