In what would be one of the largest European telecom acquisitions in recent years, Bouygues, Iliad-Free, and Orange increased their bid for French telecom operator SFR to 20.35 billion euros ($23.97 billion) on Friday.
In a crowded European telecom market, where operators have long maintained that scale is necessary to sustain investment, the trio’s proposed deal would reduce France’s mobile network operators from four to three, setting up a crucial test for regulators’ willingness to permit consolidation.
Additionally, billionaire Patrick Drahi, who has been portrayed as the French counterpart of John Malone, who was renowned for his intricate dealmaking, would completely leave SFR.
The consortium returned with a revised bid that fell short of Drahi’s expectations after around five weeks of due diligence.
Both parties then spent roughly two weeks bridging the gap to negotiate a final price.
Legal safeguards associated with the assets were also discussed. The consortium created a list of recognized legal risks and negotiated a protection mechanism with Altice France that addressed those risks.
Iliad and Orange would own 31% and 27% of SFR, respectively, while Bouygues Telecom would own 42%. The bid excludes other assets, primarily fibre infrastructure and SFR’s international businesses.
Ahead is political and regulatory scrutiny.
The bidders stated that an exclusivity period for negotiations ends on May 15 and that any deal would be subject to consultation with the appropriate employee representative bodies and subsequently require approval from antitrust regulators.
French and European competition authorities will closely monitor the acquisition if it proceeds.
An Orange representative said each operator purchasing a share of SFR will go through a separate antitrust review.
Regarding employment, consumer prices, and ongoing network investment, France’s Finance Ministry declared that it would continue to be “extremely vigilant.”
Intermonte analysts said allowing France to reduce its number of operators from four to three without selling assets by employing behavioral remedies like wholesale access might set a precedent for consolidation throughout Europe, particularly in Germany, Italy, and Spain.
Orange hopes to achieve an agreement before summer and anticipates financing its portion through debt without affecting its balance sheet.
Following the announcement, Bouygues shares dropped 1.3%, while Orange shares dropped 3.6%. According to JPMorgan, investors may be concerned that the bidders are overpaying for the assets.
