Suspicion and soured relationships sank Bouygues Telecom's deal

Sun Apr 3, 2016 7:09pm EDT
 
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By Mathieu Rosemain and Sophie Sassard

PARIS/LONDON (Reuters) - When French Prime Minister Manuel Valls phoned billionaire Martin Bouygues on Thursday evening in an attempt to save a merger between Bouygues Telecom (BOUY.PA: Quote) and state-controlled Orange, it was already too late.

The deal would have created the dominant player in an industry damaged by fierce competition, but collapsed on Friday morning with Bouygues deciding not to sell his telecoms business to the former state monopoly even though he had floated the idea himself four months earlier.

The fact Bouygues had confirmed that the unprofitable telecom service provider he founded in 1994 was for sale made his rivals and Economy Minister Emmanuel Macron think the businessman had decided he had no choice but to sell, said four people involved in the talks who spoke to Reuters on Saturday and Sunday.

"It's probably because of this first call that they all tried to rip him apart," one of the sources who is close to Orange (ORAN.PA: Quote) said, referring to the French government, which owns 23 percent of Orange, and rivals Iliad (ILD.PA: Quote) and SFR NUME.PA.

For the deal to go through, Iliad and SFR would have had to agree to buy some Bouygues Telecom assets to ease competition concerns.

Spokespeople for the French Economy Ministry, Orange, Bouygues, SFR and Iliad declined to comment for this story.

The weeks of deliberations were the best chance in years to take a contender out of the game and ease competitive pressures that had hammered profits in the industry and drained the capital needed for network investments to better serve an increasingly data-driven economy.

The deal's collapse is a blow not just for the companies but for the French government.   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