Orange abandons bid to buy Bouygues phone unit as talks fail

Paris: Orange SA abandoned its attempt to buy the phone business of Bouygues SA, denying the French phone industry a much-sought consolidation that would have eased competition in one of Europe’s toughest markets.

“After in-depth discussions, the board of directors of Orange has concluded that an agreement regarding a possible consolidation with Bouygues Telecom has not been reached,” Orange said Friday in a statement.

The sides had imposed a deadline by the end of the weekend, but the talks broke down well before then. Bouygues, in a separate statement, said key sticking points included social guarantees for its employees, the level of its stake in Orange and related governance, execution risk and the valuation of its telecom unit.

Negotiators toiled for months to craft an agreement involving at least four companies and the French government. In the end, the obstacles were too much to overcome. An accord would have cut the number of major French wireless carriers to three, giving Orange breathing room to save on costs such as equipment purchases and customer service.

Government role

Orange was negotiating with competitors Iliad SA and Numericable-SFR SAS and the French state over the sale of assets to fend off antitrust concerns. A deal would have valued Bouygues’ carrier at as much as €10 billion ($11 billion; Dh41.81 billion).

Disagreements surfaced over issues such as valuation, breakup fees and who would buy or take over assets such as Bouygues’ mobile frequencies and network, stores and personnel, people familiar with the matter said over the past weeks.

In effect, a transaction would have made Bouygues a partner with the French government, Orange’s biggest shareholder. Bouygues failed to sway the government on the price it would pay for Orange shares, standstill terms for increasing its Orange stake, and voting rights, according to people familiar with the negotiations. Antitrust risk also caused hesitation at Bouygues’ board, and an already complex deal became too messy after other players started to back away from annex agreements about asset sales, said the people, who asked not to be named because the details weren’t public.

The failure leaves the number of major mobile-phone companies in France at four. Domestic European carriers have been combining in the aftermath of massive price drops caused by Iliad’s 2012 entry into the mobile market with discounted offers. While the companies have argued they can’t sustain investment unless competition eases, regulators have applauded cheaper phone packages as benefiting consumers.