Bouygues Telecom considers cutting 2,000 jobs as future hangs in balance

Bouygues Telecom is widely expected to announce between 1,500 and 2,000 job cuts after a meeting with its unions on Wednesday, amid ongoing rumours that the struggling operator is the object of take-over interest by its two main rivals, Iliad and Orange.

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Martin Bouygues, CEO, Bouygues Group

It was reported in May that Bouygues Telecom could lose nearly 23 per cent of its 9,000-strong workforce as a direct result of its failure to acquire SFR from Vivendi, which instead agreed to sell the business to Altice.

The decision was a huge blow for Bouygues CEO Martin Bouygues, who had pulled out all the stops in an effort to secure a deal. Now, the group is understood to be working out a savings plan to reduce costs at its telecoms unit.

Indeed, Bouygues Telecom has suffered the most from the cheap mobile deals offered by Free Mobile since January 2012, and has seen its turnover fall by 26 per cent over two years, while costs have increased by 10 per cent.

According to the Financial Times, the company is now seeking a further €300 million ($406 million) in annual savings by 2016 and will need to cut staff to achieve this aim. It has already cut €600 million in annual costs over the past three years.

Meanwhile Free Mobile parent, Iliad, and Orange are still reported to be interested in buying Bouygues Telecom, although discussions so far with Iliad are understood to have stumbled on price. Indeed, Bloomberg reported that there is a €3 billion gap between Iliad's offer and Bouygues' target price of between €7 billion and €8 billion.

Orange has reportedly hired Lazard and Credit Suisse to look into a deal involving Bouygues Telecom.

Bouygues Telecom is still reportedly saying it wants to remain a standalone company, but doubts have been raised about whether this will be a feasible option for the company.

Jerry Dellis, an analyst at Jefferies in London, told the FT that consolidation in the French market would be inevitable sooner or later.

"It is very unlikely that within two years, [Bouygues Telecom] will still be on their own," Dellis told the paper. "The challenge is how they can engineer an endgame on favourable terms as soon as possible."

The French government would certainly welcome a reduction in the number of mobile operators in France from four to three, which would be achieved through an acquisition of Bouygues Telecom by either Orange or Iliad: in May, Economy Minister Arnaud Montebourg said the government will make sure the market eventually shrinks to three mobile operators.

For more:
- see this Bloomberg article
- see this Financial Times article (sub. req.)

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