French Unions Weigh Future at Bouygues Telecom After Failed Deal

  • More cuts would add to 2,000 jobs lost since Free's entry
  • Union rep: `Savings shouldn't be made at expense of employees'

Investors in Bouygues SA lost 1.63 billion euros ($1.86 billion) in market value on Monday after talks to sell the company’s phone unit to Orange SA ran aground. Workers are worried they’re next.

A sale to Orange, while eliminating Bouygues Telecom, would have included some job-loss protections. Bouygues insisted during the talks that it would protect the interests of its employees as they were parceled out to France’s other telecom players: Orange, Iliad SA’s Free and Numericable-SFR SA. The French state, Orange’s biggest shareholder, also sought to ensure that jobs would be safe.

Now Bouygues Telecom will stay on its own, the company and its workers facing prospects for more of the price wars that have hobbled operators for four years. Bouygues Telecom has eliminated 2,000 positions since 2012, the year Iliad entered the mobile market with discounted offers. Free’s low-prices put pressure on the others to cut follow suit and reduce expenses, a dynamic that will now stay in place.

“We expect a reorganization,” said Azzam Ahdab, a representative for the French Democratic Confederation of Labor union at Bouygues Telecom. “Employees expect to be shaken up until Bouygues finds profitability.”

Orange’s effort to buy Bouygues Telecom and split the assets with two of its rivals to avoid antitrust challenges would potentially have eased the price pressures, leaving carriers with more money for hiring or growth projects. Carriers have argued they can’t sustain investment unless competition eases.

“The failure of the negotiations isn’t good news for employment,” said Alexandre Iatrides, an analyst with Oddo Securities. “In the short term, providers will make new discounts, which should drive prices further down.”

Bouygues Telecom, which now has almost 8,000 employees, declined to comment beyond the short statement it released on Friday after talks with Orange ended, which said key sticking points included social guarantees for its employees.

Bouygues already offers a 25-euro ($28) unlimited phone and text plan. Chief Executive Officer Martin Bouygues told Le Figaro that “logically, at some point, prices should even increase again.”

As the deal unraveled last week, Bouygues Telecom reiterated a 2017 margin target of 25 percent for earnings before interest, taxes, depreciation, rising to 35 percent later. Last year, before the plans with Orange were announced, the company said it would seek to save an extra 100 million euros, in addition to the 400 million euros initially planned for the three years ending in 2016, while investing about 750 million euros to take on Iliad.

“These savings shouldn’t be made at the expense of employees,” Ahdab said.

At the Workers’ Force union Bouygues Telecom branch, General Secretary Bernard Allain said there’s not much left to cut at Bouygues Telecom, and he’s confident the company will turn to a focus on delivering better service.

“We already cut out all the fat,” Allain said. “We can’t go further without undermining the business. It would be suicidal for the company.”

In the short term, Bouygues Telecom workers could be better off than if the merger went through and they ended up elsewhere, said Alain Triboult, who heads the telecoms group at the French Confederation of Christian Workers.

“We are more worried on the long term,” Triboult said.

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