Bidding war could lead to consolidation in French mobile telecommunications

SFR is the subject of a merger proposal from rival operator Bouygues Telecom and a competing bid from ISP and cable TV operator Numéricable

French mobile operator SFR is the target of a bidding war between construction giant Bouygues, which hopes to merge the network with that of its own Bouygues Telecom subsidiary, and Altice, owner of French ISP and cable TV company Numéricable.

Late Wednesday, Bouygues offered to buy SFR from Vivendi for €10.5 billion (US$14.5 billion) and a 46 percent stake in the combined entity. It said its offer valued SFR at around €19 billion, taking into account the merger's value.

Altice, too, announced Wednesday that it had made an offer for a controlling stake in SFR, but did not provide details. Reports emerged last week that it planned to make a highly leveraged offer through its Numéricable subsidiary, prompting French government officials to express concern that the resulting heavily indebted company would be unable to invest in new technologies and network roll-out.

Vivendi confirmed it had received the offers, saying that its supervisory board would now study them, taking into consideration the best interests of its employees and shareholders.

If Bouygues were to win the bidding, the resulting merger would reduce the number of mobile networks in France to three, putting the combined entity ahead of current market leader Orange (formerly France Télécom) and of fledgling operator Free Mobile, which is building out its own 3G network around major cities, but is still largely dependent on a roaming agreement with Orange for nationwide coverage. Bouygues Telecom and SFR together would also become the country's second-largest ISP.

France is unusual among large European countries, in that it has only one truly international player, Orange, among its four mobile networks. Orange also has mobile networks in Spain, Poland and elsewhere, and retains a stake in its U.K. joint venture with Deutsche Telekom, EE (formerly Everything Everywhere).

Spain, on the other hand, not only has Orange, but also Telefónica, which has operations elsewhere, including Germany, Italy and the U.K., and a subsidiary of U.K. operator Vodafone, also present in Germany and Italy.

SFR was once part-owned by Vodafone, but the company eventually gave up its stake when Vivendi proved reluctant to sell. Vivendi is ready to get out of telecommunications, but SFR, its profitability depressed by the price war that followed the arrival of Free Mobile in early 2012, makes a less attractive target now. Teaming up with Bouygues Telecom may make it more interesting to international buyers.

Peter Sayer covers open source software, European intellectual property legislation and general technology breaking news for IDG News Service. Send comments and news tips to Peter at peter_sayer@idg.com.

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Tags business issuesBouyguestelecommunicationVivendiBouygues TelecomAlticeorangeSFRMergers and acquisitionsNuméricable

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