Business
Orange and Bouygues called off their $11.4bn French telecoms deal.
Reuters reports:
A proposed deal between state-controlled telecoms group Orange (ORAN.PA) and Bouygues (BOUY.PA) to create France's biggest telecoms operator collapsed on Friday, ending an attempt to ease a price war that has ravaged their margins. The collapse of the proposed 10 billion euro ($11.4 billion) cash-and-share deal is a blow to the two companies and the French government, which was heavily involved behind the scenes. A stand-off between billionaire Martin Bouygues and French Economy Minister Emmanuel Macron about the clout the businessman would have gained in the former state monopoly had effectively ended the deal, sources had told Reuters earlier. [nL5N17426F] 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 rival Iliad (ILD.PA). "In a market where the possibility of consolidation is now ruled out for the long term, Bouygues Telecom will continue its standalone strategy," Bouygues, the construction-to-media conglomerate led by Martin Bouygues said in a statement. Orange, in which the French government owns about 23 percent, also confirmed negotiations had ended.
The sides had imposed a deadline by the end of the weekend, but the talks broke down well before then. Bouygues, in a separate statement, said key sticking points included social guarantees for its employees, the level of its stake in Orange and related governance, execution risk and the valuation of its telecom unit. Negotiators toiled for months to craft an agreement involving at least four companies and the French government. In the end, the obstacles were too much to overcome. An accord would have cut the number of major French wireless carriers to three, giving Orange breathing room to save on costs such as equipment purchases and customer service.
The Wall Street Journal writes:
The government wanted to maintain a dominant stake in Orange, allowing it to remain in the driver’s seat at the former state monopoly. Bouygues’s entry into Orange’s capital placed that at risk, as the company was demanding a stake of up to 15% and significant board representation. The collapse deals a major blow to long-running efforts by France’s biggest telecom operators to consolidate a sector that has seen its profitability eroded by price wars. Telecom executives have long argued that consolidation is necessary for them to increase investment in networks and compete with rivals abroad.
