(FROM THE WALL STREET JOURNAL 4/5/16)
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 in the stock market wiped out more than 7 billion euros, or over $7.97 billion, in market value across France's four main telecommunications firms, including market-leader Orange, which fell more than 6% on Monday.
Even harder hit were the country's three smaller operators that investors had expected to benefit most from consolidation. Bouygues, the conglomerate that owns France's third-largest telecom firm, plunged by nearly 14%, while Iliad SA, the owner of the No. 4 mobile operator fell by 15%. Altice NV, the Amsterdam-listed group that owns France's No. 2 operator, Numericable-SFR, dropped by nearly 12%.
The collapse of the Bouygues-Orange deal strikes a 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 the latest in a series of attempts in the past two years by French operators to merge. But they also were 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. The prognosis is now more gloomy: "The French telecom market is mature and ex-growth," they said.
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 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 20 euros a month.
Bouygues said 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 were hobbled by the need to divvy up Bouygues's telecom assets.