French telecoms groups raise takeover offer for Patrick Drahi’s SFR
Deal would be a key test of antitrust regulators’ views on in-market consolidation
A consortium led by Bouygues Telecom has agreed to enter exclusive talks to buy the French telecoms unit of billionaire Patrick Drahi, in a long-awaited deal that will test regulators’ appetite for consolidation.
Bouygues, state-backed telecom group Orange and Iliad submitted a joint offer for SFR that would carve up SFR’s fixed, mobile and business service among themselves.
The bid values France’s second-biggest telecoms group, now owned by Drahi’s Altice Group, at €20.4bn, a higher price than the initial bid of €17bn that Drahi rejected in October.
If agreed, the deal will boost the buyers’ profitability by reducing intense competition in France and delivering large synergies.
Antitrust regulators have long been wary of such in-market consolidation because there is a risk that it would lead to higher prices for consumers, so they may block the deal or require concessions from the buyers.
But European competition watchdogs are now planning the biggest relaxation of rules on corporate mergers in decades, the FT reported this week, to help strengthen the EU economy by encouraging industrial champions capable of taking on US and Chinese rivals.
Telecoms groups in Europe have been lobbying for decades for a relaxation of merger rules, arguing they are being squeezed by big tech and video streaming companies that consume massive bandwidth yet do not have to contribute to building or maintaining communications networks.
The European telecoms market remains far more fragmented, with dozens of providers, than the US and China that only have about three players each.
For Drahi, the SFR sale is the latest in a string of divestments that have dismantled much of his once-sprawling telecoms and media conglomerate that was built in the past decade in a debt-fuelled acquisition spree. Drahi wants to wind down the group that once stretched from the US to Israel and reduce heavy debts that have led to repeated clashes with lenders.
The acquiring companies said they had until May 15 to negotiate a final offer with Drahi, warning that there was no certainty a deal would be finalised.
In a joint statement, the three buyers said the transaction “would help sustain and strengthen the entire digital economy and the telecommunications sector in France”.
They added: “The split of price and value between buyers would be around 42 per cent for Bouygues Telecom, 31 per cent for Iliad and 27 per cent for Orange.”
The proposed structure of the takeover would involve Bouygues, Iliad and Orange splitting SFR’s consumer mobile and broadband unit and its customers between them, while Bouygues would have the business that serves corporate clients. Other assets, such as mobile spectrum and network infrastructure, would also be divided up, save for in smaller towns and rural areas where they would go to Bouygues.
Labour unions at SFR have sounded the alarm on the risk of mass lay-offs if the deal goes ahead and the French government has also said it would be vigilant about the risk of price hikes for consumers and business.