After months of speculation and rumour, the battle for SFR has finally begun. Vivendi announced late on Wednesday that it had received binding offers for the French mobile and fixed operator from both Numericable shareholder Altice and the Bouygues group.
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Martin Bouygues |
The new developments pit two billionaires against each other in the race to build up their fixed and mobile assets in this important European market. Martin Bouygues, the chairman and CEO of the Bouygues Group and son of the company's founder Francis Bouygues, faces Patrick Drahi, the founder of Altice. Xavier Niel, the founder of Iliad, is currently missing from the field: Iliad had apparently not made a bid by Vivendi's 8 p.m. .deadline on Wednesday.
Vivendi now faces the task of deciding once and for all what route to take with its French unit, which, like rivals Bouygues Telecom and Orange has been engaged in a ruinous price war on the French mobile market since the arrival of Iliad-owned Free Mobile's low-cost mobile bundles for under €20 ($27.73) per month.
Altice, which owns 40 per cent of Numericable and has previously said it is interested in building up its assets in France, provided a short confirmation of its formal offer on its web site. According to reports, the company made an offer that values SFR at around €14.5 billion ($20 billion) and includes €11 billion in cash, granting Vivendi a 32 per cent stake in the new company, unnamed sources told Reuters.
Bouygues, which is offering Vivendi €10.5 billion in cash and 46 per cent of the new entity and valued SFR at €14.5 billion "pre-synergies" and €19 billion "post-synergies," on Thursday issued a lengthy explanation of why a merger between Bouygues Telecom and SFR would be ideal. Indeed, the combination of the two operators, which already have a mobile network-sharing agreement, would create the largest mobile operator in France ahead of Orange, and the second-largest fixed-line operator.
"A merger between Bouygues Telecom and SFR would lead to the creation of a major French digital communications group that would be the benchmark provider of technologies in the home, with the best indoor and outdoor coverage nationwide and with a high performance mobile network on a par with the most advanced in the world," the Bouygues group said.
Bouygues' plan is to create a new entity in which it would hold a 49 per stake and Vivendi would have a 46 per cent stake. The entity would then be floated on the stock market as soon as the merger is completed, and at the time of the initial public offering Vivendi would be offered the opportunity to monetise a further 15 per cent of the capital. Vivendi would then be in a position to sell its remaining interest at a time of its choosing.
Bouygues also promised that compulsory redundancies would be avoided, and said the merger would achieve annual cost savings of around €1.4 billion. Bouygues added that the debt of the new entity, to be fully underwritten by HSBC, would cover the financing of the acquisition (€10.5 billion) and its operating needs.
Reuters noted that Numericable also offered some assurances on employment and said it would take on new staff. Such assurances will be crucial to obtaining French approval; the country is already suffering from record unemployment levels and is keen to see measures that would help create further employment.
While the two bids will face considerable scrutiny from regulatory and competition bodies, Bouygues will have to overcome more hurdles because regulators will worry that a reduction from four operators to three will see consumer prices go up again. Indeed, the mobile market has only had four operators for just over two years.
It has been reported previously that Bouygues would be ready to sell mobile spectrum and some of its 15,000 mobile antennas to obtain approval of its bid.
For more:
- see this Bouygues statement
- see this Reuters article
- see this Bloomberg article
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