--> Three main scenarios over the coming 12 months
1) Status quo: consolidation does not materialise as operators struggle to agree on the Bouygues T. valuation;
2) Iliad to buy Bouygues T.: Iliad appears the most likely buyer as Num will be busy integrating SFR operations and be affected by high leverage (ND/EBITDA ~3x). The main driver for Iliad would be to obtain full mobile coverage;
3) Num-SFR to buy Bouygues T.: although less likely this scenario appears possible too. Num is indeed more open to acquisitions than Iliad, whose strategy has always been mainly based on organic growth and safe balance sheet structure.
--> UBS scenario analysis indicates Iliad is the best play
Iliad: our PT is derived on a standalone basis. Assuming French mobile consolidation (whichever scenario), we see >15% potential upside to our PT. Bouygues: our PT and the current share price already factor in a large M&A premium. Orange: assuming M&A triggers market repair (only if Iliad buys Bouygues T.) we estimate potential upside to our PT of <15% at ~€9.
--> Iliad is our only BUY – SELL on Orange and Bouygues, Neutral on Vivendi
We reiterate our Buy rating on Iliad, PT €208 (DCF). Orange, Sell – PT €7.9 (DCF), Bouygues, Sell – PT €24 (SOTP), Vivendi, Neutral – PT €18.5 (SOTP).