Orange and Bouygues finally admitted they were in talks for the former to acquire the latter at the start of this year. Despite subsequently hedging its position Orange seems to be serious about this move, but even if the two companies agree a deal nothing will happen unless French competition authorities can be convinced that allowing the largest French mobile operator to acquire the third largest wouldn’t be detrimental to the French consumer.
Reuters’ ‘sources close to the matter’ reckon Orange has already started informal talks with Numericable-SFR and Iliad, which owns Free Mobile, to sell them bits of Bouygues Telecom after an acquisition in a bit to placate the authorities.
“All the players want to make it happen,” one of its anonymous sources told Reuters. “It is probably the last opportunity to succeed in the consolidation of the market.” This is intriguing as it implies even Orange’s other competitors want it to acquire Bouygues. The only reason for this must be the desire to move the total number of MNOs back to three.
When Iliad was allowed to create a fourth French MNO with the creation of Free Mobile its strategy was to compete aggressively on price, which forced the incumbents to follow suit. Their profits plunged as a consequence, leading to frequent complaints about how unpleasant it was having to compete for business. There seems to be a feeling that consolidation back to three MNOs will bring back the good old days of chunky margins and long lunches.
Another likely dynamic of any acquisition deal would be an equity swap that would give Bouygues a piece of Orange. The report reckons Bouygues could be in line for 15% of Orange but that the French government, which owns 23% of Orange, wants Bouygues stake capped at 10%. The WSJ got a quote from Orange CEO Stéphane Richard apparently confirming Bouygues wants a stake in Orange.
Already, for this deal to happen, there are large number of stakeholders that have to come to an agreement. Apparently the deadline for this is 16 February, when Orange announces its 2015 numbers, so things might start getting a lot more formal before long.