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SFR buyout threatens to shake up French telecom market

© AFP

Text by FRANCE 24

Latest update : 2014-03-11

The proposed sale of one of France’s largest mobile phone networks to a rival firm is threatening to shake up the telecom market, with speculation that a three-way agreement would cut down on competition.

European telecom giants Numericable and Bouygues are locked in a multibillion euro battle to buy up SFR, France’s second largest mobile telephone network.

While Vivendi – SFR’s parent company –and French regulators consider the competing buyout proposals on the table, there has been much speculation about the eventual consequences for the country’s profitable telecom market.

Vivendi said over the weekend that it did not yet have a preference between Numericable and Bouygues, but the advantage appeared to be turning towards Bouygues.

In order to persuade anti-trust officials in France, Bouygues announced that it was ready to sell most of its network infrastructure - some 15,000 antennas - to mobile telephone newcomer Free if it was able to secure SFR.

Free, owned by the French entrepreneur Xavier Niel, has undercut telecom competitors by offering attractive TV/Internet/telephone packages to consumers and drastically slashing the price of mobile telephone services.

However, as a latecomer to the mobile telephone race, Free has a much smaller network of 3G and 4G antennas compared to France's main three mobile operators: Orange, SFR and Bouygues.

Free has only been able to compete in the mobile industry by renting antenna signal services from Orange. It owns 3,000 of its own antennas and pays Orange for the use of 12,000 other antennas.

Niel wades into the fray

This week Free’s Niel publicly endorsed the offer made by Bouygues’ that would allow him to purchase Bouygues antenna installations.

Niel said the thee-way agreement would be “favourable to consumers” and the best move for France’s economy.

“[Bouygues] is a French company that pays taxes in France. Its shareholders are also French, so the money will stay in France,” Niel said, adding that Numericable’s parent company was based in Luxembourg and traded on the stock exchange in the Netherlands.

Numericable shot back that Niel has failed to deliver on promises to build up telecom infrastructure in France, while it has invested heavily in connecting French homes to broadband cable.

A purchase by Bouygues would reduce the number of operators in France to three (Orange, Bouygues and Free). A buyout of SFR by Numericable, considered a “virtual” mobile service provider because it lacks its own network infrastructure, would see four operators vying for French customers in the future.

Bouygues and Free also appear to have found an ally in French Industry Minister Arnaud Montebourg, who said three stronger telecoms competing in France would be better for long-term employment than four weaker ones, where one risked eventual bankruptcy.

Numericable has said its 10.9 billion euro offer to buy SFR would be valid only until March 14.

Date created : 2014-03-11

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