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Mobile operator consolidation spreads to France

Orange confirms it is in discussions to buy local rival Bouygues

Mobile network operator Orange – founder of half of EE in the UK – has entered preliminary talks with local competitor Bouygues Group with a view to buying the Bouygues Telecom mobile network in France.

Orange confirmed that discussions were ongoing in a brief statement on its website, in which it said the talks were not limited by any timeframe, or any commitment to a predefined outcome.

It said it was “exploring the opportunities available within the French telecoms market” and that it would act “solely in the interests of its shareholders, employees and customers”.

According to reports in the French press, a deal could be worth about €10bn (£7.3bn) and, taken together, both operators would hold around 50% of the French mobile market.

This means both national and European-level regulators are likely take an interest, particularly in light of the disruption to the French mobile sector caused by newcomer Free Mobile, which has grown from 2.6 million customers in early 2012 to 11.3 million in September 2015, roughly the same number of subscribers as Bouygues.

Bouygues, which last year rejected a similarly valued takeover bid by rival Altice, said it was interested in opportunities that “would enable it to bolster its long-term presence in the telecoms sector”, particularly around ultrafast mobile and fixed services.

Kester Mann, principal analyst, operators at CCS Insight, said Paris is likely to extract significant concessions on any deal, including spectrum divestment and retail stores.

If a deal goes to Brussels for a ruling, current sentiment suggests that in-market consolidation is not ideal, with a recent proposed merger in Denmark being thrown out, and the merger between Three and O2 under in-depth scrutiny, said Mann.

“Today’s news will be welcomed by Numericable/SFR and Free as the elimination of a competitor strengthens their position in the French market,” he added. “Bouygues has sought to push hard the deployment of its LTE and LTE-Advanced networks to differentiate versus disruptive rivals, notably Free, which could prove attractive to Orange, which is positioning itself as a premium provider.”

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