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MarketScreener Homepage  >  Equities  >  Euronext Paris  >  Orange    ORA   FR0000133308

ORANGE

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French Telecom Stocks Tumble After Hopes of Market Consolidation Dashed

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04/04/2016 | 05:33am EST
By Sam Schechner 

PARIS--Shares in French telecommunications firms plunged on Monday after the collapse of Orange SA's deal to buy Bouygues SA's telecom arm dashed prospects for consolidation in the competitive French market.

The fire sale wiped out more than EUR7 billion in market value across France's four main telecommunications firms, including market-leader Orange, which dropped more than 5% in early trading.

Even harder hit were the country's three smaller operators which investors had expected to benefit most from consolidation. Bouygues, the conglomerate that owns France's third-largest telecom firm, plunged by more than 14%, while Iliad SA, the owner of the No. 4 mobile operator fell by 13%. Altice NV, the Amsterdam-listed group that owns France's No. 2 operator, Numericable-SFR, dropped by nearly 15%.

The collapse of the Bouygues-Orange deal strikes a major blow to long-running efforts by France's biggest telecom operators to consolidate a sector in which price wars have eroded profit margins. The talks were only the latest in a series of attempts in the past two years by French operators to merge. But they were also the talks that had become the most advanced, raising the hopes of investors.

"The market had partially priced in the consolidation," said analysts at Kepler Cheuvreux on Monday morning. The prognosis is now more gloomy: "The French telecom market is mature and ex-growth."

Telecom executives in Europe--and particularly in France--have long argued that consolidation is necessary for them to increase investment in networks and compete with rivals abroad. A carve-up of Bouygues Telecom, part of the family-controlled construction and media conglomerate, would have reduced the number of national network providers from four to three.

Consumer advocates and some competition officials say that the firms' argument for consolidation rests primarily on a desire to raise consumer prices that are among the lowest in Europe. In France, a 4G mobile phone plan is available for under EUR20 a month.

Bouygues said Friday that the talks with Orange broke down after the sides failed to agree on the value of its telecom unit and the size of the stake in Orange it would receive as part of the deal. Orange, which is 23% owned by the French state, confirmed the negotiations had unraveled without elaborating.

The merger talks, which have been going on for months, were hobbled by the need to divvy up Bouygues's telecom assets among the remaining three major telecom operators while also satisfying the French government.

The government wanted to maintain a dominant stake in Orange, allowing it to remain in the driver's seat at the former state monopoly. Bouygues's entry into Orange's capital placed that at risk, as the company was demanding a stake of up to 15% and significant board representation.

Write to Sam Schechner at sam.schechner@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
ALTICE EUROPE N.V. -1.63% 6.386 Delayed Quote.11.10%
BOUYGUES -0.70% 40.91 Real-time Quote.8.00%
ILIAD -0.59% 135.3 Real-time Quote.17.09%
ORANGE -0.04% 13.435 Real-time Quote.2.40%
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Financials (EUR)
Sales 2020 42 270 M
EBIT 2020 5 523 M
Net income 2020 2 765 M
Debt 2020 27 398 M
Yield 2020 5,31%
P/E ratio 2020 13,0x
P/E ratio 2021 12,0x
EV / Sales2020 1,49x
EV / Sales2021 1,47x
Capitalization 35 607 M
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Mean consensus OUTPERFORM
Number of Analysts 29
Average target price 15,53  €
Last Close Price 13,44  €
Spread / Highest target 41,4%
Spread / Average Target 15,6%
Spread / Lowest Target -9,85%
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Managers
NameTitle
Stéphane Richard Chairman & Chief Executive Officer
Ramón Fernández CFO, Deputy CEO-Finance & Strategy
Mari-Noëlle Jégo-Laveissičre Senior EVP-Innovation, Marketing & Technology
Charles-Henri Filippi Lead Independent Director
Helle Kristoffersen Independent Director
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