Orange Deal for Bouygues Telecom Seen Spurring Asset Salesby and
Iliad, Numericable-SFR said to be monitoring situation
Mobile infrastructure, spectrum among assets that may be sold
A takeover of Bouygues Telecom by Orange SA would trigger a bonanza of asset sales by the combined entity to overcome concern from antitrust regulators that the transaction would reduce competition in the French mobile-phone market.
Orange is in talks to buy Bouygues SA’s telecommunications unit in a transaction that would cut the number of mobile-phone operators in France to three from four. The companies are evaluating the sale of some pieces to get the deal past competition authorities, said people familiar with the matter. The market’s other two providers -- Numericable-SFR SAS, owned by billionaire Patrick Drahi’s Altice NV, and Iliad SA -- are monitoring the situation and considering buying assets, according to one person with knowledge of the situation.
Iliad could consider spending about 1.8 billion euros ($1.9 billion) to buy some mobile infrastructure and spectrum as well as Bouygues Telecom broadband subscribers, while Numericable-SFR could spend 3.25 billion euros to buy half of Bouygues Telecom’s mobile users and half of its broadband base, Stephane Beyazian, an analyst at Raymond James in Paris, wrote in a report Sunday.
Numericable-SFR is losing market share in both mobile and broadband, so “a move to a three-player market would help stabilize the customer base without radical changes in marketing strategy,” Beyazian wrote. Iliad would save about 450 million euros in mobile traffic fees paid to Orange before their roaming contract expires and get synergies in making Bouygues Telecom broadband users profitable.
In its failed attempt to buy SFR in 2014, Bouygues had agreed to sell 1.8
billion euros of assets including spectrum to Iliad to overcome antitrust
concerns. Numericable won the bidding for SFR, and then last year the combined
Numericable-SFR sought unsuccessfully to buy Bouygues Telecom.
Numericable-SFR is unlikely to renew that effort, said the person, who asked not to be identified because the process is confidential.
A potential acquisition of Bouygues Telecom by Orange would likely call for divestitures of retail stores as well, Bloomberg Intelligence analyst Erhan Gurses wrote on Monday. Iliad, the smallest mobile carrier, may use this to boost its nascent retail network, which stood at 53 stores in 2015, he wrote.
Iliad’s preference for low-cost online registrations would likely limit the extent of store acquisitions, according to Gurses. But the company’s quest to expand mobile market share, potential subscriber acquisitions and rising competition for convergence may provide a rationale for expanding its retail network.
If Bouygues were to receive cash in a deal with Orange, the company would be able to reduce debt and make acquisitions in contracting, especially in electrical engineering where it’s lagging rivals such as Vinci SA, Eiffage, and Spie, said Gregoire Thibault, a Natixis analyst, in a note Monday.