Bouygues, Numericable raise bids in French telco fight

PARIS Thu Mar 13, 2014 10:40am EDT

General view of French telecom operator SFR's headquarters in Saint-Denis, near Paris, March 7, 2014. REUTERS/Charles Platiau

General view of French telecom operator SFR's headquarters in Saint-Denis, near Paris, March 7, 2014.

Credit: Reuters/Charles Platiau

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PARIS (Reuters) - French groups Bouygues (BOUY.PA) and Numericable (NUME.PA) have both improved the terms of their bids for Vivendi's (VIV.PA) telecoms unit SFR, ahead of a decision by the seller on Friday that will reshape the country's mobile industry.

Construction-to-telecoms conglomerate Bouygues said on Thursday it would raise the cash portion of its bid to 11.3 billion euros ($15.7 billion) from 10.5 billion, while cutting the stake Vivendi would be left with in a combined SFR-Bouygues to 43 percent from 46 percent.

Cable firm Numericable also improved its offer, said two people with direct knowledge of the matter.

Three other people close to the situation, but without direct knowledge of the Numericable bid, said they had learned that the company had raised the cash portion of its bid by as much as 850 million euros.

Numericable, whose previous bid was 10.9 billion euros in cash and a 32 percent stake in the combined group, declined to comment. Vivendi also declined to comment.

The jockeying shows how Vivendi's hand has strengthened in recent weeks as SFR's suitors circle. The conglomerate had planned to spin off SFR this summer as part of two-year effort to exit telecoms and focus on its media businesses.

Both deals would change the landscape in Europe's third-biggest telecom market that has been in a price war since low-cost operator Iliad (ILD.PA) entered the mobile arena in 2012.

A Numericable win would create a major player in fixed broadband, while victory for Bouygues would cut the number of mobile operators to three from four, potentially leading to price rises.

Vivendi's board will meet on Friday morning to debate the two bids, as well as the spin off option.

Before the new bids, the race was "very close" and internal talks were ongoing, Vivendi insiders had said.

CRUCIAL FACTORS

The amount of cash offered by the buyers and Vivendi's ability to make a quicker and more complete exit from SFR are crucial factors in the bid battle, according to people familiar with the situation.

A tie-up with Bouygues would slow Vivendi's departure from telecoms somewhat because the regulatory review would be longer than that for Numericable, since the latter is not a big player in mobile.

Also, Bouygues needs to do an initial public offering (IPO) of the new company - aiming for mid-2015 - before Vivendi could sell its remaining stake on the open market, whereas Numericable shares are already floated.

Political factors could also intrude since the French government has already said it would monitor the SFR sale to ensure that jobs were protected and operators kept their promises to invest in high-speed broadband.

Industry Minister Arnaud Montebourg has declared publicly that he prefers the Bouygues bid because it would calm what he called "destructive competition" in France.

In a statement on Thursday, Bouygues said it was "committed to facilitate the liquidity of Vivendi's interest in the new entity." A spokesman said that meant Vivendi might be allowed to sell part of its 43 percent stake to financial investors before a new Bouygues-SFR was launched on the stock market in an IPO.

Vivendi's right to sell 15 percent at IPO - as outlined in its original offer - was unchanged. Taken together, the various measures offered by Bouygues would allow Vivendi to sell down its entire SFR stake within three years, said the spokesman.

Patrick Drahi, entrepreneur and founder of Numericable, had said in an interview published on Wednesday that he would not change his offer for SFR.

Numericable shares were up almost 7 percent at 1422 GMT, while Bouygues' were largely flat, and Vivendi's down 1 percent.

Yves Marcais, a broker at Global Equities, said he expected Vivendi to weigh the bids objectively, adding Vincent Bollore, the group's vice-chairman and second-largest shareholder, would likely have a big influence on the decision.

"Bollore is a practical man and he will not hesitate to choose the best solution on the financial front," Marcais said.

($1 = 0.7192 Euros)

(Reporting by Gwenaelle Barzic and Andrew Callus; Editing by Natalie Huet and Mark Potter)

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