- French carrier seeks growth beyond competitive home market
- Tie-up with Telecom Italia among several potential options
Orange SA is working with advisers to explore options for an expansion in Europe, including a potential combination with Telecom Italia SpA, people familiar with the matter said.
A tie-up with Italy’s largest phone company is among several possibilities the French carrier is considering, said the people, asking not to be identified because the plan isn’t public. The deliberations are in early stages and Orange may decide against making any major strategic moves, the people said.
The quest for expansion highlights the French company’s resolve to play a bigger role in Europe’s highly competitive phone market. Orange has struggled with years of waning sales and earnings in its home market as competition from lower-cost carriers has pushed call and data prices down.
Shares of Telecom Italia rose as much as 1.9 percent and declined 0.8 percent to 1.22 euros at 4:39 p.m. in Milan. Shares of Telecom Italia have gained 41 percent amid the stake purchases by Vivendi and Niel this year through last week. Orange declined 1.2 percent to 16.43 euros in Paris. Telecom Italia isn’t holding talks with Orange, the Italian company’s chief executive officer, Marco Patuano, told reporters at an event in Rome on Monday. A representative for Orange declined to comment.
Orange has also considered an internal restructuring, including a split of certain businesses, though decided against it to pursue expansion, one of the people said.
Orange’s plans reflect a wave of consolidation that has swept Europe’s telecommunications industry. British phone company BT Group Plc this year agreed to buy the U.K.’s largest wireless carrier EE, which is half owned by Orange, for about $19 billion. In France, billionaire Patrick Drahi acquired SFR to create Numericable-SFR.
A combination with Telecom Italia would face multiple hurdles. Milan-based Telecom Italia has a market value of about 23 billion euros ($24 billion) and debt of almost 27 billion euros, which would make a deal Orange’s largest in 15 years. Italy’s government considers telecommunications assets strategic to the country’s interest and Orange’s largest shareholder is the French state.
Any deal with Telecom Italia would probably also need the acceptance of the Italian company’s major investors including France’s Vivendi SA, led by Chairman Vincent Bollore, and French entrepreneur Xavier Niel, who only recently invested in the carrier.
Gervais Pellissier, Orange’s head of Europe, said in June that the biggest European carriers will be able to consolidate across borders, targeting companies such Telecom Italia, which operate primarily in a single market. Buyers of such smaller companies may include Orange as well as other big companies like Deutsche Telekom AG, he said.
In March, Orange Chief Executive Officer Stephane Richard told France’s Journal du Dimanche that the carrier was interested in a potential combination with Telecom Italia. Orange has since repeatedly said that no talks are under way with Telecom Italia.
Shares of Orange have risen 17 percent this year through last week as the company has shown signs of stabilizing earnings, giving the company a market value of 44 billion euros.