Orange and Bouygues $11.4 billion French telecoms deal collapses

Fri Apr 1, 2016 4:58pm EDT
 
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By Mathieu Rosemain, Gwénaëlle Barzic and Sophie Sassard

PARIS (Reuters) - Talks between Orange (ORAN.PA: Quote) and Bouygues (BOUY.PA: Quote) on a deal to create a dominant French telecoms operator collapsed on Friday, ending an attempt to ease a price war that has ravaged operators' margins.

The failure of the proposed 10 billion euro ($11.4 billion) cash-and-share deal involving Bouygues Telecom is a blow to the two companies and the French government, which was heavily involved as it has a stake of around 23 percent in Orange.

The proposed tie-up was widely seen as a make-or-break chance to reduce the number of telecoms groups to three from four and prop up profits, which have been depressed since the arrival of low-cost operator Iliad.

But a stand-off between Martin Bouygues and French Economy Minister Emmanuel Macron about the clout the billionaire would have gained in the former state monopoly had weighed on the talks, sources had told Reuters earlier.

"The two main reasons explaining the failure of these talks are execution risks and the general attitude of the French state," a source close to the matter told Reuters.

The risks included the break-up fees involved and the conditions under which each party involved would have been able to withdraw from the deal, the source added.

Orange's position as the No. 1 French telecoms operator meant that an acquisition of Bouygues Telecom would have required selling some of its assets to rivals Iliad (ILD.PA: Quote) and SFR NUME.PA, with which Orange held parallel negotiations.

This added to the complexity of getting a deal done, sources said, as apart from Bouygues himself, the talks involved two other influential billionaires, Iliad's founder Xavier Niel and SFR's owner Patrick Drahi.   Continued...

 
Company logos for French telecom operator Orange, on a tablet screen, and Bouygues Telecom, on a mobile phone screen, are seen in this illustration photo taken in Nice, France, April 1, 2016.  REUTERS/Eric Gaillard