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Bouygues Board Said to Review Bid for Vivendi’s SFR Today

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Bouygues Telecom Headquarters
The headquarters of Bouygues Telecom seen in Boulogne-Billancourt, near Paris. A merger of SFR with Bouygues Telecom would create a carrier with more than 21 million contract customers, the most profitable among wireless clients, catching up with Orange SA, and will probably attract intense regulatory scrutiny, people familiar with the situation have said. Photographer: Lucas Schifres/Bloomberg

March 5 (Bloomberg) -- Bouygues SA, the building and telecommunications company led by Martin Bouygues, is holding a board meeting today to review its bid for Vivendi’s SFR unit, according to a person familiar with the matter.

Bouygues plans to submit its offer for France’s second-largest mobile-phone company after the meeting, said the person, who asked not to be identified because the gathering is private. A bid would pitch Bouygues against fellow billionaire Patrick Drahi, who is said to be preparing a $20 billion cash-and-equity offer via its cable units Altice SA and Numericable SA. Drahi has secured debt financing from nine banks and wrapped up the offer which is ready to be submitted, said another person familiar with the matter.

If Vivendi accepts either bid, it would have to scrap a plan to distribute SFR stock to shareholders via a spinoff. A disposal of SFR, which Paris-based Vivendi fully took over from Vodafone Group Plc in 2011, would be the culmination of a shift to focus on media assets including Canal+ and Universal Music under Vincent Bollore, who will become chairman later this year.

Vivendi will have to evaluate whether any proceeds would compensate for the political and antitrust risks of clinching a merger agreement with either billionaire. A merger of SFR with Bouygues Telecom would create a carrier with more than 21 million contract customers, catching up with Orange SA, and will probably attract intense regulatory scrutiny, people familiar with the situation have said.

Rising Costs

Carriers across Europe are looking for ways to consolidate as costs rise for high-speed mobile networks and regulators impose rules on revenue sources such as roaming. Telefonica SA and Royal KPN NV, which are merging their German phone units, received a statement of objections from the European Commission last week, a signal they will have to make concessions such as asset sales.

In France, wireless service revenue has been shrinking since discounter Iliad SA started a price war with its Free brand in 2012. Orange and SFR’s mobile service sales totaled 3.5 billion euros in the third quarter of 2013, about 20 percent less than in the same period in 2011, data compiled by Bloomberg showed.

The market is in “disastrous” shape and needs consolidation, Martin Bouygues said Feb. 26, joining calls by other French carriers to the government and the competition watchdog to let mergers and acquisitions through.

Job Implications

Representatives for Bouygues and Drahi declined to comment today. Najat Vallaud-Belkacem, a French government spokeswoman, said the state doesn’t have a preferred candidate as SFR’s owner, and that any offer will be analyzed based on the implications for jobs, investments and customer-service quality.

Drahi this week met with a representative of the finance ministry as well as technology and industry ministers to discuss his offer for SFR. He made promises on jobs and investments, a person familiar with the matter said. Bouygues last week met with President Francois Hollande, the Journal du Dimanche reported.

Both offers would have to go through the French competition watchdog before being implemented, though Numericable’s proposed merger with SFR would probably avoid a lengthy antitrust challenge because it would involve a combination of landline with wireless assets, people familiar with the matter have said. Bouygues’s plans potentially hold more cost savings, the people said.

Network Sharing

Bouygues has eliminated jobs and sold assets to fund investment in its mobile-phone network and new licenses, and to help Bouygues Telecom’s shrinking earnings. Bouygues and SFR agreed last month to share part of their mobile networks to reduce costs.

Bouygues had net debt of 4.4 billion euros at the end of 2013. Moody’s Investors Service and Standard & Poor’s, which rate Bouygues at A3 and BBB+, the fourth-lowest and third-lowest investment grades, respectively, have both assigned a negative outlook, signaling they may cut their ratings.

Vivendi’s shares fell 0.2 percent to 20.60 euros at 4:05 p.m. in Paris, while Bouygues fell 0.2 percent to 28.87 euros and Numericable gained 0.4 percent to 30.57 euros. Altice dropped 0.2 percent to 31.43 euros in Amsterdam.

To contact the reporters on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net; Marie Mawad in Paris at mmawad1@bloomberg.net

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

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