Back to plan A – Option values removed
The determination of the four French operators to consolidate their domestic market has proved
insufficient to overcome the complexity of such a deal. We are now back to stand-alone strategies
for some time to come and have therefore removed consolidation option values from our TPs,
notably driving a 18–20% cut on Bouygues and Iliad.
We prefer Orange (+) to Numericable-SFR (-) at the high end of the market
All operators have fibre ambitions but for now, only Orange and Numericable-SFR benefit from an
infrastructure advantage. We prefer Orange, for which the improving trends look sustainable. For
NUM-SFR we are increasingly concerned about the group’s ability to regain commercial
momentum and restore long-term growth. We remain Outperform on Orange (TP unchanged at
EUR18) and Underperform on NUM-SFR (TP cut to EUR28 from EUR35).
We stay away from the low end market; Iliad and Bouygues downgraded to (=) from (+)
In the long run, we believe Iliad has the financial strength to execute its 4G and fibre plans and join
the high end of the market. But in the short term, the company remains exposed to the highly
competitive lower-end market and needs to manage the parallel acceleration of its 4G and fibre
investment. Conversely, we expect Bouygues Telecom to maintain its commercial momentum near
term, but think it lacks the ability to invest and should see its competitive position deteriorate in the
medium term. We downgrade Iliad (TP EUR200) and Bouygues (TP EUR32) to Neutral.