June 10 (Bloomberg) -- A 3 billion-euro ($4 billion) price gap is standing in the way of a possible merger of France’s third- and fourth-largest mobile carriers.
Iliad SA made an informal offer of between 4 billion and 5 billion euros in recent weeks to buy Bouygues Telecom, people familiar with the matter said. Bouygues Telecom’s owner, Bouygues SA, is seeking about 7 billion euros to 8 billion euros for the division, leaving the discussions at a standstill, they said. The people asked not to be identified because the discussions are confidential.
Europe’s phone companies are trying to combine as costs rise for high-speed fourth-generation networks and the pace of smartphone adoption slows. In one of Europe’s most competitive markets, a combination of Bouygues and Iliad, owner of the Free brand, would likely face fewer antitrust obstacles than a combination between Bouygues and market leader Orange SA.
A representative for Iliad declined to comment. A spokesman for Bouygues declined to comment on an Iliad offer, saying only that all options are on the table and the company favors a standalone strategy for its mobile unit.
Bouygues shares dropped as much as 2.1 percent and were down 1.5 percent to 33.80 euros at 11:34 a.m. in Paris. Iliad slipped 0.2 percent to 238.25 euros. Orange lost 2 percent to 12.55 euros.
Bouygues, a family-controlled construction conglomerate, has said it is in early-stage discussions about a deal with Orange, the largest French phone company and former state monopoly.
Bouygues’s exploration of a telecommunications sale has put on hold execution of an agreement to share mobile networks with SFR, the second-largest French operator, according to people familiar with the matter. The contract doesn’t include any breakup fee, though SFR may seek compensation if Bouygues drops out of the agreement, the people said.
Bouygues and SFR agreed in January to share part of their French mobile network to save money on infrastructure. A spokesman for SFR declined to comment. A Bouygues Telecom spokeswoman didn’t return calls seeking comment.
Bouygues Telecom has also asked employees to shelve some of its own projects before a meeting with union representatives planned this week, a person familiar with the measures said. The company may unveil plans to eliminate as many as 2,000 jobs, more than a fifth of its workforce, as it looks for 300 million euros in cost cuts, another person familiar with the matter said.
Prices for mobile service in France have plunged since 2012, when Iliad, controlled by billionaire entrepreneur Xavier Niel, began offering deeply discounted subscriptions. The resulting price war has also led to layoffs and reduced profits at Orange and SFR.
Numericable SA in April agreed to buy SFR from Vivendi SA, adding a mobile arm to its broadband services.
Attempts to consolidate telecommunications in France have been backed by Economy Minister Arnaud Montebourg, who wants a return to three mobile operators. The French state, which owns about 27 percent of Orange, has asked the former phone monopoly to seek European alliances and mergers at home, Montebourg has said.