Bouygues and Orange confirm merger talks

Mobile network operator Orange – founder of half of EE in the United Kingdom – has entered preliminary talks with local competitor Bouygues Group with a view to buying the Bouygues Telecom mobile network in France.

“The group is exploring the opportunities available within the French telecoms market, while keeping in mind that its investments and its solid position afford it a total independence in its approach”, the telco said.

Orange said that the talks were not “limited by any particular calendar” and said there was “no commitment to any particular outcome”.

The industrial and construction company headed by Martin Bouygues said in a separate statement that the two telecoms had signed “a confidentiality agreement”.

French telecoms firms have fought a drawn-out price war since low-priced Iliad joined the market at the start of 2012, leading to sporadic talks about deals.

Last year, Martin Bouygues, the group’s CEO reportedly rebuffed an offer from rival French telco, Numericable-SFR after holding out for at least Euro 11 billion.

The main issues in the negotiations would be jobs, investment in infrastructure and especially fiber optic networks, and antitrust-related disposals, a source familiar with the matter said.

A tie-up would reduce the number of operators in France to three, so it would have to be approved either by France’s competition watchdog or the European Union’s, since Orange has widespread interests outside France.

Kester Mann, principal analyst, operators at CCS Insight, said Paris is likely to extract significant concessions on any deal, including spectrum divestment and retail stores.

At 0913 GMT, Orange shares were up 1.2% to €15.37 while Bouygues was 1.8% higher at €37.84.

“For the second, no selections have been taken and there’s no assure that there can be an outcome to those preliminary discussions”, Bouygues added. Shares in Numericable-SFR leapt 10 percent, while Altice was trading up 5.6 percent.