Great Reboot

Orange and Bouygues Telecom seen reaching a deal in March - sources

PARIS (Reuters) - Orange ORAN.PA and Bouygues BOUY.PA are likely to reach an initial agreement on the sale of Bouygues's telecoms unit in March at the earliest, amid wrangling over terms that would make Bouygues the second biggest shareholder in Orange after the French state, sources close to the matter said.

The Orange telephone company logo is seen at their headquarters in Paris, France, January 12, 2016. REUTERS/Charles Platiau

Highlighting the political sensitivity of the drive to consolidate the telecoms sector without diluting state power, Orange CEO Stephane Richard met President Francois Hollande on Monday to discuss the deal, the sources said.

“I don’t see how an announcement could be made before March, after Bouygues’ results,” one source said. The construction group is due to publish its full-year earnings on Feb. 24.

Orange denied on Monday that any deal had been reached to divide up Bouygues Telecom assets after weekend press reports that a preliminary agreement could be presented on Tuesday when Orange publishes its full-year results.

One key element still under discussion is the size of the stake that Bouygues, headed by billionaire Martin Bouygues, would get in France’s leading telecoms operator, the sources said.

The state currently owns 23 percent of Orange’s shares and wants to keep a blocking minority in the operator, the sources said. Buying Bouygues Telecom, estimated at 10 billion euros ($11.1 billion) in cash and shares, would dilute that stake.

To reach a preliminary deal, the French authorities, which support the transaction, and Bouygues need to find common ground, the sources said.

Since talks between Orange and Bouygues revived in January, sources close to the government have said it wants to cap Bouygues’ stake in the former national operator at 10 percent, while sources close to Bouygues have said that they aimed for a 15 percent stake.

Given the involvement of the government, Hollande will have a say in the deal, they added.

Separate talks between Orange and rivals Numericable-SFR NUME.PA and Iliad ILD.PA on possible asset sales to satisfy competition concerns if it acquires Bouygues Telecom have made good progress, after having nearly failed last week, the sources said.

Details on pricing and the perimeter of the asset sales are still being discussed, but are going into the right direction, sources said.

Spokespeople for Orange and Bouygues declined to comment.

Reporting by Mathieu Rosemain, Gwenaelle Barzic and Alexandre Boksenbaum-Granier; Editing by Paul Taylor