Blunder Raises France Telecom Shares

A gaffe by France’s new government yanked France Telecom shares up 25%, as the Finance Ministry said it could buy out the firm to rescue it from a relentless market beating--and then backtracked.

In what appeared to be a clumsy communications blunder, a Finance Ministry spokeswoman initially said France would consider renationalizing the 55.5% state-owned group if there was no end to the confidence crisis that has wiped 96% off its value in two years.

Shortly afterward, a spokesman at the same ministry said the comments were wrong and based on a misunderstanding, and said the month-old government had no plans, for the time being, to buy out minority shareholders in France Telecom.

It was unclear whether the gaffe was a mistake by a new press team or a leak to test market reaction, lift the flailing shares and hurt some of the short-selling hedge funds that have driven the stock down recently. But analysts welcomed signs that France Telecom’s main shareholder might at last take action.

France Telecom shares, crushed by worries over the group’s 61-billion euro debt, were repeatedly halted while attempting to leap as much as 27% as investors puzzled over the mix-up. The stock was frozen for two hours at midday but surged in late trading to close up 25.3%.

A spokesman for France Telecom declined to comment on the issue and reiterated that the firm was in no need of a cash injection or rescue plan.