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France Seeks More Phone Mergers at Home, Alliances in Europe

Shoppers Browse Products Inside the Orange SA Store in Toulouse
Orange, in which the government is the largest shareholder with a 27 percent stake, has been asked to factor European alliances into its strategy to help consolidation beyond France, Economy Minister Arnaud Montebourg said. Photographer: Balint Porneczi/Bloomberg

France will encourage mergers and acquisitions among the country’s wireless carriers and has asked market leader Orange SA to seek European alliances, Economy Minister Arnaud Montebourg said.

“Consolidation is a necessity in France and in Europe, and we will work actively to encourage it,” Montebourg told the National Assembly’s economic and financial commissions during a meeting to discuss the sale of SFR, the country’s second-largest carrier to Altice SA.

Vivendi SA agreed April 5 to sell SFR to billionaire cable tycoon Patrick Drahi and his Altice telecommunications holding company in a deal valued at more than 17 billion euros ($23 billion), rejecting a sweetened government-backed offer from Bouygues SA.

Montebourg said the transaction raised questions about the future of Bouygues Telecom as well as Iliad SA, an Internet-service provider that started selling discounted mobile packages in January 2012, prompting price wars among France’s carriers. A merger of Bouygues Telecom and Iliad isn’t planned for now, the minister said.

“There are questions about what Bouygues and Iliad’s future will be if they don’t merge,” Montebourg said. “It doesn’t seem planned for now, but that can change.”

Orange Alliances

Bouygues SA shares fell 0.3 percent to 29.36 euros at 9:14 a.m. in Paris and Iliad slipped 0.2 percent to 204.5 euros. Orange fell 0.4 percent and Vivendi dropped 0.3 percent.

France will also seek carrier consolidation beyond its borders, Montebourg said. Orange, in which the government is the largest shareholder with a 27 percent stake, has been asked to factor European alliances into its strategy to help consolidation beyond France, he said.

Orange’s Stephane Richard, who was offered a second term as chief executive officer by the company’s board last month, has repeatedly said Europe’s telecommunications industry needs consolidation. Others in the region have made similar comments -- Deutsche Telekom AG former CEO Rene Obermann said in November said Europe’s phone companies must seize the moment to consolidate if they want to stand up to international competition.

Orange isn’t in discussions with Germany’s Deutsche Telekom about a possible merger, Richard said in a December interview.

European Digital Agenda Commissioner Neelie Kroes has been pushing for less fragmentation in the industry, calling for regulatory changes including ending roaming charges. Though carriers have called for softer antitrust rules that would allow for more mergers and acquisitions in the region, they’ve resisted Kroes’ proposals, arguing that eliminating roaming revenue is a burden for the companies that have been battered by price wars and the economic crisis.

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