Sfr, French risiko in Tlc: Bouygues, Iliad and Orange in exclusive negotiations

A new attempt, which places France as a possible forerunner of a whole consolidation effort that has been (too) long indicated as salvific by the European Tlc industry.

Bouygues Telecom, Orange and Iliad announced that they have entered into exclusive negotiations with Altice France for the takeover of Sfr, France's second largest operator, with an offer that values the assets at EUR 20.35 billion. It is a figure raised from the initial offer of 17 billion returned to sender by Altice's owner, Patrick Drahi. But above all, it is a sign of what is at stake: the already mature and fiercely competitive French market could drop from four to three big players, in one of the most sensitive deals in recent years for industry, politics and antitrust.

The exclusivity granted by Altice France will last until 15 May and will serve to finalise the terms and documentation of the transaction. The consortium has also already put pen to paper on the division of the perimeter: the B2B business would go to Bouygues; the consumer business would be divided among Bouygues, Iliad and Orange; infrastructure and frequencies would be divided among the three, with the exception of Sfr's mobile network in the less dense areas, destined for Bouygues Telecom. The expected distribution of price and value is about 42% to Bouygues, 31% to Iliad and 27% to Orange.

In a joint note, the three groups claim an industrial and national logic. The operation, they read, would allow 'strengthening investments in the resilience of ultra-wideband networks, in cybersecurity, but also in innovation and new technologies such as artificial intelligence'; 'consolidating control of strategic infrastructures for the country'; and 'preserving a competitive ecosystem for the benefit of consumers'.

But the point is right here. Because if for years European operators have been calling for an easing of the rigidity on concentrations, arguing that they do not have sufficient mass to compete and to finance networks, on the other hand the classic fear of the authorities remains open: less competition may mean higher prices for consumers and businesses. This is also why the Sfr dossier goes beyond French borders: it is both a market test and a regulatory test for Tlc in the EU. Where, moreover, the framework of the new guidelines on mergers is coming to a head and could put pen to paper a loosening of the rules that the telcos are crying out for, with their revenues and margins being consumed by hyper-competition and price wars (Italia docet).