French Phone Carriers Cool on Mergers as Market Rebounds

  • Focus shifting from savings drive to new services, expansion
  • Government also not in favor of combinations near term

Major French phone carriers are setting aside any merger scenarios for the next couple of years as the market recovers, making the drive to seek savings through combinations less necessary, according to people familiar with the matter.

The government, a major shareholder in largest carrier Orange, also doesn’t favor consolidation in the near term, said the people, asking not to be named as the views aren’t public. Since the latest failed major merger attempt in 2016, the French wireless market has begun to show signs of recovery, and the government considers the industry competitive and combinations as not beneficial for consumers, the people said.

Iliad’s Free and Bouygues Telecom have added subscribers this year while Orange returned to revenue growth in France after eight years of declines, registering a 0.5 percent gain in the second quarter. While SFR Group is seen as a potential target, the carrier isn’t for sale as main owner Altice focuses on executing a job-cut plan set to be completed mid-2019, the people said.

Low-cost carrier Iliad’s market entry in 2012 with contracts as low as 2 euros ($2.36) a month left incumbent operators Orange, Bouygues Telecom and SFR struggling to respond, pushing the industry to years of shrinking sales and margins. Orange’s attempt to reduce costs by buying Bouygues’s phone business collapsed in 2016, leaving the market split between the four players.

Since then, although merger speculations have continued, the carriers have turned their attention to new services and geographical expansion. Iliad is seeking to start a wireless service in Italy, Orange is launching a French banking business and expanding in Africa, and Altice is pushing forward in North America after an initial public offering of its U.S. unit.

Representatives for the French government, Orange, Bouygues, Altice and Iliad declined to comment on consolidation plans.

Chances for a tie-up with Bouygues Telecom are low in the short term as Bouygues is a mindset of standalone development, Orange Chief Executive Officer Stephane Richard said in an interview with Les Echos published Sept. 28. Sebastien Soriano, head of the French telecoms regulator Arcep, said in interview with Le Figaro earlier this year that consolidation is neither necessary nor to be wished as the market has found its dynamic with four operators.

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