Bouygues CFO Says Phone Operators Are Exploring Partnerships

Bouygues SA (EN), the French construction and media conglomerate which last month lost a bidding war for rival phone operator SFR, said it’s open to a tie-up with another telecommunication company as a price war dents earnings.

“All scenarios are on the table,” Bouygues Chief Financial Officer Philippe Marien said on a conference call with journalists today. “All market operators are looking at hypotheses, opportunities, work sharing, partnerships, commercial exchanges.”

Paris-based Bouygues said today its operating loss deepened in the first quarter amid a price war in mobile phones, spurring the company to seek 300 million euros ($411 million) in new annual savings at Bouygues Telecom by 2016.

Orange SA (ORA) is considering a purchase of Bouygues Telecom, Les Echos reported today, quoting Orange Chief Executive Officer Stephane Richard as saying that the company is “assessing” its options. Last month, Vivendi SA snubbed Bouygues’s offer to buy SFR, France’s second-largest phone operator, and agreed instead to sell it to Altice SA in a deal valued at more than 17 billion euros.

Earlier today, representatives of the CFE-CGC union at Orange and Bouygues Telecom said the carriers should merge to save jobs, in joint letter to French Prime Minister Manuel Valls. The French state owns about 27 percent of Orange and has representatives on its board.

Asset Sale

To curb its debt, Bouygues is selling assets and cutting costs to counter discount phone carrier Iliad SA. (ILD) It’s backing the plan of Alstom SA, in which it has a 29 percent stake, to consider the sale of its energy-equipment units to General Electric Co for $17 billion.

Bouygues Telecom, France’s third-largest mobile-phone company, posted a 23 percent drop in first-quarter earnings to 163 million euros as revenue dropped by 5 percent. It said it lost 79,000 mobile customers in the first quarter and gained 100,000 customers in the fixed broadband market.

Bouygues reiterated a forecast for a “slightly positive” cash flow generation at Bouygues Telecom in 2014. Bouygues Telecom’s priority is to adapt to the evolution of the market and establish its “stand-alone strategy,” Marien said.

Group Sales

Bouygues also reiterated that group sales in 2014 will be “close to the 2013 level,” and maintained its prediction for a “robust” operating performance of construction businesses this year.

The group’s operating loss before one-time items and restructuring costs widened to 96 million euros in the first quarter from 77 million euros a year earlier, the company said today. Sales climbed 3 percent to 6.84 billion euros, led by construction revenue.

Bouygues had a net profit of 285 million euros in the first quarter, helped by positive litigation settlements in the telecom market and the sale of a minority stake in tollroad company Cofiroute to Vinci SA. Last year it had a first-quarter loss of 42 million euros.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net Mark Beech, Kim McLaughlin

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