UPDATE 1-France's Orange backs CEO for second term
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PARIS, March 26 (Reuters) - The board of France's state-backed Orange on Wednesday voted to give chief executive Stephane Richard a second term, providing continuity to the group at a time of tumult in its domestic market and brewing consolidation in Europe.
The French government, which owns 27 percent of the company, backed Richard to stay on despite an ongoing investigation of his role as a government aide in a 2008 arbitration case in which the state awarded a large payout to businessman Bernard Tapie. The state nominates three of Orange's 15 directors, and effectively names the CEO.
Richard, who took over as CEO in March 2011, denies wrongdoing in the Tapie case.
The 53 year-old executive will now pilot Orange through a rough environment as group sales continue to decline - as they have been since 2008 - under the effect of tough competition in France and regulatory changes that cut mobile fees.
Orange has promised to stabilise operating margins this year, but analysts question whether it will do so and forecast margins declining to 30.5 percent from 30.9 percent last year.
Much could depend on how Richard confronts changes afoot in France, which accounts for the bulk of sales and profits.
Orange's second-largest domestic competitor, Vivendi's SFR is up for sale in a deal that will reshape the market, which has been locked in a price war since the 2012 arrival of low-cost player Iliad to the mobile arena.
Vivendi is in exclusive talks until April 4 with local cable group Numericable over the sale of SFR, but rival Bouygues continues to be interested in the company.
Richard's appointment to a second four-year term will be submitted for shareholder vote at a May 27 meeting.
Since taking over the helm of Orange, Richard is credited with calming a suicide crisis that had rocked the group's roughly 17,000 employees in 2010. But the group's shares have slid more than 30 percent during his tenure - dragged down by brutal competition in France - while the European telecom index has climbed almost 4 percent.
Orange shares closed up 0.44 percent at 10.27 euros. (Reporting by Leila Abboud; editing by Maya Nikolaeva and Keiron Henderson)