Orange CEO sees possible return of consolidation to French market in 2016

The CEO of Orange said consolidation could return to the French mobile sector in 2016 once the country has completed its 700 MHz frequency auction, which is scheduled to end later this year.

In a wide-ranging interview with French broadsheet Les Echos, Stephane Richard said consolidation is not on the agenda today. However, he intimated that such a measure would be desirable by claiming that France is the European country in which operators' margins are the lowest.

He added that although consolidation is less of a necessity for Orange, the "situation of each of our competitors raises questions. Numericable-SFR is losing customers, Bouygues Telecom is gaining customers but remains tight financially, and Free must invest heavily in its network."

The most recent attempt to consolidate the French market was made by Altice in June this year. The company -- which last year acquired Orange rival SFR to create an integrated powerhouse under Numericable-SFR -- offered to buy Bouygues Telecom in a proposal said to be valued at about €10 billion ($11.2 billion) to €11 billion.

At the same time, Numericable-SFR and Iliad also said they were in exclusive negotiations with a "view to purchasing a portfolio of assets in connection with the offer submitted by Altice for the acquisition of Bouygues Telecom by Numericable-SFR."

However, Bouygues Group robustly rejected the Altice offer, insisting that Bouygues Telecom was "well-positioned" to take advantage of future growth in the telecoms market and could revive profits on its own.

In the Les Echos interview, Richard conceded that the rise of Altice and its founder Patrick Drahi has been "meteoric" and expressed admiration for the group's "audacity".

However, he added that Altice has taken advantage of a situation in which debt is very cheap. "It must be recognised that such a course is rare in France. Now Altice still has much to prove. Its leaders must give coherence to what remains for the moment an asset collection. And then they will have to demonstrate that they have an industrial strategy beyond 'cost cutting'. Cost reduction is not a strategy," Richard told Les Echos.

Altice recently said it does not plan to launch a new price war on the French mobile market. Michel Combes, the company's new group COO and former CEO of Alcatel-Lucent, told Les Echos last week that he does not believe that winning back customers requires lowering prices.

Also on the subject of the price war, Richard said it was not as intensive as when Free Mobile first arrived on the market in 2012. Although he said operators have switched to a "war of promotions," he noted that consumers are now not focusing only on price but also on the network and service.

"France is the most competitive market in Europe," he added. "Competition remains fierce in our country."

For more:
- see the Les Echos interview

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