PARIS Orange (ORAN.PA) is studying a purchase of smaller French rival Bouygues Telecom and is in talks with conglomerate parent Bouygues (BOUY.PA), Les Echos said on its website on Thursday, as the government pushes for consolidation in the sector.
Stephane Richard and Martin Bouygues, the chief executives of the two groups, have discussed the matter several times, with the government kept informed, the daily newspaper said. The state owns 27 percent of Orange.
The deal would value Bouygues Telecom at more than 6 billion euros ($8.23 billion), and by selling in return for shares, Bouygues and its shareholder JCDecaux (JCDX.PA) could end up holding close to 10 percent of Orange, Les Echos said.
"We're weighing up our options, but no one on the government side has asked me to study the takeover of Bouygues Telecom," Les Echos quoted Richard as saying.
French Economy Minister Arnaud Montebourg said this week the government would succeed in reducing to three the number of domestic telecom players, stressing tough competition in the sector was hurting jobs and investment in high-speed broadband.
The government earlier this year backed a bid from Bouygues to take over Vivendi's (VIV.PA) SFR telecom unit and combine it with Bouygues Telecom, but Vivendi chose cable firm Numericable NUME.PA, leaving the number of mobile operators at four.
Montebourg said on Monday that Bouygues Telecom should explore tie-ups with other operators.
Bouygues executives said during a presentation of first-quarter group results on Thursday the company was working on further restructuring at its telecom unit and exploring potential tie-ups in the industry but that its focus was to keep it an independent business.
"Bouygues Telecom's priority today is to adapt to the evolution of the market, and to pursue and finalize its standalone strategy," Bouygues Chief Financial Officer Philippe Marien said on a conference call.
"Afterwards, all scenarios are on the table ... All telecom operators ... are considering all possibilities and all opportunities ... Today, we are very focused on putting in place our standalone plan."
In an interview with the Financial Times this week, Orange head Richard said Bouygues Telecom was "facing a real challenge" and would have to restructure the company massively.
"So I understand that they would also look at other options including finding an understanding with the other players such as network sharing or a merger," he told the paper. "I think they are still assessing the options, but they need to make a decision quite quickly."
Orange was not immediately reachable for comment on Thursday.
Earlier, unions published a letter sent to Prime Minister Manuel Valls calling on Bouygues Telecom and Orange to merge to help save jobs. They believe up to 2,000 posts are threatened at Bouygues Telecom.
As part of its proposal to buy SFR, Bouygues Telecom had proposed to sell 15,000 mobile antennas and some of its mobile spectrum to low-cost operator Iliad (ILD.PA) for up to 1.8 billion euros to head off competition regulators' concerns.
Les Echos reported that this plan still stood should Orange take over Bouygues Telecom.
(Reporting by Natalie Huet and Alexandre Boksenbaum-Granier, editing by David Evans)