Vivendi’s SFR-Iliad Deal May Be Prohibited, BFM Reports

Vivendi SA’s SFR unit and Iliad SA have been told by competition regulators that their competing French phone businesses wouldn’t be allowed to merge, BFM reported, citing unidentified people in the industry.

In separate consultations, the two companies were told that a hypothetical merger of SFR and Iliad would be rejected as the market share would be too big, television station BFM said on its website. Iliad spokeswoman Isabelle Audap and a Vivendi representative declined to comment. French Competition Authority spokeswoman Virginie Guin didn’t immediately respond to requests for comment.

SFR had 20.9 million mobile customers and 5 million fixed-line subscribers as of Sept. 30, while Iliad had 5.3 million fixed subscribers and 4.4 million mobile clients. Former monopoly France Telecom SA had 26.6 million mobile clients and

17.8 million fixed-line subscribers.

Iliad’s entry into the French mobile market one year ago, with packages starting at 2 euros ($2.63) a month, prompted competitors to lower prices and cut costs and jobs. Vivendi is looking to refocus on media and content. It is considering the sale of some telecommunications assets and has been exploring options for SFR.

Vivendi shares dropped 1.4 percent to 17.20 euros at 10:57 a.m. in Paris, while Iliad fell 0.3 percent to 132 euros.

Vivendi informally discussed a sale to former co-owner Vodafone Group Plc, though the two companies were widely divided on a valuation, people with knowledge of the plans said in October.

Concerns over valuation and deal structure also stood in the way of a potential tie-up with Numericable, the French cable operator owned by private-equity firms including Carlyle Group LP that has approached Vivendi about a potential merger with SFR, the people said.