France to rule on Orange-Bouygues Telecom deal
Orange’s potential merger with Bouygues Telecom would require approval only from French competition authorities, and not the European Commission, said people familiar with the situation — increasing the chances of a deal.
At least two people with knowledge of the matter have said that Orange, France’s biggest mobile operator by subscribers, would qualify for scrutiny solely by national regulators because it meets a criterion that two-thirds of its European revenues come from France.
A €10bn acquisition of Bouygues Telecom, France’s third-biggest mobile operator, by Orange would drastically change the telecoms landscape in France: reducing the number of competitors from four to three; potentially ending a three-year price war; and setting conditions for higher spending on infrastructure.
But when Orange confirmed that discussions were taking place earlier this month, doubts surfaced as to whether an eventual proposal would be a subject for Brussels or Paris.
Since then, UK competition authorities have indicated that they will give the green light to the sale of Orange’s EE stake to BT. That approval helps tip Orange’s revenue profile in favour of qualifying for French competition scrutiny only.
In comments last week, Stéphane Richard, Orange’s chairman and chief executive, said examination of any deal in Paris or Brussels would make little difference. However, analysts have indicated that such a deal would stand a much greater chance of success if examined in France.
European Commission regulators are widely seen as favouring higher competition as a way of keeping prices low for consumers. Margrethe Vestager, the competition commissioner, blocked a proposed telecoms merger in Denmark in September, in her only ruling in the sector since taking up the post.
By contrast, analysts have suggested that French competition authorities would be more likely to weigh other factors in a potential Orange-Bouygues deal, such as stimulating investment in the telecoms sector.
“Examination of a deal in France would mean that authorities could balance up consumer issues against investment,” said Jerry Dellis, telecoms analyst at Jefferies. “Certain industrial policy objectives can be taken into account.”
Emmanuel Macron, France’s economy minister, has said that he is “not religious” on the issue of market consolidation, and the government, which is also Orange’s largest shareholder with a 23 per cent stake, is known to want more investment in telecoms infrastructure.
Nevertheless, even with home regulatory advantage, people familiar with the talks said there were still several difficult hurdles to overcome. Not least of these is the need for Orange to strike agreements with the country’s two other competitors — Numericable-SFR and Free — to offload some of Bouygues Telecom’s network, and allay domestic competition concerns.