France Telecom SA shares fell 4.3 percent after Morgan Stanley analysts cut their rating for the stock on concern Europe's No. 2 phone company will have trouble lowering 70 billion euros (US$69.5 billion) of debt.
The shares fell US$0.80 to 18 euros on the Paris stock exchange. France Telecom had climbed 27 percent the previous two days as press reports gave details of a government-backed rescue.
Chief Executive Officer Thierry Breton will next week present his strategy for cutting France Telecom's debt. Under his predecessor Michel Bon, borrowings quadrupled through acquisitions of businesses and wireless permits. The state-controlled company faces 15 billion euros of repayments next year.
"We believe France Telecom will defer a capital restructuring and will struggle to make significant further headcount and capital expenditure reductions," Paul Marsch and Nick Lyall wrote in a note to clients. They cut their rating to "underweight" from "equal weight."
"We believe France Telecom shares look fully valued ahead of management's review."