Orange-Bouygues Telecom deal talks to rumble on

Tuesday, Feb 16, 2016

France’s largest mobile operator by subscribers is locked in negotiations with Bouygues Telecom, the country’s third-biggest telecoms provider, over an agreement that would transform the sector by reducing the number of players from four to three.

Reports at the weekend suggested that a deal — Orange is expected to pay about €10bn for Bouygues Telecom in cash and shares — could come as early as Tuesday, when Orange reported full-year earnings.

The operator reported earnings before interest, taxes, depreciation and amortisation of €12.43bn, slightly ahead of analysts’ forecasts of €12.3bn.

Revenue for 2015 was €40.24bn, flat when compared with 2014 on a like-for-like basis. As a percentage of revenues, ebitda was 30.9 per cent during the year, 0.1 percentage point higher than in 2014.

Sales during the past three months of 2015 reached €10.4bn, little changed on a like-for-like basis when compared with the same period a year earlier. The company said on Tuesday that it was aiming for a higher adjusted ebitda on a like-for-like basis this year than in 2015.

In spite of heightened speculation over an imminent announcement, simultaneous discussions with Free and Numericable-SFR have added a layer of complexity to the talks.

In particular, Orange is trying to broker a deal that would see France’s other two operators buy large chunks of Bouygues Telecom’s infrastructure, spectrum and client base.

The four-way discussions, considered a necessary part of any deal for it to pass muster with the country’s competition authorities, were described by a person close to the situation as “extremely complicated”.

On Tuesday, as it announced its full-year results, Orange said of the talks with Bouygues Telecom: “These discussions are ongoing and require at least several weeks before any decision is taken.” It added that Orange, whose largest shareholder is the French state, would act “solely” in the interests of its investors, employees and customers.

Analysts say that a deal, if successful, would reshape France’s telecoms landscape, one of Europe’s most competitive. The entry of low-cost operator Free in January 2012 added a fourth company in the sector, forcing groups to lower prices to consumers while slashing their cost base.

Operators such as Bouygues Telecom have been hit particularly hard by the price war. Industry executives as well as analysts see a potential Orange-Bouygues Telecom tie-up as a way to stabilise prices and set the conditions for increasing investment in the sector.


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