(Adds price details from Les Echos)
By Sophie Sassard and Leila Abboud
LONDON/PARIS, March 4 Bouygues will
submit an offer on Wednesday to buy Vivendi's telecom unit SFR
and will make pledges on jobs and network investments
to win support for its bid, two people close to the situation
said on Tuesday.
Bouygues, France's third-biggest mobile operator, is willing
to sell mobile spectrum and some of its 15,000 mobile antennas
to address regulators' concerns that the tie-up with
second-placed SFR would create a dominant player, said one of
Bouygues and Vivendi both declined to comment.
The arrival of Bouygues, a family-owned
construction-to-media conglomerate, in the race to buy SFR comes
after French cable operator Numericable made a
preliminary offer of roughly 14.75 billion euros ($20.25
It is likely to be welcomed by Vivendi, which wants to cut
its exposure to telecoms to focus more on its media businesses,
since the additional competition could push up the bids.
Vivendi had been planning to split off SFR into a separate
company this summer, but is now open to selling if it gets an
offer it considers attractive, sources earlier said.
It could not be determined how much Bouygues offer would be
worth to Vivendi.
Les Echos reported in its Wednesday edition that Bouygues'
bid was "around 15 billion euros" and would be financed via
borrowing and a capital increase. The group's net debt to core
operating profit ratio could double from its current level, the
paper said without citing its sources.
France's telecom operators are eager to consolidate the
market in the hopes that it will end a price war sparked by the
entry of low-cost player Iliad to the mobile arena in
Since then, the market has gone from among Europe's cushiest
- the three operators were fined 534 million euros in November
2005 for cartel-like behavior - to one of the region's most
competitive where packages of broadband, TV, and fixed calls
start at 20 euros a month.
Analysts have said the combination of Bouygues and SFR is
sure to attract scrutiny from competition regulators because of
the risk that consumer prices would rise.
Societe Generale said the combined entity would have 42.8
percent market share in mobile overall, compared with 35.5
percent for current market leader Orange.
In terms of mobile service revenue, a metric that strips out
handset sales, Bouygues-SFR would hold 51 percent compared with
42.5 percent for Orange.
"Bouygues will do what it takes to keep a competitive market
and even after remedies and the commitment on investment and
jobs, the deal remains very interesting for both Bouygues and
SFR," said one of the sources.
SFR and Bouygues already have a network sharing deal in
place, which calls for them to share ownership of 11,500 mobile
masts to cover non-urban areas where 57 percent of the
population live. They plan to eliminate 7,000 towers between
them and reap cost savings of roughly 300 million euros a year
The French government is likely to weigh in on the future of
SFR, which employs 9,000 people.
Industry Minister Arnaud Montebourg said on Tuesday that the
state would be particularly vigilant and would discuss the sale
terms with those involved. "We have some positions of principle
on employment and investment," he said.
In an interview with Le Figaro on Tuesday, Numericable's
largest shareholder, Patrick Drahi, who owns 40 percent through
his Altice holding company, also promised to protect
jobs and even hire more people.
($1 = 0.7277 Euros)
(Additional reporting by Gwenaelle Barzic; Editing by Andrew
Callus, William Hardy and Tom Brown)