French operator group Orange has decided to further reduce its stake in BT despite the shares being worth considerably less than when it acquired them.

Orange is flogging 133 million shares in BT – around a third of its stake in the company – with BT itself snapping up around half of them. Orange is also using another third of its BT shares as collateral on a £520 million bond issue and will offer those shares in place of cash upon the bonds’ maturity in four years, which would leave Orange with just over 1% of BT’s shares.

When BT bought EE it was owned by Orange and DT, having been formed as a joint venture of Orange UK and T-Mobile UK. At the time Orange chose to be largely compensated in cash – leaving just a 4% equity stake in BT group – while DT chose to gamble on the future BT share price by taking a 12% piece of BT.

BT’s share price at the time of the completion of the EE acquisition was around £35. That declined to around £23 by the end of the year and then suffered another dramatic fall when the Italian accounting scandal was uncovered. Today BT’s share price is around £18 which means Orange is losing almost half of its initial stake.

It’s hard to view this move as anything other than a statement of pessimism by Orange in BT’s mid-term prospects. Orange doesn’t need the cash urgently so it just seems to be cutting its losses. It will be interesting to see if DT decides to follow suit but, of course, it’s losses would be much more substantial if it did.