By Dominic Di-Natale BBC business reporter in Paris

French trade unions are ready to take their protests to the streets

The French government must unwind its 59% stake in the firm - and many other companies it controls - under European Union directives.

Unions say that France Telecom's 106,000 workers are likely to lose their employment and pension rights under privatisation, and have vowed to fight the plan.

Legal experts say that there is no alternative to the French government's push for privatisation.

'Putting their house in order'

"In many cases member states are infringing their European Union Treaty obligations," says John Cook a partner with law firm Norton Rose.

"It's a case of putting their house in order, and breaking the traditional policies that many governments, particularly the French I think, are wedded to, where there's always been a tradition of state involvement and state control," he says.

France's right-wing government says it is going to let its stake in France Telecom slip below the 50% threshold, effectively relinquishing control of the company.

It has tried to placate opponents, who do not want the phone operator to fall into private hands, by proposing a second law that protects the rights of France Telecom staff as civil servants.

But unions say the government is likely to betray workers and could one day simply change the law.

And because France Telecom would be fully privatised by then, it would be almost impossible to win those rights back.

Companies on the block

Benoit Martin, a leader at the CGT trade union, says: "Public workers have the same problem across France. It's not just France Telecom, it's EdF [Electricite de France] as well. Workers at both companies must work together to fight this privatisation."

And the French government has a long list of companies it wants to get rid of.

Besides, France Telecom and EdF, they include the national air carrier Air France, which should go before the year is out.

Then there is Sanef, the motorway manager.

The national gas company Gas de France is also slated for a sell-off but that will take time.

And there are minority stakes in well known companies like Thales, Snecma, Thompson Multimedia and Renault that the government also needs to dispense with.

It is estimated that the sale of the three biggest companies could net the French government as much as 100bn euros - although that ultimately depends on the state of the stock markets.

The next step is for parliament to approve the France Telecom plan on 5 August.