June 11 (Bloomberg) -- Bouygues SA plans to eliminate 17 percent of the jobs at its telecommunications unit after merger talks with Orange SA and separately with Iliad SA failed. Bouygues shares fell 6.3 percent.
Bouygues Telecom, France’s third-largest mobile-phone company, will cut 1,516 positions. Discussions with Iliad and Orange in the past two months were inconclusive, said Olivier Roussat, the unit’s chief executive officer. This year, Bouygues Telecom was outbid by rivals to acquire Vivendi SA’s SFR phone business and Virgin Mobile.
“Bouygues is sending a message to regulators, to say: this is what your decisions have brought on,” said Guy Peddy, an analyst in London for Macquarie Bank Ltd. “This may mean the excitement about consolidation pauses in the short term, but down the line the move to cut costs by Bouygues could become a catalyst.”
Bouygues, a family-run construction and media conglomerate, plans to reduce annual costs at the phone unit by 300 million euros ($406 million) by 2016, partly by eliminating administrative, marketing and information technology positions, and shrinking its array of offers.
The stock dropped 2.15 euros to 32.02 euros in Paris. Orange declined 3.3 percent and Iliad fell 6.8 percent.
“Our goal is to make Bouygues Telecom viable autonomously for a long period in a market with four players,” Roussat said during a briefing in Paris.
The savings will help bring Bouygues Telecom’s profitability and cash generation back to pre-2012 levels in two to three years, Roussat said. Iliad’s entry as France’s No. 4 mobile operator in 2012 triggered a price war in the country.
France, one of Europe’s most competitive wireless markets, has faced calls for consolidation from industry executives and politicians.
A 3 billion-euro price gap stood in the way of a combination of Bouygues with Iliad, people familiar with the matter said this week. Bouygues was seeking about 7 billion euros to 8 billion euros for the division, the people said.
Bouygues’s discussions with Orange, the largest French phone company, got stuck at an early stage, though Economy Minister Arnaud Montebourg backed the idea of a merger. Montebourg also put his weight behind Bouygues’s bid for SFR this year, though Vivendi in the end agreed to sell to cable operator Numericable SA.
Numericable, which offers phone and high-speed Internet packages, has said it wants to increase sales and profit by tapping into rising demand for speedier Internet connections.
Bouygues Telecom has a similar strategy. The company will continue to “heavily” invest in ultra-high-speed mobile networks as customers use more data for activities such as watching videos on their phones, Roussat said. It will start selling an “aggressive” fixed-line Internet offer based on fiber technology later this month, and offer a more powerful set-top box, Roussat said.
The company is seeking to move from its headquarters in Issy-Les-Moulineaux south of Paris next year to rent cheaper offices.
“We’re not becoming a low-cost provider,” Roussat said. “Our target is to grow quite rapidly our market share in broadband, and we’re well positioned to surf on changes in mobile usage.”
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