French incumbent Orange is in talks about a tie-up with its struggling smaller rival Bouygues Telecom, the French economy minister said today confirming earlier reports.
Arnaud Montebourg, who has long called for consolidation in the mobile market,…
French incumbent Orange is in talks about a tie-up with its struggling smaller rival Bouygues Telecom, the French economy minister said today confirming earlier reports.
Arnaud Montebourg, who has long called for consolidation in the mobile market, indicated in a TV interview that the two operators are currently in discussions. He added that other talks were also taking place in the industry.
Yesterday, local newspaper Les Echos revealed that 27% state-owned Orange was interested in buying number three Bouygues Tel, which recently lost out to Altice and Numericable in its attempt to take over wireless competitor SFR.
Subsequently, the incumbent confirmed it was “exploring the opportunities the changes in the telecommunications sector in France present”. It added that consolidation of the French mobile market would be positive in the long-term for both investment and the consumer but stressed that its leading position gives it “complete independence in its decision-making”.
Bouygues Tel was not immediately available to comment.
Since Free Mobile launched in 2012, the other three French telcos have seen their subscriber numbers decline amid a fierce price war. Just days ago, it was rumoured that Bouygues Tel, owned by industrial conglomerate Bouygues, could cut up to 2,000 jobs out of 9,000.
Orange CEO Stephane Richard and Martin Bouygues have reportedly met several times recently. A deal with the leading operator would value Bouygues Tel at around €6bn, reported Les Echos, and could see Bouygues and its partner JCDecaux own 10% of Orange.
TelecomFinance understands that the incumbent has long favoured consolidation of the mobile sector, since the arrival of Free has also put pressure on its operations. The merger of Numericable and SFR concerns management at Orange, and the telco plans to complain to the French regulator about certain aspects of the proposed deal, which would create a direct competitor to the incumbent.
But industry experts have expressed doubts about the likelihood of an Orange/Bouygues Tel deal going ahead given the antitrust issues involved. A marriage between the two would create an entity controlling more than half of the mobile market.
Already, SFR parent Vivendi preferred a merger with cableco Numericable over a horizontal tie-up with direct competitor Bouygues Tel, because a vertical deal will face fewer regulatory hurdles.
Frederic Boulan, a Nomura analyst, believes that a Bouygues Tel/Orange combination “would be extremely challenging to sell to antitrust authorities unless Orange sells a significant portion of Bouygues’ assets”.
According to Les Echos, Bouygues would be ready to sell its frequencies to Free for €1.8bn, in an agreement very similar to the one announced a few months ago, when the operator was looking to buy SFR.
But reports suggest that the talks could also be a ruse to put pressure on Free’s parent Iliad to come up with a better offer for Bouygues Tel than the €4bn-€5bn previously reported. In any case, Free might also come out as a winner of this market shake-up.
