UPDATE 1-French telcos Bouygues and SFR to share networks

Fri Jan 31, 2014 12:59pm EST

(Adds minister comments, background)

PARIS Jan 31 (Reuters) - French network operators Bouygues Telecom and SFR agreed on Friday to share part of their mobile networks to improve client coverage and save costs.

With the French market locked in a price war since low-cost player Iliad launched a mobile service two years ago, operators are looking to cut costs. Network sharing is the only real option because the French government has warned it would not look favourably on a merger that would reduce competition.

The shared network of Bouygues and SFR and will cover 57 percent of France's population, the operators said in a joint statement.

The agreement will involve the creation of a joint entity to manage the infrastructure - a process which will take until 2017 to complete, but each operator will retain total commercial independence, they said.

"This agreement will allow the two operators to improve their mobile coverage and achieve significant cost savings," the statement said.

French Industry Minister Arnaud Montebourg told a telecoms conference that he welcomed the SFR-Bouygues announcement. (Reporting by Gwenaelle Barzic; Writing by Lionel Laurent; Editing by Pravin Char)

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