* Bids expected from Numericable, Bouygues - source
* Vivendi does not see bid from Iliad - 2nd source
* Any deal to be reviewed by Paris watchdogs not EU
By Leila Abboud, Matthieu Protard and Gwénaëlle Barzic
PARIS, March 3 Vivendi has asked
bidders for its telecoms business SFR to submit preliminary
offers by Wednesday night, said one person close to the
situation, putting pressure on Bouygues, a latecomer
to the auction whose bid faces competition issues.
The fresh attempt to consolidate the French telecoms market
comes after more than two years of brutal competition sparked
the arrival of low-cost player Iliad to the mobile
arena. Revenues of the three other telcos have fallen 17 percent
since Iliad's Free Mobile service launched in January 2012,
while average revenue per mobile subscriber is expected to fall
another 12 percent by 2016, according to Goldman Sachs.
The damage is part of the reason why Vivendi has been
seeking to reduce its exposure to the capital-intensive telecoms
business to focus more on its media units, such as
pay-television and music. It was preparing to split off SFR into
a separate listed company this summer, but is now also open to
listening to offers that would head off the demerger.
Vivendi expects to receive bids for France's second-biggest
mobile operator from local cable firm Numericable and
Bouygues, owner of the third-largest mobile operator, said a
second person close to the matter.
Vivendi does not expect to get a bid from Iliad
despite reports the fourth-place mobile player is also
interested, said the two sources.
A third source close to the situation said Iliad, owned by
billionaire Xavier Niel, continued to monitor the situation
around SFR. It has lined up financing from several banks in case
it wants to jump in with a bid a later date, the source said.
Asked about the Wednesday deadline, first reported by Le
Monde newspaper, a Vivendi spokesman said only: "Vivendi will
take its time to study all the possibilities for the future of
The offers are expected to include details on price,
financing, governance, synergies and a potential roadmap for
Vivendi to sell down a minority stake it might retain in the
business, as well as an estimate of the deal's impact on jobs in
France, a key issue for the government, said the second person.
"The deadline counts more for Bouygues because nothing is
known so far about its offer," said the first source, adding
that Numericable had already laid out its position to Vivendi.
Bouygues, the construction-to-media conglomerate, faces a
tougher battle to get its hands on SFR because merging the
number two and three mobile operators would attract tough
regulatory scrutiny - a handicap Numericable would not face
since it is not a force in mobile. Numericable has also been in
talks on and off with Vivendi since 2012 over SFR, whereas
Bouygues has jumped into action only in the past few weeks.
Nor is Vivendi abandoning preparations underway towards the
demerger of SFR while it negotiates with potential bidders. With
Citigroup and Societe Generale as advisers, it continues to work
on the project.
Once Vivendi has the bids in hand, the board is expected to
decide sometime in March whether to move ahead in exclusive
talks with one of the bidders or to press ahead with the split.
"Vivendi is running a triple-track process," said the second
person, referring to the split option and the parallel talks
underway with two bidders.
The group confirmed last Monday it had been approached for a
deal by Altice, the parent company of French cable
A spokesman for Altice, which owns 40 percent of
Numericable, declined to comment. Spokespeople for Bouygues and
Iliad did not immediately return requests for comment.
Numericable has lined up about ten banks to finance its bid,
which would include 8 billion euros in debt and 3 billion in a
capital increase subscribed 75 percent by Altice, the first
Vivendi, which would keep SFR's debt in this scenario, would
get 11 billion euros in cash and 32 percent of the capital of
the newly formed company.
Any deal which reduces the mobile operators in Europe's
third-biggest telecom market from four now to three is sure to
come under lengthy regulatory review because it could result in
higher prices for consumers. A combined SFR-Bouygues Telecom
would hold 42.8 percent of the mobile market at end-September,
according to Societe Generale, while current leader Orange
would have 35.5 percent and Iliad 9.8 percent.
But unlike similar consolidation deals in Ireland and
Germany now under review by the European Commission, a French
mobile merger would be reviewed by Paris competition watchdogs
and not Brussels.
That's because any combination of SFR with Bouygues, Iliad,
or Numericable would bring together two groups that earn more
than two-thirds of their EU-wide turnover within a single member
state, giving the Commission no standing to review it, according
to rules posted on the Commission's website. A spokesman for the
competition watchdog in Brussels declined to comment.
The political maneuvering has already begun in Paris.
Bouygues Chief Executive Martin Bouygues meet with President
Francois Hollande last Thursday to discuss consolidation in the
telecom sector, according to the Journal de Dimanche.