SFR bidder Altice hails need for mobile and fixed convergence

Altice founder Patrick Drahi said the future of telecoms lies in the convergence of mobile and fixed operations and not in the merger of mobile operators that are in decline and do not know how to deliver high-speed fixed-line services.

In France, Drahi is hoping to achieve his ambition of creating a fixed and mobile operator through the merger of Vivendi-owned SFR with Altice-controlled Numericable.

In an interview with French newspaper Les Echos, Drahi reiterated that Altice does not plan to increase its offer for SFR, and said the offer remains valid until Friday. Last week Altice made an offer to Vivendi that included €10.9 billion ($15 billion) in cash and Numericable shares representing 32 per cent of the share capital of new Numericable-SFR group.

Drahi faces some formidable competition from Bouygues. In a bid to smooth the regulatory path, the telecoms and construction group has said it will sell its mobile network to Iliad if its offer to buy SFR is approved--a move that has since been criticised by Numericable CEO Eric Denoyer as "not credible'.

"Our strategy is to build the best network and use it to grow - not on marrying two operators in decline just to wring out cost savings," Denoyer told Reuters. "There is no need for asset sale or concessions or anything."

The Altice/Numericable offer is expected to encounter less regulatory resistance because the market would retain four mobile operators, while a merger of Bouygues Telecom and SFR would reduce the number of mobile operators to three from four. Bouygues' bid includes €10.5 billion in cash, and a 46 per cent stake in the new company.

Bouygues' deal with Iliad is nonetheless a strong early move and clearly underlines the company's intentions. For his part, Drahi is not only playing the convergence hand but is tapping into French patriotism: Drahi told Les Echos that his plan is a "real made in France" project that will be based in France and pay French tax, and added that Numericable already users French equipment manufacturers such as Alcatel, Sagemcom, and Technicolor.

This will no doubt meet with the approval of French ministers who have recently called on French consumers to buy products "made in France" in an effort to boost the economy and generate employment.

Drahi has also promised that there will be no job cuts, and said the combined Numericable-SFR would generate "more than €1 billion in cash flow synergies per year".

"Marrying our network with the commercial strength of the SFR brand, we will be capable of recruiting almost 5 million customers in four years," he added.

Drahi said he would undertake a complete overhaul of SFR should the merger with Numericable go through, noting that SFR currently spends almost €400 million a year on IT per year, compared with €20 million at Numericable.

Meanwhile Numericable reiterated its three-year targets on Wednesday to increase sales by 2-5 per cent annually and invest in upgrading its network. The company said adjusted EBITDA fell 0.5 per cent to €616 million in 2013 as revenue grew slightly by 0.9 per cent higher to €1.31 billion.

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

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