Altice Confirms Bid for Bouygues Telecom

Combination with Numericable-SFR would produce France's biggest mobile operator and leave country with just three mobile networks.

Iain Morris, International Editor

June 22, 2015

4 Min Read
Altice Confirms Bid for Bouygues Telecom

French cable company Altice has confirmed it has made a fresh offer to buy Bouygues Telecom, France's third-biggest mobile operator, following weekend reports that it was looking to pay as much as €10 billion (US$15.85 billion) for the business.

A deal would leave France with just three mobile network operators and put Altice in control of the country's biggest player if regulators allow it to combine Bouygues Telecom with its Numericable-SFR unit, which currently operates France's second-biggest mobile phone business and the country's largest cable outfit.

Similar consolidation has been sweeping across Europe but Altice's move could face opposition from French politicians keen to preserve the current four-player set-up. European Union officials have also recently expressed concern about the impact takeover activity could have on competition in the telecom sector. (See BT, EE Defend $19.9B Merger Plans.)

Media reports suggest Altice founder and chairman Patrick Drahi is willing to pay a huge premium to secure ownership of Bouygues out of concern that rising interest rates could make a bid even costlier in the months ahead.

According to a Reuters report, a number of analysts believe Bouygues is currently worth about €5 billion ($7.9 billion), just half of what Altice is said to be offering.

Drahi has been in an acquisitive mood in the past couple of years, adding SFR, US cable operator Suddenlink and Portugal Telecom to his expanding telecom empire. (See Is Altice the Great US Cable Consolidator?, What's It All About, Altice? and Altice to Buy Suddenlink in $9.1B Deal.)

Like other executives in the European telecom market, Drahi believes ownership of both fixed and mobile assets will prove critical amid growing demand for converged services and as rivals focus on luring consumers to "quad-play" bundles of fixed voice, broadband, mobile and TV services.

France is now home to four national operators rolling out both fiber and 4G networks. Besides Numericable-SFR and Bouygues, those include former state-owned monopoly Orange (NYSE: FTE) and the highly disruptive Iliad (Euronext: ILD).

Numericable-SFR has the most extensive fiber footprint of all the national players, according to recent data, while Bouygues lags only Orange when it comes to 4G coverage.

Fiber footprint (millions of homes passed)

4G coverage (% of population)

Orange

3.9

76%

Numericable-SFR

6.7

50%

Iliad

3.4

40%

Bouygues Telecom

2

71%

A Numericable-SFR takeover of Bouygues could also help to boost profitability in the French mobile market, which has seen prices tumble since Iliad strode into the market in early 2012.

After Iliad launched a series of cut-price offers, other players were forced to overhaul their own tariffs or risk losing more subscribers to the aggressive upstart.

Numericable-SFR has been concentrating more on catering to heavier-spending consumers than on trying to build market share. Last month, the operator raised its medium-term profitability targets after reporting a year-on-year increase in EBITDA for the first three months of the year, but it saw revenues drop by 4.6% over the same period. (See Numericable-SFR Raises Profit Targets.)

Loss-making Bouygues, which has been the subject of takeover speculation for some time, flagged a 2% fall in sales in January-to-March quarter but said EBITDA was stable, compared with the same period of 2014, "as the effect of repricing within the customer base was offset by cost savings."

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Drahi is hoping to overcome the objections of competition and regulatory authorities to his latest move through a parallel agreement with Iliad, which would acquire spectrum and network assets from Bouygues during a deal, according to Reuters.

In a statement published on its website, Numericable-SFR says "it has entered into exclusive negotiations with Iliad for the resale of a portfolio of assets in the context of this offer."

Light Reading approached Altice for further details about the arrangements with Bouygues and Iliad but had not received a response at the time of publication.

Shares in both Altice and Bouygues appeared to receive a huge boost from confirmation of the offer. Altice's stock was trading about 22% higher on the Amsterdam Stock Exchange on Monday morning, while Bougyues' was up about 15% on the Euronext Paris.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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