August 30, 2018 / 7:26 AM / 3 months ago

UPDATE 3-Bouygues boss sees no French telecom tie-ups before next year

* H1 current operating profit 303 mln euros, tops analysts’ forecast

* Bouygues expects to continue to improve profitability in 2018

* Bouygues Telecom keeps all its targets, shares up 5 pct

* (Recasts with CEO comments to analysts on telecom consolidation)

By Dominique Vidalon and Gilles Guillaume

PARIS, Aug 30 (Reuters) - The head of Bouygues said on Thursday he was keeping an open mind about potential tie-ups in the French telecom sector but cautioned no deal was likely before early 2019.

Martin Bouygues made the comments after his conglomerate reported stronger-than-expected first-half results, bolstered by further signs of improvement at its telecom arm.

That encouraged investors who sent shares in the group, which also builds roads and owns French broadcaster TF1 , up as much as 5 percent.

Bouygues said its construction business had a record high order backlog and it kept a full year outlook for higher profitability, though cold weather hurt its road building business.

Bouygues, whose attempt to merge Bouygues Telecom with market leader Orange failed two years ago, said the ongoing process to reallocate mobile phone frequency bands in France was likely to freeze any talks about future telecom sector consolidation for five months until early 2019.

“During tender periods, we are obliged to refrain from holding any discussions between operators,” he told analysts. “This brings us to early 2019. Until then, nothing will happen. After that we will see...I think we are in a satisfactory position at the moment. We keep an open mind.”

France’s telecoms sector, hit by a price war following the entrance of low-cost player Iliad in 2012, has been the subject of takeover speculation in recent years.

Last month, Orange’s Chief Executive Stephane Richard said market conditions were likely to lead to a new round of merger talks between France’s four telecom operators from 2019 onwards.

Martin Bouygues also acknowledged on Thursday that he had held a “discussion” last spring that did not lead to any agreement.

Patrick Drahi, majority-owner of Altice and owner of SFR, and Bouygues met at the end of May, sources have said.

An offer made then by Bouygues to buy SFR was quickly rejected by Drahi.

FORECAST-BEATING RESULTS

Bouygues shares, which had lost 14 percent this year, were up 4.7 percent by 1338 GMT after its first-half results beat forecasts.

“No slowdown in telecoms, construction margins to recover in the second half,” said Raymond James analysts, keeping a “market perform” rating.

Bouygues saw first-half current operating profit fall 12.7 percent to 303 million euros ($354 million), hit by a 174 million euro operating loss at its Colas road building division as cold weather hurt first-quarter business.

However, current operating profit beat a Reuters poll forecast for 284 million euros.

Operating profit at Bouygues Telecom rose 10 percent to 148 million euros in the first half, a further improvement that reflected growth in its mobile and fixed-line customer base.

Bouygues Telecom saw revenue rise 7 percent, outperforming a 4 percent rise in total group revenue, and helped by price increases and a new range of fixed and mobile offers introduced in the second quarter.

It added 901,000 mobile customers in the first half, and confirmed all its targets, including that of 300 million euros of free cash flow for 2019.

$1 = 0.8554 euros Reporting by Dominique Vidalon and Gilles Guillaume; Additional reporting by Genaelle Barzic; Editing by Inti Landauro and Susan Fenton

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