Bouygues, Altice Said to Start Regulator Talks on SFR Bids

Bouygues (EN) SA and Altice SA (ATC) have begun informal meetings with French regulators as each side seeks to convince Vivendi SA (VIV) to choose its bid for SFR, France’s second-largest phone company, people familiar with the talks said.

Bouygues is focusing on the potential to stem losses in the French mobile-phone businesses as it tries to convince the government to back its bid, the people said, asking not to be identified discussing a private matter. It’s also proposing the sale of wireless spectrum and base stations to discounter Iliad SA, they said.

Patrick Drahi, who controls cable operator Numericable SA through Altice, is arguing that his plans wouldn’t reduce the number of mobile carriers in France and would accelerate the deployment of ultra-high-speed networks, the people said.

The group that succeeds in wooing regulators at France’s industry ministry and competition authorities stands a good chance of also convincing Vivendi to accept its offer. The case is also a precursor of future battles over telecommunications mergers elsewhere as European phone companies look to consolidate to cope with rising network costs and slow growth.

Spokesmen for Drahi, Bouygues and the Competition Authority had no comment.

Martin Bouygues offered 10.5 billion euros ($14.4 billion) plus assets at the Bouygues Telecom unit. Altice’s proposal values SFR at about $20 billion through a mixture of debt, cash and equity, people familiar with the matter have said.

Protecting Jobs

Opinions within the French government may vary. Industry minister Arnaud Montebourg, who has criticized job cuts at companies including Peugeot SA during his tenure, is most concerned with protecting employment and the strength of French companies, one of the people said.

Montebourg is open to a possible reduction in the number of mobile carriers as long as robust competition continues, said a person familiar with the government’s thinking.

The Competition Authority, which would have to sign off on a merger, is more concerned about preserving the broadest range of consumer choice in the French mobile market, they said.

The authority will also examine issues related to fixed and broadband telecommunications, as well as media content production and distribution, because billionaire executive Martin Bouygues controls TF1, France’s largest free television channel by audience, and Vivendi owns Canal Plus, the biggest pay-TV channel in the country, two of the people said.

Regulator Study

A Drahi bid may be approved within the 30-day study, while the Bouygues bid may take longer, the people said.

The Competition Authority’s probe of Vivendi’s sale could take nine months, the regulator’s president Bruno Lasserre said in an interview with Le Figaro published today. An in-depth review is more likely than a simple 25-day procedure, Lasserre told the newspaper.

Bouygues will also argue that a reduction from four to three operators in the French market is different from that in Germany, where European Union regulators are challenging the merger of Telefonica SA and Royal KPN NV’s local units, the people said.

The key distinction, in the company’s eyes, is that a French deal would leave intact Iliad (ILD) -- which two years ago started offering packages with its Free brand for as cheap as 2 euros a month -- while the German transaction will absorb KPN’s discount-focused EPlus division, they said.

Vivendi has announced a shift in strategy to refocus on media assets and plans to split SFR and list it separately by July 1. The company is due to submit its plans to shareholders during a June 24 annual meeting.

“By accepting the Bouygues offer, Vivendi would also take the risk of delaying its strategy of refocusing on media,” Stephane Beyazian, an analyst at Raymond James Euro Equities, wrote in a note. “We continue to see a SFR plus Numericable scenario in pole position, with antitrust concerns and Vivendi’s timing more likely to prevail.”

To contact the reporters on this story: Marie Mawad in Paris at mmawad1@bloomberg.net; Matthew Campbell in London at mcampbell39@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Mark Beech, Ross Larsen

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