Orange SA and Bouygues SA are heading into a make-or-break weekend as they try to salvage their wireless-phone merger plan, after acknowledging that talks had not advanced sufficiently to clinch a deal.
Shares of both companies declined after they agreed to extend discussions, with months of talks failing to produce an agreement on a deal that would create a French wireless giant. The boards will meet again before the end of 3 April after a final negotiating push, they said in separate statements on Thursday. Orange’s planned purchase of Bouygues’ wireless carrier would value the unit at as much as €10 billion ($11 billion).
The companies and the French government have yet to agree on how many Orange shares and votes Bouygues would receive in the transaction, people familiar with the matter said. The sides are also still debating how potential breakup fees would be shared, with board members raising questions about the risk that a deal might be knocked down by competition authorities, the people said, asking not to be identified because the matter isn’t public.
Bouygues said its board "will meet before the end of the weekend in order to make a final decision whether to pursue the merger plan or not."
A union would eliminate one combatant in one of Europe’s most competitive wireless markets, cutting the number of major players to three and potentially making competition less fierce. That would allow Orange to save on costs such as equipment purchases and customer service. French telecommunications companies have been seeking to combine in the aftermath of a price war caused by Iliad SA’s 2012 entry into the mobile market with discounted offers.
Shares of Orange declined 1.5 per cent to €15.35 at 9:10 am in Paris, while Bouygues lost 3.3 per cent to €36.
The talks involve numerous parties as Orange tries to offload some Bouygues assets to allay any antitrust concerns. To head off any antitrust challenges, Orange has been negotiating to sell part of Bouygues Telecom’s assets to Numericable-SFR and Iliad, the No. 2 and 3 operators in the French market by clients. A smaller operator, Coriolis Telecom SAS, may bid for some Bouygues Telecom assets, Le Parisien reported this week. Last year, Bouygues rejected a €10-billion offer from Numericable, which is controlled by billionaire Patrick Drahi’s Altice NV.
The French government holds about 23 per cent of Orange, the former state phone monopoly, including a direct stake of about 13 per cent and about 10 per cent owned through Bpifrance, the public investment bank.
While carriers have argued they can’t sustain investment unless competition eases, regulators have applauded cheaper phone packages as benefiting consumers. Orange said 5 January it was in talks to buy the Bouygues business.
The discussions have dragged on for months, at times teetering on failure. Orange had said it was aiming for a decision by the end of March. Bouygues said 24 February the talks need to be completed by the end of the first quarter to limit disruption to clients, employees and the market.
While Orange has fashioned a deal meant to avoid approval problems, the agreement will still require review by the French Competition Authority.
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