Reports: SFR bidding war heats up as Vivendi sets deadline

Speculation surrounding the possible sale of French operator SFR to a domestic rival reached fever pitch on Wednesday after Vivendi reportedly asked all potential bidders to submit their preliminary offers by 8pm this evening.

Vivendi's motivation is to put pressure on laggard Bouygues Telecom to make its move, unidentified sources told Reuters. This week it was reported that Numericable and its 40 per cent shareholder Altice made a preliminary offer of almost €15 billion ($20 billion) for SFR, including around €11 billion in cash plus €3 billion in Numericable's cable assets and a €750 million capital increase by Altice.

Iliad is believed to be the third potential bidder, although the sources told Reuters that Vivendi does not expect to get a bid from Iliad.

Reuters said Bouygues Telecom, which is reportedly evaluating a bid for SFR with the aid of banking groups HSBC and Rothschild, is now expected to submit its bid on Wednesday, and will make pledges on jobs and network investments to win support. Les Echos reported that Bouygues Telecom's' bid will be "around €15 billion" and would be financed via borrowing and a capital increase.

A merger between Bouygues Telecom and SFR, which already have a network-sharing agreement, would face greater regulatory scrutiny than a merger with Numericable, which is active in the cable services market and therefore has fewer service overlaps with SFR.

"To some degree, Iliad and Bouygues have to look at SFR again now, just as a matter of house-keeping and good management because Numericable is moving in on SFR," a banker told Reuters last week. "My prediction is that the SFR and Numericable deal is what gets done. The rest of it is just noise."

For Bouygues, the motivation behind such a major acquisition would be to secure a better footing in a market that has been in the grip of a sustained price war since Iliad's Free Mobile launched its low cost plans in January 2012. SFR, Orange and Bouygues Telecom have all suffered from the effects of falling prices and have been forced to take radical measures to attract and retain customers.

Societe Generale told Reuters that a combined Bouygues Telecom/SFR would have 42.8 per cent market share in mobile overall, compared with 35.5 per cent for current market leader Orange.

For its part, Vivendi has been seeking options for SFR for some time as part of its strategy to rid itself of its troublesome telecoms assets and focus on its media business. In November Vivendi's supervisory board agreed unanimously to the plan to demerge SFR from the group, but the company is open to an outright sale if the price is right, sources have said.

Vivendi also recently entered into exclusive negotiations with Belgacom on the acquisition of 100 per cent of the Belgian incumbent's Telindus France unit, in order to strengthen SFR's unified communications services for enterprise users ahead of the company's spinoff.

For more:
- see this Reuters article
- see this separate Reuters article
- see this Les Echos article (translated by Google Translate)
- see this Bloomberg article

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