Patrick Drahi, founder of Luxembourg-headquartered multinational cable and telecoms company Altice, does not hold back when it comes to taking a gamble on mergers and acquisitions.
Fresh from an attempted onslaught on the U.S. market, where Altice announced a $9.1 billion (€8.2 billion) deal to become a majority owner in Suddenlink Communications and could be looking for more cable assets to buy, Drahi has turned his attention back to France, although so far with little success.
To be sure, Altice picked up some pretty substantial assets in France when it acquired SFR and MVNO Virgin Mobile, but Drahi wants more. His ambition for further growth led to Altice making a bid for Bouygues Telecom. Bouygues, however, responded briskly with a resounding "non."
As things stand, it's not certain that Altice will make a second attempt, at least not before France's 700-MHz auction, which is planned to take place by the end of the year.
Indeed, analysts from Jefferies International said at the time that the "categorical terms" in which Bouygues couched its rejection would make it difficult for Altice to return to the table with an improved offer.
However, there is a persistent belief that consolidation in France remains inevitable. That is the view of CCS Insight, which said in a recent research note that it would be "unsurprised" if Altice made an improved offer, while Free Mobile's parent Iliad--owned by the equally ambitious and equally canny French billionaire Xavier Niel--should also not be ruled out.
But what about the ambitions of Bouygues Telecom itself? Bouygues Group CEO Martin Bouygues continues to insist that Bouygues Telecom is "well-positioned" to take advantage of future growth in the telecoms market and can revive profits on its own. The group added that Bouygues Telecom "has the means to return to an EBITDA margin of at least 25 per cent by 2017 (the same level as in 2011), a margin that should continue to rise in the longer term."
Bouygues Telecom--seen as the hardest hit by a price war sparked by Free Mobile--has taken some measures to restore its position, such as being first to market with LTE-Advanced and taking a leadership position with tri-band carrier aggregation. The company also overhauled its smartphone plans by adding in free content and offering an option to share data between devices. It also provides highly attractive pricing for mobile broadband services.
However, the company still lacks some of the marketing advantages of rivals. For example, Orange and SFR are very strong on multi-play, both offering the option to combine fibre and mobile plans. Bouygues Telecom no longer appears to market such an offer, although services such as quad-play are regarded in some quarters as increasingly important to ensure customer "stickiness". It also does not match the low prices offered by Free Mobile, and nor does it have a secondary brand to target different market segments after it brought B&YOU under the general Bouygues Telecom umbrella.
The coming year will certainly be one to watch in France, with some crucial events on the horizon. Will Bouygues Telecom achieve its profitability goals? Will all four operators participate in the 700-MHz auction, and how competitive will that be? Will Altice or Iliad make another offer for the company? Perhaps a completely different scenario will emerge.
As they say in France, "on verra."--Anne