France Telecom slashes dividend by 40% France Telecom, owner of the Orange brand, has been forced to slash its dividend by 40 per cent largely because of a price war in the French mobile phone market. The cut came as Stéphane Richard, the company's chief executive, claimed on Thursday that the launch of Iliad's ultra-low cost Free Mobile in January had made France the cheapest mobile phone market among similar western European countries and the US. Iliad, owned by French billionaire Xavier Niel, offered its Free Mobile service at no cost to many of its existing customers, while there were also large-scale defections by customers of the big incumbent operators - Orange, Vivendi's SFR and Bouygues Telecom - forcing them to slash their prices. In a plea to French policy makers, citing new unpublished research on the telecoms sector, he said: "France is now the cheapest market in terms of telecoms prices. There is no room to decrease prices further in this country. Mr Richard also warned about higher taxes being imposed in France by the Socialist government adding that the "public debt crisis could lead to some temptation to increase the fiscal burden on our companies." France Telecom has had to find €150m of extra cash to pay new French taxes this year. Mr Richard also warned of additional cuts in European roaming charges and said the economy in 2013 would be worse than anticipated. "We will have to manage with a depressed macro environment," he said. We do not expect any major improvement. He warned that he was also seeing signs of slowing growth in the company's important Middle East and African markets, as well as Europe. Partly as a result of Free's launch, France Telecom said it would cut its dividend for this year and next to €0.80 per share. This compares to €1.40 paid out last year and a €1.21 to €1.35 range promised in February. The cut will allow for continued investment in fibre networks and 4G spectrum. The company confirmed it had operating free cash flow for 2012 of about €8bn, but warned it would fall to €7bn next year before increasing again in 2014. Shares in France Telecom rose 2 per cent in early trading in Paris to €9.49, as the company offered further evidence that it had managed to halt the loss of customers to Free Mobile. Mr Richard also pointed out that while he had slashed the dividend, it was less bad than some rivals such as Spain's Telefónica, which cancelled its payout altogether. Orange said its mobile market share in France was stable at 37.4 per cent as it added 317,000 new customers in the third quarter. This compared with declines of 615,000 in the first quarter and 155,000 in the second. Gervais Pellissier, the France Telecom deputy chief executive, said it could be interested in bidding for Vivendi's Maroc Telecom , Morocco's leading telecoms operator. The comments came as France Telecom reported third-quarter a 3.5 per cent fall in third quarter sales to €10.8bn, while earnings before interest, tax, depreciation and amortisation fell 7.3 per cent to €3.65bn.