French government says will pursue telecom market consolidation

Wed Apr 9, 2014 7:24pm EDT

* SFR-Numericable deal maintains four mobile players

* Government says this number should come down to three

* Bouygues now seen as potential target for Iliad

* Montebourg vows to continue with "friendly pressure"

By Gwénaëlle Barzic

PARIS, April 9 (Reuters) - The French government will continue to pursue consolidation in the country's telecoms sector after Vivendi's decision to sell its SFR unit to cable firm Numericable, Economy Minister Arnaud Montebourg said on Wednesday.

The government had openly supported a rival bid from Bouygues, arguing that the number of mobile operators needed to come down to three to end a destructive price war and encourage investment in high-speed broadband. Vivendi finally picked Numericable on Saturday, in a move that keeps the number of operators at four.

The deal creates France's second-biggest telecoms player behind Orange, but it weakens smaller operator Bouygues, which could now become a prey for Iliad, the operator that has slashed prices and hurt its rivals' margins since the 2012 launch of its Free Mobile service.

"There are two smaller operators that remain, and we can wonder what their future will be unless they merge, which doesn't seem to be on the agenda right now," Montebourg told a parliamentary committee hearing late in the evening.

"Our policy of re-consolidating the sector, of bringing it down to three operators remains all the more relevant. We will work actively in this direction," he said.

On Tuesday, Montebourg - freshly promoted from Industry Minister to Economy Minister after a government reshuffle - met both Numericable's main shareholder Patrick Drahi and Bouygues' Chief Executive Martin Bouygues.

Montebourg said he had received a letter from Drahi in which the Franco-Israeli billionaire reaffirmed his commitment to preserve jobs and invest in high-speed broadband, and offered to list his Luxembourg-based holding company Altice on Euronext in Paris. It is currently listed in Amsterdam.

"We will ensure that the promises made are respected," Montebourg said, adding that the government would also be vigilant as to the impact of the deal on subcontractors' jobs.

"We will continue with our friendly pressure," he said, speaking alongside his new junior minister in charge of digital affairs, French-Canadian Axelle Lemaire. (Reporting by Gwenaelle Barzic; Writing by Natalie Huet; Editing by Ken Wills)

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