Orange Said to Pitch Bouygues Takeover Plan to French State

  • Valls, economy minister to meet with executives from companies
  • Structure of $10.9 billion deal is said to be at draft stage

Orange SA will pitch its plan to acquire Bouygues Telecom to France’s prime minister this week, as talks progress on consolidating the telecommunications industry around the country’s former monopoly, people familiar with the matter said.

The goal is to reach an agreement on the transaction before Orange reports earnings on Feb. 16, the people said, asking not to be named discussing confidential talks. The deal is likely to value Bouygues SA’s mobile-phone unit at about 10 billion euros ($10.9 billion), though the structure -- how much Orange will pay in cash versus shares and what assets will be sold to rivals to alleviate antitrust hurdles -- is still being negotiated, they said.

Orange has approached Iliad SA and Altice NV’s Numericable-SFR SAS about selling them parts of Bouygues’ telecommunications business, the people said. France’s biggest phone company would keep between 20 percent and 30 percent of Bouygues Telecom assets, one of the people said.

Iliad is considering taking Bouygues Telecom’s shops, most of the mobile network and part of the customers, one of the people said. Numericable-SFR is interested in parts of the network, wireless frequencies, and some clients, they said.

“Orange holds regular meetings with the state on diverse subjects,” the company said in an e-mailed statement. “However, there are no plans to pitch a project regarding a possible acquisition of Bouygues Telecom this week.”

Representatives of the government and Bouygues declined to comment on this week’s planned meetings between executives and French Prime Minister Manuel Valls and Economy Minister Emmanuel Macron. Iliad and Altice declined to comment.

Price Declines

French telecommunications have been combining in the aftermath of massive price drops caused by Iliad’s 2012 entry into the mobile market with discounted offers. While carriers have argued they can’t sustain investment unless competition eases, regulators have applauded cheaper phone packages as benefiting consumers. Orange said Jan. 5 it was in talks to buy the Bouygues business.

A deal is almost certain to be studied by France’s competition authority instead of the European Union antitrust watchdog, according to one of the people familiar with the matter. A deal between TeliaSonera AB and Telenor ASA to combine their Danish businesses imploded in September the face of opposition from the EU regulator, which also has begun an in-depth investigation of a combination ofCK Hutchison Holdings Ltd.’s Three mobile operator in the U.K. with Telefonica SA’s O2.

Orange will walk away from a deal to buy the Bouygues unit if it’s too risky to execute, Orange Chief Executive Officer Stephane Richard has said. Richard said he’s evaluating a potential Bouygues accord based on whether it creates value for Orange, puts jobs in jeopardy, and how risky it is to pull off.

Meanwhile, the French government, which is Orange’s biggest shareholder, will scan the proposal for the impact on investments, jobs and prices in France, as well as the company’s ability to do future deals outside its home market, a person with knowledge of the matter said. While Orange, the former national monopoly, has informally consulted the government on a deal, it has yet to present financial details to officials, the person said earlier this month.

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