Orange still linked to Bouygues Telecom acquisition talks despite denials

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Orange and Bouygues Group faced fresh merger speculation after reports in France said the companies had entered into deep negotiations over an acquisition of Bouygues Telecom.

The companies deepened talks over the sale of Bouygues Telecom with the signing of a confidentiality agreement in late December, MarketWatch reported, citing an article published by French newspaper Le Journal du Dimanche over the weekend.

Such agreements typically signal a move towards formal merger discussions, MarketWatch explained, adding that executives from Orange and Bouygues Group are due to discuss a deal in meetings next week.

Orange has tabled an offer totalling €10 billion ($10.9 billion), comprising €8 billion in shares and a further €2 billion in cash, MarketWatch reported. A combined Orange and Bouygues Telecom would have a market capitalisation of around €50 billion -- some €9 billion more than Orange is currently worth -- the business news site said.

While neither company responded to comments on the latest merger speculation, they have each previously denied talks are taking place.

In early December, Orange told FierceWireless:Europe that the operator is "the telecoms operator that has the least need for consolidation" in France, in an emailed statement.

However, MarketWatch stated that the operator is concerned its overall market capitalisation is currently too small in relation to other European giants including Deutsche Telekom and Telefonica.

In early December Orange also denied it was eyeing an acquisition of Telecom Italia, amid ongoing speculation regarding the France-based operator's future expansion plans. At the time, Orange said it had no specific target in mind as part of a strategy exploring how the European telecoms market could develop over the next five to ten years, and issued a flat denial that it had opened talks with Telecom Italia.

Bouygues Telecom has been mooted as a potential takeover target after being hit hard by a price war in France that was sparked by the entry of Free Mobile in 2012. Despite its troubles, Bouygues Telecom remained bullish that it would return to growth without a takeover -- a view that appeared to be bearing fruit in the third quarter of 2015 when the operator recorded its first rise in network revenues since the second quarter of 2011.

For more:
- see this MarketWatch report

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