* Minister regrets Yahoo decision to not buy French website
* Says France open to investment, but has to help recovery
* Orange still looking for investor to develop beyond Europe
France's industry minister said on Wednesday that Yahoo Inc's plan to buy a majority stake in online video website Dailymotion from France Telecom would not have benefited the two companies.
"The minister expressed his desire that a partnership between Yahoo and Orange (France Telecom) be built on an equal basis that would be beneficial to both sides," Arnaud Montebourg's office said in a statement.
The minister also said he regretted Yahoo Inc's decision to abandon plans to buy the stake.
Yahoo had been in talks to buy a 75 percent stake in Dailymotion, owned by France Telecom, in a deal that would have valued Europe's largest video website at $300 million.
Yahoo declined to comment.
France owns a 27 percent stake in France Telecom and French government officials had raised concerns that the country would lose control over one of its biggest Internet industry successes if the deal went ahead, two people familiar with the matter said.
A deal with Dailymotion and a non-European partner would have had little impact on employment in France since Dailymotion operates with only about 165 employees.
Montebourg, one of France's Socialist government's most outspoken ministers, said he remained committed to attracting foreign investment especially from American firms, which are the biggest investors in the country, but that the investments had to contribute to the recovery of the country.
A spokesman for Orange, part of France Telecom, said discussions were ongoing with several potential investors as Dailymotion needed to find a partner outside Europe to accelerate its development.
He said this could be in the United States or Asia, for example, where Dailymotion needed to expand to ensure its future development. "It is not about finding a new source of funding."
Dailymotion is the 12th biggest video-sharing website in the world, according to web tracking firm comScore, trailing Google Inc's YouTube, but with a leading position in Europe.
It gets roughly 120 million unique users per month, more than any other French web company. Last year it broke even and generated 40 million euros in sales. France Telecom has been searching for a partner to boost the site's development outside Europe, especially the United States.
French government officials and France Telecom executives had sought a compromise in which Yahoo would take a 50 percent stake instead, but Yahoo balked, the Wall Street Journal reported on Tuesday.
Dailymotion, founded in 2005 by two young entrepreneurs has received roughly $68 million in venture capital backing and was bought by France Telecom in 2011.
Online video, which commands higher ad rates than traditional Web content, is increasingly important to Yahoo as it seeks to reverse declines in revenue and visitor traffic.
Yahoo Chief Executive Marissa Mayer, who took the reins of the struggling Internet pioneer in July, has so far focused her acquisition efforts on small, mobile start-up companies.