Orange acquisition of Bouygues Telecom said to be close to completion

Stephane Richard, the CEO of French operator Orange, had said his company is close to an agreement to acquire France’s third-largest mobile operator Bouygues Telecom, according to multiple reports.

The deal has been on the negotiating table since at least the start of this year, but Richard has previously been keen to stress the complexity of such a deal and to downplay the likelihood of it even happening at all. Apart from the usual haggling there’s the small matter of getting regulatory approval for what amounts to significant consolidation of the French telecoms market.

What, it seems, would not be acceptable is for Orange to acquire all of Bouygues Telecom and incorporate it entirely. According to Ovum’s WCIS  service Orange currently owns 39% of French mobile subscribers and adding Bouygues’ would give it the majority. The most obvious way to resolve this would be for the other two MNOs – SFR and Free – to receive some Bouygues assets, and that’s exactly what is being negotiated.

“These talks are nearly completed,” Richard is reported by Reuters to have said at a press event in Paris. “I think we roughly agree on the major points of this dividing up. This is an important step, but only one of the steps.”

According to another report in the FT SFR, which is now part of the Altice group, would pay around €4 billion for Bouygues’ fixed and mobile customers, while Free – owned by Iliad – would drop around €2 billion on Bouygues’ masts, spectrum and retail outlets. What Orange would get for its estimated €4 billion piece of the deal is currently unclear.

If this deal does go through it would largely reverse the process that saw Free Mobile granted a mobile license four years ago to create a fourth French MNO. Free embarked on the entirely predictable strategy of competing aggressively on price, which forced the incumbents to either follow suit or lose customers. They weren’t happy about this and have lobbied vigorously for a return to the good old days ever since.

Telecoms.com spoke to Bengt Nordström, CEO of telecoms consultancy Northstream, who has been keeping a close eye on consolidation moves in the European telecoms market.

“This development was preceded by a period of very intense price competition between the operators, which is now forcing them to seek scale and save costs through mergers and consolidation,” said Nordström.

“In many ways, this is similar to what we’re seeing in the UK, where BT and EE have merged to become a dominant and fully converged operator. However, the difference is that the UK regulator Ofcom does not like to approve further consolidation in the market, including the proposed merger between O2 and Three.

“In France, authorities accept that the market needs a different structure when it has stopped growing and is stagnating. They are sacrificing the four-player mobile operator market but are ensuring that the market still has strong players for French consumers and enterprises to choose from for their telecom and media services.

“In contrast, in the UK authorities are about to create a situation where they have one very large fully converged operator – BT/EE – with around £24 billion in revenues. The next biggest operator will be O2 with around £6 billion in revenues. If the goal is to bring back to the UK a structure of how the telecom market looked like before privatisation 30 years ago, then the authorities are doing a pretty good job.”