Updates throughout with details on deal with EQT, Eutelsat's response, Finance Minister quotes, context on sale of LMB

By Gianluca Lo Nostro and Louise Rasmussen

PARIS, Jan 30 (Reuters) - French Finance Minister Roland Lescure earlier this week blocked Eutelsat's sale of its ground antennas, he said on Friday, citing national security concerns tied to the satellite operator, the main European rival to Elon Musk's Starlink.

"These antennas are used for both civilian and military communications. Eutelsat is Starlink's only European competitor. It is clearly a strategic asset. And so I said no," Lescure told TV station TF1.

Eutelsat, whose shares fell 5% in early Paris trading, is headquartered in France and the French government is its largest shareholder with a 29.6% stake. On Thursday, the company said its planned sale of passive ground infrastructure to Swedish private equity firm EQT EQTAB.ST would not proceed.

The deal, initially announced in 2024, had been expected to generate net proceeds of about 550 million euros ($656 million). While a company spokesperson declined to comment on Lescure's remarks, Eutelsat said that it would benefit from a 5% increase in profit margins over the next three years due to savings from no longer leasing these assets

"This decision is exclusively linked to the critical nature of this activity in terms of French sovereignty and is in no way linked to the quality of the investor," Lescure wrote on Bluesky following his televised remarks.

Ground antennas, which connect satellites to terrestrial networks, are considered sensitive infrastructure because of their dual-use capabilities in civilian and military communications.

Eutelsat provides satellite services to the French army after it signed a 10-year contract valued at 1 billion euros last year.

Lescure also confirmed the government's role in the sale of French defense firm LMB Aerospace to U.S.-based Loar Holdings.

The state will retain its "golden share", while production will remain in France's Correze region, the minister said. Efforts to identify a French or European buyer for the company were unsuccessful, Lescure added.

($1 = 0.8380 euros)

(Reporting by Inti Landauro and Louise Rasmussen in Paris, Gianluca Lo Nostro in Gdansk; Editing by Matt Scuffham)

((Louisebreusch.rasmussen@tr.com; +45 21 27 97 79;))