Orange and Bouygues Telecom share price soars on confirmed merger talks but French telco deal faces competition probes

 
Clara Guibourg
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France’s largest mobile operator Orange has confirmed merger talks with rival Bouygues, marking the latest step in European telco firms’ race towards consolidation.

A deal between the two, merging France’s largest and third-largest operators, has been estimated to be worth €10bn (£7.3bn). Rumours of the talks were first reported by French newspaper Journal de Dimanche on Sunday, but Orange confirmed on Tuesday morning it was in preliminary talks “with a view to a consolidation with Bouygues Telecom”.

Both firms’ share prices rose 1.3 per cent on confirmation from Orange, but analysts note it is still “far from a done deal”, with Mirabaud’s Will Draper warning that competition probes may form a significant hurdle:

The risk of regulators blocking the deal is high: having worked so hard to improve competition in the market it would be odd for the French to undo this via re-consolidation, and there is a high chance of an EU probe too.

This is just the latest in a burst of merger or proposed mergers among European telco firms over the past year, including the UK’s BT takeover of EE, Sweden’s Telia Sonera buying Norwegian Tele2 and Italy’s Wind and Three merger.

Critics warn that this will deteriorate competition and choice for consumers, and the EU competition watchdog has already slammed the brakes on planned mergers, including the proposed deal between O2 and Hong Kong investment group CK Hutchison. The European Commission has launched an in-depth investigation into the takeover, which would create the UK’s biggest mobile operator.

Orange, with 28.2m customers in France alone and a whopping 200m worldwide, has previously seemed uninterested in the idea of a merger, arguing that its size left it in better shape than its competition to withstand dropping prices.

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