EU subsidy probe for France Telecom

The European Commission said one of France Telecom's rivals had complained that the company got an illegal injection of public money when the government agreed to reduce its retirement costs and exempt it from social security payments when the former state monopoly was privatized in 1997.

European states are only allowed to fund private companies within a narrow set of conditions, to make sure that government money does not give one business an unfair advantage over others.

If the EU's executive arm rules a state aid program illegal, a company can be ordered to pay back the money it received from the government.

Regulators did not say how much money was in question.

France argues that France Telecom had faced an excessive financial burden from its obligation to finance retirement pensions of state employees and the government move helped create a level playing field for all telecoms companies.

France Telecom was also exempted from social security payments designed to cover workers from the risk of unemployment -something that state employees do not require but workers in the private sector do.

The French government is France Telecom's largest shareholder with a 27.4-percent stake.

In a statement, France Telecom said the pensions scheme has not conferred any advantage on the company, so it does not anticipate any impact on its financial results.

"France Telecom will continue its collaboration with the French authorities and the Commission's services to gather all the elements that will quickly end this procedure," it said.