Bouygues Telecom reverts to standalone strategy after Orange talks collapse

Bouygues Group said its telecoms unit would resume its previous strategy as a standalone operator after talks on a potential merger with Orange finally collapsed before the extended deadline of Apr. 3.

In a statement, Bouygues said it was not possible to find agreement with Orange on all of the points it had outlined from the start, including the interests of Bouygues Telecom's employees; the level of Bouygues' equity stake in Orange; the execution risk; and Bouygues Telecom's valuation.

"Bouygues Telecom will continue its standalone strategy, which has already resulted in a return to growth in sales and EBITDA in 2015. Bouygues firmly believes the telecoms market exhibits strong growth potential, driven by the exponential development of digital uses, and that Bouygues Telecom is particularly well positioned on this market to benefit from this momentum," the company said.

The fallout from the failure of the talks, which were first announced in January, has been significant, with the share prices of all four French network operators plummeting on Monday.

Recriminations could also follow after reports revealed how relationships between the various participants had soured during the talks. It appears that the involvement of the French government also had a disastrous outcome: citing unnamed sources, Reuters reported that Martin Bouygues stormed out of a meeting with Emmanuel Macron, France's Minister for the Economy, because he felt humiliated by the government's demands.

Thus, what began as a real commitment to find a solution to the mobile price war in France appears to have ended with a great deal of bad blood between the market players. Sources suggested to Reuters that Macron and rival operators had misunderstood Martin Bouygues' motives from the start, assuming that he had no choice but to sell Bouygues Telecom because he had floated the idea himself.

"It's probably because of this first call that they all tried to rip him apart," a source close to Orange told Reuters, referring to the French government -- which owns 23 per cent of Orange -- and rival operators Iliad and SFR.

The talks were certainly complex. To succeed, the resulting combined entity would have to sell some of its assets to Iliad and SFR. Bloomberg reported that the more the talks progressed, the clearer it became to those concerned that it would be very difficult to come to a deal that would satisfy all parties. The news agency added that this complexity was further exacerbated by a clash of egos, personal dislikes and political considerations.

Martin Bouygues remained firm on his demands throughout: he wanted €10 billion ($11.3 billion) for his telecoms assets and a stake of at least 10 per cent in Orange. Ultimately, a deal proved too difficult to pin down and both companies announced that talks had ended in separate short statements on Apr. 1.

It has also emerged that the talks were code-named "Jardiland" - the name of a French gardening-supply retailer.

Orange CFO Ramon Fernandez followed up with a tweet on Monday:

"After three months of intense Jardiland, back to high-speed business with an incomparable Orange momentum," he wrote.

For more:
- see this Reuters article
- see this Bloomberg article
- see this separate Reuters article
- see this Orange statement
- see this Bouygues Group statement

Related articles:
Report: 'Real progress' made in Orange-Bouygues talks
Orange says no deal reached as yet in Bouygues talks
Orange overhauls European leadership as Bouygues talks continue
Arcep head keeps sharp eye on Orange/Bouygues Telecom merger talks
Arcep seeks end to France's mobile roaming and network-sharing deals

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