France to review Numericable-SFR deal, pursue more mergers at home and in Europe

The proposed €17 billion ($23 billion) deal to merge Numericable with SFR to create a new fixed and mobile powerhouse in France will come under the regulatory scrutiny of France rather than the European Commission, according to comments this week by European Competition Commissioner Joaquin Almunia.

According to Reuters, Almunia told reporters at the sidelines of a conference organized by the Hellenic Competition Authority that "this operation will belong to the French authority."

The move makes sense given the complementary nature of Numericable and SFR's businesses: Numericable, in which shareholder Altice is raising its stake to 74.6 per cent from 40 per cent as part of the merger with SFR, primarily has fixed cable assets while SFR has a mix of mobile and fixed telecoms assets.

However, it raises the prospect of some interesting discussions ahead, as French politicians had backed the rival bid for Vivendi's SFR by Bouygues. A merger of Bouygues Telecom and SFR would have reduced the number of mobile operators in France from four to three, and was favoured by Arnaud Montebourg, who was recently promoted from Industry Minister to Economy Minister, and Orange. It's already clear that Montebourg will be keeping a sharp eye on progress and ensuring that Altice founder Patrick Drahi fulfils his promises on employment and other issues.

The French government has also already been discussing future scenarios for the mobile market, which has been engaged in a price war since Iliad's Free Mobile launched its sub-€20 mobile plans in January 2012. This cutthroat competition has been particularly hard on Bouygues Telecom, which will be weakened further after a Numericable/SFR merger and is now seen as a potential target for Iliad.

Montebourg said during a parliamentary committee hearing this week that the government will continue to pursue consolidation in the telecoms sector, and said the Numericable/SFR transaction raises questions about the future of Iliad and Bouygues Telecom. According to Reuters, Montebourg said the policy of bringing the number of mobile operators down to three "remains all the more relevant. We will work actively in this direction."

Bloomberg added that Montebourg is not only looking to consolidate the French market, but has also asked Orange to seek more European alliances. That would not be an unwelcome task for the operator: Orange CEO Stephane Richard along with several other European telecoms leaders has called for greater consolidation in the European telecoms sector.

At present, all eyes are on Telefónica Deutschland's planned acquisition of domestic rival E-Plus from KPN: if that is cleared by the European Commission, it is expected to create an M&A "earthquake" in Europe, according to Richard.

For more:
- see this Reuters article
- see this separate Reuters article
- see this Bloomberg article

Related Articles:
After SFR, Bouygues Telecom's future could lie with Iliad
Altice to buy Vivendi's SFR for €17B
Altice rumoured to be Vivendi favourite as Bouygues makes third bid
Bouygues ups pressure as Altice talks on SFR near deadline
Vivendi buys Telindus France for €95M

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