In the wake of the Numericable acquisition of SFR, which made France’s biggest cable TV operator the second-largest mobile service provider in France, market leader Orange apparently is in talks about an acquisition of Bouygues Telecom, though much speculation suggests it is Bouygues that will buy Illiad’s Free Mobile.
Holding 40 percent market share, it might have been unthinkable some time ago that Orange would be allowed to get bigger in the French market, and that might yet remain the case. Numericable now has about 30 percent share of the French mobile market.
Bouygues has about 18 percent market share, while Illiad’s Free Mobile has about 10 percent share. Under past conditions, it would have been unthinkable for regulators to consider supporting any mergers that would make Orange bigger.
And, most likely, that remains the case, even as French communications regulators actively seek a reduction of French mobile carriers from four to three leading suppliers.
Instead, regulators are likely to favor a combination of Bouygues and Free Mobile, a move that would create a new competitor with about 28 percent market share.
An Orange bid to buy Bouygues would trigger antitrust review and an uphill battle. So one line of thinking is that such a deal is largely tactical, aimed at driving up the price Illiad might have to pay to acquire Bouygues.
It might seem a bit unusual that the smaller firm is seen as buying the larger firm, but each firm’s equity value matters. Illiad is valued more richly than Bouygues, for example. Also, Bouygues telecom operations represent about a third of total Bouygues revenues.
For Illiad, communications is its only business.