French cable operator Numericable has agreed a €13.5 billion ($18.5 billion) takeover of Vivendi’s SFR, beating off competition from communications rival Bouygues for the country’s second-biggest mobile operator.
The acquisition promises to radically alter the shape of the French telecoms market, putting Numericable (Paris, France) in control of mobile assets and giving it the opportunity to challenge telecoms incumbent Orange (Paris, France) in the market for bundled services that include fixed, broadband and mobile elements.
However, it will ensure the French mobile market continues to be contested by four players for the foreseeable future, which may salve the concerns of competition authorities yet to sign off on the deal.
Although it had won backing from French government ministers, the bid from Bouygues (Paris, France) would have reduced the number of mobile operators to just three, comprising incumbent Orange and upstart Iliad (Paris, France) besides the combined Bouygues and SFR.
Besides handing over €13.5 billion in cash, Numericable will give Vivendi (Paris, France) a 20% share in the new company and promised another payment of €750 million if certain financial targets are achieved.
The Numericable offer was preferred to a last-minute bid that Bouygues tabled last Saturday morning, including €15.5 billion in cash but only a 5% stake in the new entity.
In a statement, Vivendi said it preferred Numericable’s offer because of the opportunities it presented to develop a strong position in the so-called quad-play market and because it is likely to face less regulatory opposition than a tie-up with Bouygues.
“This should represent a total value in excess of €17 billion,” said Vivendi on the Numericable offer.
The takeover leaves Bouygues in a difficult situation as a relatively small third player that has suffered badly in the French mobile market since the entry of Iliad in early 2012.
Analysts are speculating that Bouygues and Iliad may have to form ties to stand up to Orange and Numericable in the new-look market.
Bouygues had already approached Iliad about a possible sale of its network and airwaves, hoping this might assuage regulatory concerns regarding its bid for SFR, and may look to re-establish contact now the SFR bid has failed.