Numericable-SFR Merger Seen Avoiding Antitrust Challenge
Numericable SA’s proposed merger with SFR, the French phone carrier owned by Vivendi SA (VIV), would probably avoid a lengthy antitrust challenge because of little overlap in businesses, people familiar with the matter said.
Combining Numericable’s 1.7 million broadband users with SFR’s 21 million mobile-phone customers is unlikely to lead to an extended review by regulators because it would involve a merger of landline with wireless assets, said the people, who asked not to be named discussing private deliberations. A deal also wouldn’t reduce the number of mobile operators in France.
Numericable and its shareholder Altice SA (ATC), both controlled by billionaire Patrick Drahi, are preparing a $20 billion offer to merge with SFR, a person familiar with the matter said. SFR has become the subject of a contest between Numericable and Bouygues SA (EN), the construction to mobile-phone company that’s also preparing a bid ahead of a deadline tomorrow, people familiar with the matter said.
“Regulators probably would have no problem about fixed-mobile consolidation in France,” said Andres Bolumburu, an analyst at Banco de Sabadell SA in Madrid, who drew comparison of a Numericable-SFR merger with Vodafone Group Plc’s acquisition of Kabel Deutschland Holding AG in Germany last year. “I can’t see any big hurdles in that sense.”
Regulators approved the acquisition of Kabel Deutschland by Vodafone for more than $10 billion in part because the transaction would keep Germany’s wireless network operators at four.
If Vivendi drops its plan to proceed with a spinoff of SFR and opt for a straight sale of France’s second-largest mobile operator, it would probably face the choice of a relatively low Numericable offer that’s more likely to be approved, or a potentially higher bid from Paris-based Bouygues that comes with significant regulatory risks.
Iliad SA (ILD), the company founded by Xavier Niel that started a wireless price war in France two years ago, is watching closely how the auction unfolds, though it’s unlikely to make an offer for SFR, another person familiar with the matter said.
Antoine Colombani, a spokesman for EU Competition Commissioner Joaquin Almunia, didn’t return an e-mail seeking comment. Representatives for Numericable, Bouygues, Iliad and the French competition authority declined to comment.
A spokesman for Paris-based Vivendi said the board will decide in due course depending on the bids received. Vivendi said last week it had received an approach about a potential “alliance” between SFR and Numericable.
Vivendi rose 1.3 percent to close at 20.64 euros in Paris, Numericable added 1 percent to 30.46 euros, while Altice climbed 1.6 percent to 31.50 euros in Amsterdam.
Operators 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 (TEF) and Royal KPN NV’s proposal to merge their German phone units received a statement of objections from the European Commission last week, signaling the carriers will have to make concessions to win approval.
Drahi, Altice’s chairman with a net worth valued at $7 billion according to the Bloomberg Billionaires Index, has received guarantees from lenders for 8 billion euros ($11 billion) of debt, the person with knowledge of his plans said. The bid will include about 11 billion euros in cash, 3 billion euros in Numericable’s cable assets and a 750 million-euro capital increase by Altice, said the person.
Because of greater potential cost savings and to compensate for regulatory hurdles, Bouygues is weighing a higher offer for SFR, one of the people said, asking not to be named because the discussions are confidential. Bouygues’s bid will likely be a mixture of cash and stock, and will let Vivendi retain a minority stake in the combined entity, another person said.
In 2011, Vivendi bought full control of SFR, paying Vodafone Group Plc (VOD) about 8 billion euros for its 44 percent stake, valuing the carrier at 18 billion euros at the time.
Vivendi and Numericable have negotiated on and off over the past year without coming to an agreement on valuation, people familiar with the matter said last week. While talks with Numericable are the most advanced, Iliad and Bouygues are trying to derail those negotiations and overcome regulators’ skepticism about mobile mergers, they said.
A merger of SFR with Numericable would keep the number of wireless network operators in France to four. Orange SA (ORA), Bouygues and Iliad also run mobile networks. Phone companies in France have been eyeing consolidation for more than a year to put an end to a price war brought on by the arrival of Iliad in 2012, though their talks have never made it past the informal first approach.
At the end of September, Orange had 26.8 million wireless customers. Bouygues Telecom ranked third with 11.1 million, followed by Iliad’s 7.4 million, according to data compiled by Bloomberg. A combination of either Bouygues or Iliad with SFR would create a new national leader that would topple Orange.
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