Orange engages Bouygues in French Telecom merger talks

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Baku, January 6, AZERTAC

French telecom operator Orange SA has entered preliminary talks to buy the telecom assets of construction-to-media conglomerate Bouygues SA in an attempt to consolidate France’s cutthroat broadband and mobile industries.

The two companies said Tuesday they had signed a confidentiality agreement. The move paves the way for the firms to exchange crucial financial information to assess a possible deal, deepening preliminary talks that have been under way since October.

“These discussions aren’t limited by any particular calendar and hold no commitment to any particular predefined outcome,” Orange said.

A deal would help France’s telecom operators recover a year long price war stemming from the rise of a fourth mobile operator owned by Iliad SA.

Bouygues Telecom suffered the most from the subsequent price war, because it had a larger staff relative to its base of subscribers. The increased competition also affected competitor SFR, leading then owner Vivendi SA to embark on spree of asset sales that eventually led to SFR’s purchase by cable magnate Patrick Drahi.

Shares in France’s telecom sector rose sharply early Tuesday on hopes that an Orange-Bouygues Telecom deal would ease competition and bolster prices. Orange and Bouygues shares rose 1.3% and 0.2% respectively in early trading. Shares in cable and mobile-telecom operator Numéricable-SFR SA surged 8% while Iliad rose 2.9%.

A combination of Orange, France’s biggest operator, and the No. 3 operator Bouygues Telecom could require the disposal of significant assets to receive approval from antitrust authorities, according to analysts.

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