Orange CEO Richard Asks French Rivals to Lead ‘Needed’ Tie-Ups

Orange SA’s Chief Executive Officer Stephane Richard is calling on Bouygues SA, Iliad SA and SFR to take the lead on consolidating the French wireless market to help end price wars.

France needs tie-ups in the mobile business and Orange is prepared to take part, though the country’s largest phone company refuses to be the forerunner to a deal, Richard said in a Bloomberg Television interview in Aix-en-Provence.

“Between Bouygues, Iliad and SFR-Numericable, we still have room to see some maneuver,” Richard said. “I hope that this will happen and we are still ready to take a part in this game of consolidation, because it’s a necessary move for the consumers, for investment and for the country.”

Talks for potential tie-ups have heated among French carriers since Vivendi SA agreed in April to sell SFR, Orange’s largest rival, leaving the country with four phone companies after years of falling prices. Iliad entered the market in January 2012 by selling discounted phone packages, prompting a price war.

French carriers aren’t alone coping with falling phone bills. To stem a decline in landline and wireless service revenue, phone and cable carriers across Europe are pursuing a flurry of mergers and acquisitions. Telefonica SA last week got clearance for its 8.55 billion-euro ($11.6 billion) acquisition of Royal KPN NV’s E-Plus unit in Germany, a regulatory decision that may provide impulse for a new round of mergers and acquisitions.

Critical Size

“The French market has not the critical size to support four operators, full operators fixed and mobile,” Richard said. “I definitively believe that one day we will probably switch from 4 to 3, as it’s going to be the case in Germany, in Ireland, or maybe in other European countries.”

Still, Orange is shifting to the backseat and leaving it to its competitors to call talks back on, after recent talks with Bouygues Telecom and Iliad failed, mainly because of disagreements on price and some concerns about antitrust hurdles.

Bouygues Telecom, France’s third-largest mobile operator, was looking for a buyer as profitability and cash generation declined. The company last month announced plans to eliminate 17 percent of its workforce.

Price Wars

French Economy Minister Arnaud Montebourg has since called on the carriers to return to negotiations to consolidate.

Montebourg is among politicians and executives who fear that low-cost pricing will spread from the wireless segment into fixed-line packages of phone, television and high-speed Internet, threatening margins and jobs in the industry. Bouygues Telecom slashed the price of more of its packages last month after it said that cheaper fixed offers helped its sales in the second quarter.

The French government owns 27 percent of Orange, the country’s former phone monopoly. Orange made 49 percent of its sales in its home market in the first quarter and has seen its profits fall amid a mobile price war that has gone on for nearly three years.

Richard said phone bills probably won’t go any lower in mobile, while customers in the fixed business tend to switch providers less, which means prices are less prone to fall.

“Any kind of scheme that would bring back three operators would be a good move for the market and for the leader of the market,” Richard said. “I’m ready to come back to the negotiations, but not as the forerunner.”

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