Orange reportedly in talks with Bouygues as Numericable bids for Virgin Mobile France

Just days after France's government began pushing for greater telecoms consolidation to reduce competition, reports have emerged that Orange is in talks with Bouygues over a possible merger with its telecoms unit, and Altice confirmed that Numericable has made an offer to buy Virgin Mobile France.

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Stephane Richard

A report in Les Echos said Orange is in talks with French conglomerate Bouygues over an acquisition of Bouygues Telecom. If successful, such a merger would achieve the government's stated aim of cutting the number of mobile players from four to three.

The deal would value Bouygues Telecom at more than €6 billion ($8.23 billion), the report said. In addition, by selling in return for shares, Bouygues and its shareholder JCDecaux could end up holding close to 10 per cent of Orange, Les Echos added. The French state still also owns 27 per cent of Orange, but Orange CEO Stephane Richard told Les Echos that "no one on the government side has asked me to study the takeover of Bouygues Telecom."

The paper added that the price on the table with Orange is better than the offer Bouygues had received from Iliad of €4 billion to €5 billion.

While not confirming the report, Orange issued a somewhat cryptic statement on Thursday evening, saying it is "assessing the opportunities that the changing landscape in the French telecommunications might offer".

"Orange believes that consolidation of the French mobile market would be positive in the long term for both investment and for the consumer," the company added.

Bouygues has also reportedly said that French operators are generally exploring partnerships. According to Bloomberg, CFO Philippe Marien told journalists that "all scenarios are on the table", and he made it clear that the group's telecoms unit is open to a tie-up with another operator.

Meanwhile Altice separately confirmed that Numericable Group has made an offer for mobile virtual network operator (MVNO) Virgin Mobile France that values the company at €325 million. Carphone Warehouse, which owns 46 per cent of Omer Telecom (also known as OMEA Telecom), the holding company for Virgin Mobile France, said it and all other shareholders of Omer Telecom have entered into an exclusivity agreement with Numericable on the proposed sale of 100 per cent of Omer. The other major shareholder is UK-based Virgin Group.

Carphone Warehouse added that during the exclusivity period the parties would carry out the necessary consultations with employee work councils, with the transaction also being subject to the approval of the French Competition Authority.

The two moves represent a further overhaul of a mobile communications market that has already seen Vivendi agree to sell SFR to Altice instead of Bouygues in recent weeks. Altice plans to merge the mobile operator with its majority-owned Numericable cable unit. Altice also noted that Vivendi will contribute €200 million to finance the acquisition of Virgin Mobile France, which would enhance the value of its stake in Numericable after the merger with SFR.

The French mobile market has only just started to emerge from a ruinous price war that has seen the launch of low-cost brands such as Orange's Sosh and Bouygues Telecom's B&YOU to compete with the more competitive tariffs launched by Iliad's Free Mobile.

Bouygues Telecom suffered particularly from the increased competition, and is reported to be working on an austerity plan that unions fear could see up to 2,000 job cuts.

For more:
- see this Les Echos article (in French)
- see this Bloomberg article
- see this Altice statement

Related Articles:
France pushes for just 3 operators as Orange raises concerns over SFR deal
Report: Bouygues Telecom faces massive job cuts after failure to buy SFR
For European telecoms operators, 4 is a crowd
Vivendi rebuts claims by Martin Bouygues of 'anomalies' in SFR process
France to review Numericable-SFR deal, pursue more mergers at home and in Europe

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