French telcos explore wider bid for billionaire Drahi’s assets
Orange, Bouygues and Free consider new proposal for multiple Altice assets after €17bn bid for SFR was rejected
French telecoms groups Orange, Bouygues and Iliad-owned Free are exploring a fresh multibillion-euro offer to buy rival SFR that would also encompass other assets from Patrick Drahi’s Altice France empire, as they step up efforts to bring the tycoon to the negotiating table.
The three operators, which had a €17bn joint bid for the bulk of SFR’s operations rejected in October, are exploring an expanded bid in an effort to simplify any sale process for Drahi, according to three people familiar with the matter.
As well as SFR, Altice France also owns operations in the French overseas territories and holds stakes in outsourcing operation Intelcia, data centre business UltraEdge and broadband network XpFibre.
Orange, Bouygues and Free said their offer for SFR last month, which was swiftly rejected by Altice France, corresponded to an enterprise value of €21bn for the entire company.
The people emphasised that the consortium was also considering other options — including a renewed effort to acquire SFR alone.
The potential sale of SFR, Altice’s flagship brand, comes as Drahi looks to dismantle a communications empire he built through a debt-fuelled deal spree, piling about $60bn in debt at its peak across the group.
As interest rates have risen, the French-Israeli billionaire has been forced to restructure Altice’s debts and sell assets. The hope among the bidders for SFR is that a deal to take several assets off Drahi’s hands in a single transaction would simplify this process.
But a disposal of SFR, which would reduce the number of operators in France’s telecoms market from four to three, is likely to face intense regulatory scrutiny.
Under the terms of the initial offer the three bidders would have carved up SFR’s consumer business between them, with Bouygues and Free sharing the B2B unit. Altice felt the offer undervalued SFR.
Two of the people said the consortium is trying to strike a deal ahead of spring next year, when Orange is expected to close its €4.25bn acquisition of the other 50 per cent of its Spanish subsidiary MasOrange. That deal could result in intensified regulatory scrutiny of an SFR buyout.
Under EU rules, the automatic trigger for Brussels to review a merger is not met if each of the parties involved derives more than two-thirds of its EU-wide turnover from one member state. The buyout of MasOrange will result in Orange — which currently makes about two-thirds of its revenues in France — falling below that threshold.
The consortium believes French regulators may look more favourably on a deal than their counterparts in Brussels, according to people familiar with their thinking.
However, New Street Research analyst Russell Waller said that either way Brussels “will probably want to have a say” on a deal of “such significance”.
The bidders believe that ongoing customer losses at SFR — which totalled 99,000 in mobile and 19,000 in broadband between April and June this year — will lower the value of the asset over time, according to people familiar with their thinking.
Drahi is simultaneously running separate sale processes for several Altice France assets, including SFR’s business division, its broadband network infrastructure and XpFibre.
Altice has received a bid of about €1bn for the B2B unit from Altitude, a business services provider, according to two people with knowledge of the situation.
Following a recent restructuring of Altice France’s €24bn debt pile, which saw creditors take a 45 per cent stake in the group, Drahi must gain approval from an independent director on any asset sale of more than €3bn.
The company’s creditors may block any independent bid for Altice’s B2B unit in the hope that the consortium makes a new approach, according to a person familiar with their thinking.
Altice France, Iliad and Orange declined to comment. Bouygues did not respond to a request for comment.