PARIS?A recovery in Bouygues SA's telecoms business is strengthening the hand of Chief Executive Martin Bouygues in his talks to sell the unit to former state monopoly Orange SA, in which he wants to take a stake of at least 10% as part of any deal.
Mr. Bouygues ruled out accepting a lower stake, adding that Bouygues could buy up to 15% in Orange. The French state, which owns 23% of Orange, would remain the largest shareholder if a merger were agreed, he said.
"If we don't reach a deal we'll carry on with our stand-alone strategy," Mr. Bouygues told reporters. "We're interested in taking a stake in Orange to benefit from future growth in the telecoms sector."
Orange declined to comment.
Like his counterpart at Orange, Mr. Bouygues put the chances of a successful outcome at 50%. A deal could value Bouygues' telecoms unit at as much as â,¬10 billion ($11.02 billion).
Bouygues Telecom was hard hit by a brutal price war when Iliad entered the French mobile market in 2012, making subscription offers for as low as ?2 a month. In November, Bouygues unveiled a plan to lure 1 million more customers to its mobile service and 1 million more to its landline offers by 2017, cutting costs and focusing on rolling out its fixed line capabilities and 4G network.
Revenue at the group's telecoms unit rose 2% in 2015 to ?4.5 billion as the company reported Wednesday it had added 769,000 mobile clients and 360,000 fixed line customers, providing further evidence of a turnaround for French telecoms firms.
Earnings before interest, taxes, depreciation and amortization at the unit rose 8% year-on-year to ?752 million in 2015, in line with the company's target of ?750 million.
"The next step is that either the deal happens or doesn't happen," Mr. Bouygues said. "For our staff and for the market this is a highly destabilizing situation so we're giving ourselves a few more weeks but discussions won't extend beyond the end of the first quarter."
The group, which also builds roads and controls French television broadcaster TF1, said full-year net profit for the group halved to ?403 million due to a number of asset sales in 2014 that inflated earnings last year. Operating profit rose 5.6% to ?941 million, topping analysts' expectations.
Sales at Bouygues overall in 2015 dropped 2% to ?32.43 billion as revenue at TF1 and the company's real estate arm Bouygues Immobilier declined.
"Thanks to the strategy of transforming its business segments, the group should continue to improve profitability in 2016," Bouygues said.
Write to Nick Kostov at Nick.Kostov@wsj.com