Bouygues ultimatum over Orange talks

The Orange logo hangs inside an Orange SA mobile phone store in Marseille, France, on Tuesday, Dec. 22, 2015. Orange is in early talks about buying Bouygues SA's phone and television businesses, according to people familiar with the matter, in a move that would reduce the number of wireless carriers in France and follow in rivals' footsteps of bringing telecommunications and media together. Photographer: Balint Porneczi/Bloomberg©Bloomberg

Bouygues is prepared to walk away from talks with Orange over the sale of its telecoms unit unless it receives a stake of at least 10 per cent of the French operator.


On this topic

IN Telecoms

The Paris-based construction and telecoms conglomerate has been in intense negotiations with the market leader for at least a month over a potential tie-up that would reduce the number of competitors in France from four to three.

But Martin Bouygues, chairman and chief executive of the group, said on Wednesday that he only put the chances of a successful outcome at 50 per cent.

“If we don’t reach a win-win deal for everyone, we will pursue our standalone strategy,” he said of Bouygues Telecom, France’s third-largest mobile provider by subscribers.

Mr Bouygues, who last year rejected a €10bn offer for his unit from Franco-Israeli billionaire Patrick Drahi, said that a resulting tie-up that would leave Bouygues with a 10-15 per cent share in Orange would be “perfectly acceptable”.

But he added that the talks, which people close to the situation have described as “extremely complex”, would need to conclude by the end of March so as not disrupt day-to-day business.

His comments came as Bouygues predicted rising profits across its business segments this year as the French construction, media and telecoms conglomerate revealed an increase in 2015 operating profit that beat expectations.

The group said that operating profit, excluding one-off items, reached €941m compared with €888m in 2014. That came in well ahead of analysts’ expectations of about €880m.

Full-year revenue was €32.43bn, 5 per cent lower than the previous year on a comparable basis and slightly below market forecasts. The figure was 2 per cent lower on a reported basis than in 2014.

You need JavaScript active on your browser in order to see this video.

No video

At Bouygues Telecom, sales and earnings before interest, taxes, depreciation and amortisation increased last year thanks to a net increase in mobile and broadband subscriber numbers as well as aggressive cost-cutting.

The unit said that it added 360,000 broadband subscribers and 769,000 mobile customers during the year. On Wednesday, it confirmed its target of gaining an additional 1m mobile customers and 1m broadband customers by the end of next year compared with December 2014.

The group said that cost-cutting at the telecoms unit would continue this year with a plan to save “at least” €400m compared with the end of 2013.

Industry executives and analysts say that a merger with Orange would help stabilise prices and enable greater investment in infrastructure.

A price war initiated in January 2012 with the entry of low-cost Free mobile service devastated earnings in the sector, forcing operators to slash operating costs and lower prices to consumers.

Bouygues came off particularly badly, and speculation has long suggested that Mr Bouygues would eventually look to sell the unit.

Last week, Orange said that the talks to buy Bouygues Telecom for an estimated €10bn in cash and shares continued and were likely to take several more weeks because of the complexity of the negotiations.

Bouygues’ construction business, which accounts for the vast bulk of its revenues, reported that it was adjusting to the decline in the French market because of increased international orders.

It announced that international business accounted for 59 per cent of its order book compared with 53 per cent a year earlier. It also forecast that a continuation of that international momentum would help improve profitability starting this year.

Operating profit last year across its construction activities was €831m compared with €841m in 2014.

Copyright The Financial Times Limited 2016. You may share using our article tools.

Please don’t cut articles from and redistribute by email or post to the web.

Source link


Latest Issue

BDC 317 : Jun 2024