The change of status of France Télécom provided for by the 1996 Law also included various provisions relating to its staff. According to this Law, the category of civil servants of France Télécom is attached to the national company France Télécom and comes under its management. The staff with civil servant status retained this status and the guarantees attaching to it. The conditions of employment of the civil servants working for France Télécom are identical to those of the civil service: they benefit from the guarantee of employment and may be dismissed only on serious grounds, in the cases defined by law. As regards the recruitment of new staff, the 1996 Law allowed France Télécom to recruit civil servants until 1 January 2002, whilst at the same time allowing it to recruit employees on a contract basis under collective agreements.

At 31 December 1996, France Télécom employed 165 200 persons, of whom 94,1 % were civil servants. In fact, without awaiting the deadline of 1 January 2002 established by the 1996 Law, France Télécom stopped recruiting civil servants from 1997. Consequently, the number of civil servants decreased by 47 % in 10 years, from 133 434 civil servants in 1997 to 69 892 in 2007. This decline is distinctly steeper than that of the total workforce of France Télécom (– 25 %), which stood at 124 166 employees at 31 December 2007.

The 1996 Law also excluded France Télécom from the scope of the general and specific compensation for old-age provided for by the 1990 Law and resulting, for France Télécom, in the payment of compensation and over-compensation in addition to the employer’s contribution, as shown in Table 1. Between 1991 and 1996, the amounts paid in this respect accounted for 18 % of the pensions paid to the civil service staff.

The employer’s contribution in full discharge of liabilities, introduced by the 1996 Law, replaces the additional contribution provided for in point (b) of Article 30 of the 1990 Law. This contribution is based on a competitively fair rate based on equalisation of the levels of wage-related social security contributions and tax payments from equal net salary. The method of equalisation is based on a reconstruction of what the costs would be for a competitor with employees coming under the ordinary social security arrangements, including retirement pensions, providing them with a net wage equal to that of the civil servants of France Télécom with an identical employment structure.

The end to the recruitment of civil servants from 1997 capped the staff of civil servants working for France Télécom. Despite the retirement of a growing proportion of the staff of civil servants between 1991 and 2010, the table shows that the employer’s contribution of EUR 744 million paid by France Télécom in 2010 was EUR 407 million less than the retirement pension costs that the company paid to the French State before the entry into force of the reform in 1996 and was equivalent to the only employer’s contribution that France Télécom paid 20 years previously in 1991 (EUR 1 151 million and EUR 743 million respectively, see Table 1).

In this way, it appears that the provision intended to spread the effect of future increases in contributions resulting from the 1990 Law, set aside each year by France Télécom for a total amount of FRF 23,4 billion (EUR 3,6 billion) in 1996, was taken into consideration when calculating the amount of the exceptional contribution (or compensating balance). The part of this contribution which did not correspond to the provisions set aside would cover this additional cost for a period of 10 years. Its amount was established taking into account the amount already set aside by the company as clearly emerges from the discussions at the time.

In any event, the amount of the exceptional contribution of FRF 37,5 billion allocated to the public body managing the exceptional contribution from France Télécom in 1997 corresponds to the amount of the contribution, below FRF 40 billion, mentioned during the discussion of the draft of the 1996 Law. Although it was paid to the State budget in 1997 and fed it each year for the payment of civilian and military pensions, the amount of this contribution was set in order to offset the additional cost to the State resulting from the application of the 1996 Law.

The wage share of the financing of the pension liabilities for the civil servants, established pursuant to Article L 61 of the Civilian and Military Retirement Pensions Code since the foundation of the public operator France Télécom in 1991, was not changed by the 1996 Law. Moreover, the 1990 and 1996 Laws did not change the pension arrangements for the ordinary employees of France Télécom, which are those of the ordinary social security rules for pension insurance, supplemented by the complementary pension schemes AGIRC for executives and ARRCO for non-executives. Under this arrangement, France Télécom and its ordinary employees assume equivalent obligations to those of competing undertakings with regard in particular to the payment of contributions in full discharge of liabilities by the employer.

On the basis of these figures, it can be concluded that the amounts and their justification debated at the National Assembly and the Senate to set the amount of the compensating balance or exceptional contribution from France Télécom correspond to the proportions verified ex post during the 10-year period mentioned in the debates on the draft law. Indeed, the maximum amount of the exceptional contribution announced, EUR 6 billion (FRF 40 billion) corresponds to the forecasts drawn up by the public body until 1996 to meet the future retirement costs forecasted at that time, i.e. EUR 3,6 billion (FRF 23,4 billion) plus the difference of EUR 2,4 billion payable by the State between the employer’s and employees’ contributions levied between 1997 and 2006, on the one hand, and the benefits to be paid, estimated in 1996 for the same 10-year period, on the other.

On account of the provisions of the Finance Act 1997 which governs them, the amounts of the annual payments of the public body managing the exceptional contribution from France Télécom paid in 1997 did not correspond to the amounts of the benefits estimated or actually paid to the retired staff of France Télécom or to the amounts of the remaining costs to be financed by the State and were not determined on the basis of these amounts. Examination of the amounts actually transferred confirms this dissociation. Despite the exceptional contribution paid by France Télécom in 1997, Table 3 shows that the amounts of the benefits paid to retired civil servant staff of France Télécom exceeded annual resources from 2004, with the exception of the year 2006.

Therefore the payments of annual contributions by France Télécom and the annual payments of the public body managing the exceptional contribution are not allocated separately and ex ante to the benefits paid to the retired staff of France Télécom in the earmarked account for pensions. In fact, the allocation of the exceptional contribution solely to the financing of the benefits in question since 1997, if it had been applied instead of the system of payment of the amount plus 10 % per year provided for in the Finance Act 1997, would have led to the public body being wound up at the end of 2008, rather than at the end of 2011 as planned, in view of the amount not covered by the annual contributions, shown in Table 3. In any event, in either case, the amount of the exceptional contribution would have been used up at 31 December 2011.

The funding by the State of the payment and servicing of the pensions granted to the civil servants of France Télécom results from the application of the Civilian and Military Retirement Pensions Code, which alone applies to the former civil servants in question. Neither the 1990 Law nor the 1996 Law changed the status of these civil servants or the principle of the State funding the payment of their pension. This funding seems to arise from the principle whereby employees with civil servant status serve the common good independently and in the public interest. This is not the case where these civil servants work for an undertaking providing a paid-for service, with the aim of serving the interests and benefit of this undertaking, in competition with other undertakings which provide the same services.

In this perspective, the payment of compensation to the State, provided for by the 1990 Law, both in its original wording and after the amendments introduced by the 1996 Law, constitutes an exception to the principle of funding by the French State. This exception is justified by the nature and overall structure of the arrangements applicable to the pensions of the civil servants employed by France Télécom. In fact, the French State is obliged to effect the payment and servicing of the pensions granted, under the Civilian and Military Retirement Pensions Code, to the civil servants of France Télécom, who are covered by the general status of civil servants of the French State and not by the ordinary law on social security benefits.

Even in the absence of the payment of compensation by France Télécom, the French State would still be bound to honour its pension commitments to the civil servant staff concerned, unless it amended these commitments unilaterally. On the contrary, making available State-trained civil servants to France Télécom with no compensation for pensions paid or to be paid would confer a clear advantage on the latter.

Since France Télécom’s competitors do not employ staff with civil servant status for whom the French State would be under a similar financial obligation, the logic of the arrangements for funding pensions and the payment of compensation for France Télécom introduced by the law is not transferable to them. This is shown by the fact that, since the status of the staff employed by the competitors differs with regard to the risks of non-payment of wages covered by the ordinary law on social security benefits, the French authorities appear to consider that the payment of social security contributions to cover the risk is justified in their case. However, it is precisely this status that the French Republic is using to consider that the inclusion of the risks not common to the civil servants and the ordinary employees in the calculation of the compensation paid by France Télécom to the State pursuant to the 1996 Law is not justified.

Therefore, as regards the costs paid on account of the employment of their ordinary staff, these undertakings are not in a comparable situation in fact or in law to that of France Télécom as regards its civil servant staff, contrary to the arguments of the French Republic and France Télécom presented in their comments.

On the other hand, the compensation scheme in favour of the State for the payment of the pensions of civil servants working at La Poste, before the amendments described and approved under certain conditions by the Commission in its La Poste decision, was also that of a national company comparable to a public industrial and commercial undertaking and remained, pursuant to the 1990 Law in its original wording, similar to that of France Télécom, in that it provided for the annual repayment to the State of the pensions granted to the retired civil servants and the payment of the costs provided for in Article L-134 of the Social Security Code.

Even if it seems that La Poste is not in competition with France Télécom, which the advantages granted to the latter could distort or threaten to distort, the fact remains that the logic and provisions of the retirement scheme for the civil servants of France Télécom before the 1996 reform were the same as those of the comparable scheme applied to La Poste at the same time. Moreover, the Commission considered in its La Poste decision that the reform of the scheme applicable to La Poste constituted State aid, contrary to the arguments put forward by the French Republic in respect of France Télécom. More generally, to assess the situation of France Télécom, the reference situation is that of a public or private undertaking employing civil servant staff who have retained their status. Such undertakings would be in the same reference situation as France Télécom. It is therefore in terms of this reference scheme that the existence of State aid in favour of France Télécom can be assessed.

On account of the detailed rules for calculating the rate of the employer’s contribution provided for by the Law, since 31 December 1996, France Télécom pays the State less compensation than it would have paid if the Law had not been passed. In addition, on account of the fact that the employer’s contribution introduced by this Law is in full discharge of liabilities, France Télécom immediately wrote back at 31 December 1996 the provision earmarked in these accounts for the payment of its future liabilities. Hence the burden from which France Télécom was released was neither new, since the 1990 Law adopted the previous budgetary practice, nor unforeseeable, since the undertaking set aside provisions for this purpose, nor did it derogate from ordinary social security arrangements since these do not apply to the compensation paid by France Télécom.

From its entry into force, the 1996 Law transferred to the French State liability for the annual contribution ultimately covering in full the cost of funding the pensions of the staff concerned. The amount of aid granted in this way by the 1996 Law can be calculated, since its entry into force, by the annual difference between the compensation consisting of the contribution in full discharge of liabilities paid by France Télécom to the French State and the costs that it would have paid pursuant to the 1990 Law, indicated in Table 1, if this Law had not been amended, minus the amount of the flat-rate contribution paid in 1997.

It can be seen from the estimates supplied by the French Republic and set out in recital 40 that, at the time of the 1996 reform and until the foreseen expiry of the financial liabilities resulting from the burden assumed by the French State, the French authorities were able to estimate this total amount of net new costs until 2043, the date on which the financial liabilities of the State in relation to the retired civil servants or their beneficiaries would end, at EUR […] billion. The present value of the net cost amounted to EUR […] billion in 1996, after deduction of the annual contributions by France Télécom (EUR 15,2 billion), those of the employees (EUR […] billion) and the exceptional flat-rate contribution of EUR 5,7 billion.

The French authorities were aware that the ‘transfer of the pension costs for the civil servants of France Télécom to the general State budget’ was ‘a new and heavy burden for the State’ that the exceptional flat-rate contribution or the proceeds of the sale of part of the shares in the undertaking held by the State would only cover in part. The debates mentioned in recital 31 show that the French State did not seek in 1996 to offset in full the new burden it was assuming for the future but, on the contrary, sought to assume a new burden and for ‘the interests of the undertaking to be taken into account first in this matter’.

It is obvious that, even with different actuarial assumptions from those used by the French State to estimate the new burden it was assuming and notwithstanding the exceptional flat-rate contribution paid in 1997, the reform granted a substantial economic advantage in the form of lower employer pension contributions. Since the flat-rate contribution or balance compensation did not allow the charges transferred to the French State to be covered in full but, at the very most, to be reduced, and in view of the proportions in question, the actuarial calculation used at the time and the accuracy of the estimates resulting from it for the period up to 2043 as a whole cannot be confirmed as appropriate.

Moreover, the financial advantages resulting from the lower contributions by France Télécom cannot be compared with the alleged disadvantages arising from the employment of civil service staff, as France Télécom argues, supported by the French Republic. In fact, the 1996 Law did not, in any case, increase these alleged disadvantages, since it did not lead to the recruitment of additional civil servants. In addition, by discharging France Télécom from a part of its financial liabilities, the objective of the 1996 Law was not to compensate for an alleged disadvantage associated with wages or, according to the words of France Télécom, the lesser fluidity of employment of civil service staff.

• Firstly, France Télécom, on the eve of the full opening-up of the French market to competition, had a trained, competent body of staff, without which, if it had had to be replaced entirely, its market position could not have been maintained, which France Télécom omits to point out in its written submissions.

• In addition, the amount of the wages and the investment in staff training that France Télécom analyses as disadvantages, are normal costs in the budget of an undertaking, and it has not been established that they do not improve staff recruitment and productivity compared to competitors.

• Moreover, although it is true that France Télécom does not have the option of adjusting its total wage bill by implementing a social plan to cut the workforce regarding the staff concerned, it is doubtful that such a plan targeting employees with civil servant status only on the grounds of this status, could validly be implemented, whereas the stop on the recruitment of civil servants in 1997 and the recourse to ordinary employees offered it certain possibilities for flexibility of adjustment of its total wage bill.

• Finally, although it is true that the undertaking devotes a substantial budget to encouraging early retirement by the staff in question, the fact remains that the incentive and the interest for the undertaking to introduce such a measure would have been less without the passing on to the French State of financial liabilities assumed by France Télécom, provided for by the 1996 Law. The mechanism in this way allows the encouragement of early retirement and therefore funding at an earlier stage by the State for the staff concerned. Without the 1996 Law, France Télécom would have continued to provide this funding.

In the absence of a link to the question of whether or not an economic advantage exists resulting from the measures in question, taking into consideration competitive advantages drawn by France Télécom from its former monopoly, invoked by the complainants, would appear to be equally baseless. The alleged advantages and disadvantages are in fact unrelated to the question of levelling the conditions of competition on the telecommunications markets with regard to social security costs.

Only the exceptional flat-rate contribution provided for by the 1996 Law immediately placed a cost burden on France Télécom in relation to the reference situation already identified. The payment of the flat-rate contribution reduced the amount of aid from which France Télécom has benefited and will benefit until the expiry of the financial burden assumed by the French State in the place of France Télécom pursuant to the 1996 Law. Without prejudice to the accuracy of the actuarial methods used by the French Government at the time, without this flat-rate contribution, the amount of the burden from which France Télécom would have been relieved would have amounted to EUR 18,9 billion and not EUR […] billion, in 1996 net value.

The 1996 Law therefore permitted and still permits France Télécom to have increased financial resources at its disposal to operate on the markets in which it is active. On account of the 1996 Law, these resources were therefore greater than those at France Télécom’s disposal under the 1990 Law in its original wording. The telecommunications services markets on which France Télécom operated and operates throughout French territory and in other Member States have been gradually opened up to competition through the progressive disappearance of exclusive or special rights from 1988, then, with the exception of specific derogations, totally from 1998. There was total opening-up to competition in France in 2002. The removal of the legal barriers was accompanied by the entry of other operators with which France Télécom was and is in competition, even before the legislative measures of 1990 and 1996 which are the subject of the present decision.

Released from the obligation to set aside provisions for the future retirement costs of its civil service staff and subject to a lower annual contribution level, France Télécom’s balance sheet was relieved of liabilities and costs, thereby increasing its attractiveness to raise capital, which placed it in a more favourable situation than before the 1996 reform. Released from a burden incurred from its historical French market, France Télécom was in this way able to develop more easily on the markets of other Member States newly opened to competition, which it in fact did, as shown in recitals 48 to 50.

As a result, relieving the burden of France Télécom arising from the method of calculating the compensation to pay to the French State for funding the pensions of the civil service staff distorts or threatens to distort competition between France Télécom and these new operators in France and in the other Member States where France Télécom is present.

The fact remains that the annual levies in full discharge of liabilities paid by France Télécom since the 1996 reform do not permit a competitively fair rate to be achieved, as emphasised in the decision to initiate the procedure. This results from the fact that the rate applied to France Télécom includes only the contributions corresponding to the common risks of private-sector employees and civil servants and, as a result, excludes the contributions corresponding to the non-common risks, such as unemployment or non-payment of wages in the event of the firm going into receivership or compulsory liquidation.

It therefore results from Table 4 that not taking the non-common risks into account in the calculation of the contribution to be paid by France Télécom is reflected in a considerable difference between the compensation paid by France Télécom to the State and what it would pay if the contribution rate were calculated to ensure an entirely level playing field with the bases for the calculation of the costs paid by competitors. Consequently, the aid measure resulting from the Law does not comply with the principle of proportionality. For it to comply with this principle and in order to attain the legitimate objective stated of improving the conditions of competition by equalising the calculation methods relating to the costs borne by the undertakings operating on the telecommunications markets concerned in France, the aid granted to France Télécom pursuant to the 1996 Law should have equalised, and should effectively in future equalise, these costs by including those relating to the risks not common to the two categories of staff.

In this respect, France’s argument that the civil servants are not exposed to certain risks and, that as a result, it is not justified to pay a contribution for these risks, cannot be accepted. Firstly, it is pursuant to State measures that these risks would not arise, so there is no justification for France Télécom to draw a pecuniary advantage. For example, it is by virtue of the commitment by the French State to the civil servants still working at France Télécom and on account of the fact that the French State is its own insurer that the risk of non-payment of wages in the event of the firm going into receivership would not arise. However, the possibility of France Télécom filing for bankruptcy, just like a competitor, cannot be ruled out. In both cases, it is not a matter of an advantage supplied to the undertaking, but directly to its employees. The guarantee of the payment of wages takes effect after the undertaking has ceased to exist. However, a competing undertaking will have to pay contributions to guarantee the risk of non-payment of wages after its disappearance, in contrast to France Télécom. It is therefore not justified to give the latter an advantage, in the form of a lower contribution or, in fact, an exclusion of this risk from the method of calculating the contributions of France Télécom.

Then, more fundamentally, the objective itself of the reform introduced in 1996, which does not seem to have been brought to its logical conclusion, is to equalise the conditions of competition with regard to tax and social security payments between all the competitors of the sector, irrespective of the status of their staff and the existence of an actual obligation for France Télécom to affiliate with and subscribe to the competent management bodies. It is precisely this logic of equalisation of the conditions of competition which would be liable to make the measure examined compatible with the internal market. Whether or not the staff of France Télécom are exposed to such risks is not therefore relevant under this logic.

In conclusion, a reduction in the funding of the pensions with a transfer of the net burden to the State would respect the principle of proportionality only if it allowed a level playing field. However, France Télécom has not been placed in a situation which is fully equivalent to that of the undertakings in the sector as regards wage-based social security contributions, since certain social security contributions and tax payments have not been integrated into the basis of assessment for calculating the annual contribution.

Likewise, contrary to the claims of the French Republic and France Télécom, it is not justified to take into consideration the amount of the exceptional flat-rate contribution of EUR 5,7 billion already paid by France Télécom in 1997 to compare it with the insufficiency of the rate of the contribution in full discharge of liabilities applied to France Télécom.

In fact, contrary to the reform as foreseen by the La Poste decision invoked by the French Republic and France Télécom, the reform of the arrangements for financing the retirement pensions of the civil servant staff of France Télécom occurred on the eve of the opening-up, at Union level, of the markets where France Télécom could operate.

Moreover, it appears that France Télécom took advantage of this liberalisation by establishing itself in the markets of other Member States, thanks not only to its change of status into a public limited company, but also, in part, from the elimination of retirement pension commitments from its balance sheet and the lower future potential charges resulting from the reform. This reduction in its balance-sheet commitments enabled France Télécom to boost its solvency and borrowing capacity. The debt figures, supplied by the complainants in their comments and not contested by the French Republic regarding the amounts, show that the net financial debt of France Télécom rose from EUR 19,2 billion in 1997 to EUR 83 billion in 2002.

It is true that a dedicated investment policy for expansion on the markets of other Member States, made possible by the liberalisation, may be at the origin of this very substantial increase in financial debt. Nonetheless, raising the necessary funds was rendered possible in part by reduction in retirement costs for a net amount of EUR […] billion transferred to the French State in 1996. As a result, the comments of the telecommunications operator claiming that the aid enabled France Télécom to finance its international expansion (comments set out in recital 68), albeit indirectly, are not without foundation.

It has not therefore been established that the situation of the two undertakings under the effect of the law applicable before the respective reforms and, consequently, the competitive impact of these reforms, was similar. The facts point to the contrary. As a result, an examination coming to similar conclusions in both cases is not justified.

Furthermore, in the case of the La Poste decision, there were sufficient reasons to consider that the exceptional flat-rate contribution could be reallocated in the future as an advance on the payment of the contributions linked to the adjusted competitively fair rate. Such reasons are lacking in the present case. In fact, the condition imposing the reallocation of the exceptional contribution by La Poste was established after the Commission had initiated the formal investigation procedure, calling into question the underestimation of the contribution in full discharge of liabilities necessary to attain a competitively fair rate.

To a large extent, and even though the French authorities did not recognise it explicitly, the allocation of the exceptional flat-rate contribution in question in the La Poste decision was therefore the result of negotiations between the Commission and the Member State with a view to ensuring the payment of a contribution in full discharge of liabilities ensuring a competitively fair rate. In these negotiations, the starting point of the French authorities expressed in their notification of 23 June 2006, after the first contacts on the file in December 2005, was that the exceptional contribution for La Poste provided for was not necessary from the point of view of the level playing field, contrary to the envisaged draft reform of the annual contribution.

In this way, the Commission decision did not confirm a reform which had entered into force, as France Télécom seems to maintain. In fact, the notification and the decision to initiate the procedure of 12 October 2006 preceded the establishment of the amount of the exceptional contribution by Law No 2006-1771 of 30 December 2006 (Amending Finance Act 2006). These negotiations concerned several aspects of the reform and in particular, the taking into account of the advantage which the notified reform could have represented in the past, the scope of the contribution rate envisaged and the terms for taking into account the specific nature of the La Banque Postale in relation to the postal activities and the staff allocated. These negotiations continued and it is only in their comments of 8 June 2007 that the French authorities accepted the terms of allocation of the exceptional contribution under an overall agreement relating to the reform, in this way going back on their position notified on the subject of the exceptional contribution and the method of calculating the future annual contributions.

The Commission cannot disregard the fact that the purpose of the specific flat-rate contribution already paid in 1997 was, as expressly established by Article 6 of the 1996 Law, to compensate the French State in part for the financial burden it was assuming on account of the 1996 Law.

In addition, it is inferred from the content of the Senate report cited in recital 27 that, in adopting the principle of the exceptional contribution, the legislator did not seek to take into consideration, and still less to compensate for, the difference between the annual contributions of France Télécom and the relatively higher contributions of the competitors. On the contrary, the legislator deliberately imposed on France Télécom the payment of annual costs not covering the risks which are not common to the two categories of staff (civil servant and non-civil servant) and did not establish a link between this choice and the levying of the exceptional contribution paid in 1997.

The burden for France Télécom represented by the flat-rate contribution was paid as general revenue to the State budget, assigned to the public body responsible for its management and used. Under these circumstances, the Commission cannot therefore, in whole or in part, reallocate fictitiously and retrospectively the exceptional flat-rate contribution already used for a purpose totally divorced from that assigned to it by the French authorities and not provided for by the Law, i.e. compensation of not taking into account risks not common to ordinary employees and civil servants. This flat-rate contribution was not therefore introduced in anticipation of full equalisation, under different legislative and regulatory arrangements, of the annual charges of France Télécom with those of its competitors.

For the same reasons, on account of the rules for the management and repayment to the budget provided for in the Finance Law since 1997 and implemented up to now, the allegations and calculations of the French Republic intended to show that the 1996 reform has ended now with considerable surplus revenue for the State cannot be accepted.

[…]. In addition, the allegation does not reflect the actual behaviour of the French authorities. In view of the management rules established in the Finance Acts passed since it was set up, this public body has not generated such revenue, which for that matter was not foreseen and did not generate interest. On the contrary, the resources of the body were to have been drawn down in full as at 31 December 2011. They would have been drawn down earlier if they had been allocated to financing the 1996 reform — which the French Republic challenges incidentally — even by including in them the higher revenues from corporation tax, as argued by the French authorities. Also, taking into account higher revenue from corporation tax is unlawful, as it leads to confusion of the different roles of the State. The combination of these different roles proposed by the French authorities cannot be accepted and a distinction should be maintained between on the one hand the State granting aid to France Télécom by financing the payment of the retirement pensions of the civil servants, in order to develop a merit-based competition process, and on the other hand, the State as shareholder of France Télécom and, ultimately, the State as a public authority exercising its power to raise taxes.

In addition, it should be noted that the application made by the French Republic and France Télécom to take into consideration the exceptional contribution when examining the compatibility of the reform is in contradiction with the comments the French Republic made in its letter of 17 March 2004, according to which ‘the exceptional flat-rate contribution provided for by Article 6 of the Law of 26 July 1996 could not therefore be seen as compensation for an alleged ‘advantage’. The analysis of its amount is all the less relevant in the light of the State aid rules’ since this amount was ‘an extraordinary contribution in favour of its sole shareholder [the French State], which can be assimilated to an extraordinary dividend distributed before any opening-up of the capital to private investors’.

The reasoning underlying the argument put forward at the time by the French Republic shows a certain economic and financial logic. It is reasonable, for a sole shareholder, on the eve of the opening-up of the capital to other investors, to absorb, for its benefit alone and as far as possible, the funds available in the undertaking before the opening-up of the capital, provided that this does not compromise the attractiveness of the investment. This last aspect was taken into consideration in the financial parameters imposed on the opening balance of France Télécom, from which the exceptional flat-rate contribution results indirectly, as mentioned before Parliament in 1996. Consequently, it was perfectly consistent on the part of a prudent single shareholder State to draw out the largest possible amount in extraordinary dividend, according to the terms of the French Republic, rather than to leave the funds in the undertaking, from which after opening-up the capital in 1997, it would draw at most its pro rata in the capital maintained.

The validity of this reasoning put forward at the time by the French Republic, which called for the analysis of the amount of the balance compensation of EUR 5,7 billion not to be taken into account in any way for the assessment of the reform in the light of the State aid rules, is also corroborated by its comments during the procedure. In fact, by declaring that the gauging of the amount of the balance compensation was undertaken in terms not of the estimated cost of the reform for the State or the advantages which France Télécom would draw, but of the contributive capacity of the undertaking, the French Republic points out that the imposition of a balance compensation would result more from the behaviour of a prudent single shareholder than that of a regulatory State concerned about the balance of the retirement pension costs it was assuming under the reform.

If such reasoning were to be accepted, the Commission should not, as requested at the time by the French Republic, take into account the exceptional flat-rate contribution in the analysis of the compatibility of the reform with the State aid rules. As a result, only the reduction in the annual contributions of France Télécom to below the level of those of the competitors, called for by the reform since 1997, should be taken into account.

For the same reasons, the Commission cannot accept the complainants’ comments calling for the introduction of mechanisms to adjust the exceptional flat-rate contribution paid in 1997 and the annual employer’s contribution from France Télécom to ensure the financial neutrality of the reform. This would also amount to a new calculation and a retrospective fictitious reallocation in whole or in part of the exceptional flat-rate contribution paid to the State budget in 1997. Likewise, the mechanism proposed would amount to introducing an ex-post control, year after year, the purpose of which would not be to ensure the proportionality of the aid granted, although reduced by the exceptional flat-rate contribution, in 1997, but to eliminate any aid under the reform.

On the other hand, it is worth examining whether the payment of the exceptional contribution can be taken into account in the assessment of the compatibility of the aid measure with the internal market by retaining the justification of this payment as established by the 1996 Law.

Under the 1996 Law, the exceptional flat-rate contribution in 1997 was paid in return for the financing of the pensions by the French State. Under these conditions, the effects of its imposition on the overall financial equilibrium of the reform introduced by the 1996 Law as applied so far must be taken into consideration. It is appropriate to take into account the time during which the cost of the retirement pensions was covered by the exceptional flat-rate contribution.

Furthermore, the schedule for this compensation, which neutralises the effects of the reform, coincided furthermore, to within a few months, with the resources of the public body responsible for managing the exceptional contribution of France Télécom actually being exhausted, which was scheduled for 31 December 2011. The flow analysis is supported by the fact that, in any case, the exceptional contribution will have been in fact drawn down in full. As a result, no amounts would remain that were not repaid to the State budget that it would be possible to reallocate otherwise than as provided for by the Finance Law applicable.

It is therefore justified that, on account of the payment of this exceptional contribution in 1997, France Télécom is not required to pay an annual contribution supplement for the period between 1 January 1997 and a date after 31 December 2010 which still has to be determined precisely. In fact, in so far as, in Table 5, the figures for 2011 and those for the cost of compensation and over-compensation result from estimates, in particular, it is appropriate for the precise date to be decided by the French Republic on the basis of the final dates for the payments made, the final amounts of the benefits paid and the lower contributions and other advantages for France Télécom resulting from the 1996 Law, following the calculation principles indicated in Table 5.

On the other hand, after neutralisation of the effects of the exceptional contribution and the drawdown in full of the resources paid to the State, the aid granted in 1996 to France Telecom will have full effect by conferring an advantage on France Télécom in relation to its competitors. The aid will then be justifiable only by subjecting France Télécom to the payment of a contribution in full discharge of liabilities, calculated at a rate ensuring a true level playing field. Hence, if the provisions of the 1990 Law, as amended by the 1996 Law and the secondary regulatory provisions applicable, in that they provide that the rate of the contribution in full discharge of liabilities is calculated so as to equalise the levels of wage-based social security contributions and tax payments between France Télécom and the other undertakings in the telecommunications sector subject to the ordinary social security arrangements, by limiting the calculation to the risks which are common to the ordinary employees and the State civil servants, were to remain unchanged, the aid granted to France Télécom until the expiry of the financial obligations assumed by the French State instead of France Télécom pursuant to the 1996 Law would not comply with the principle of proportionality.

To fulfil the criterion of conformity with the common interest provided for in Article 107(3)(c) of the TFEU, the compatibility of the aid therefore requires compliance with the conditions accompanying the present decision.