(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 the people.
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 billion).
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 January 2012.
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 by 2017-2018.
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)