BOUYGUES SA PARIS (Reuters) - Orange (>> ORANGE SA) and Bouygues (>> BOUYGUES) have given themselves until Sunday to salvage a merger between France's dominant telecom operator and Bouygues Telecom, citing lack of progress ahead of a Thursday deadline.
The boards of each company met independently on Wednesday, but concluded that negotiations were not sufficiently advanced, Orange and Bouygues said in separate statements.
Former French monopoly Orange has been in talks since early January to buy Bouygues Telecom for 10 billion euros (8 billion pounds) in cash and shares.
A deal would cut the number of French mobile operators to three from four and end a four-year-long price war that has hit profits.
Bouygues would become the second largest shareholder in Orange behind the French state and would have to sell some assets to rivals Iliad (>> ILIAD) and SFR (>> Numericable Group) to ease competition concerns.
Bouygues said its board would "meet before the end of the weekend in order to make a final decision whether to pursue the merger plan or not".
Orange said it would meet again on Sunday to examine the result of the discussions.
Two sources close to the matter told Reuters late on Wednesday that the companies would extend their talks beyond Thursday as key issues remained unresolved.
The boards met separately for more than three hours, but the value of Bouygues Telecom, the eventual size of the stake of Bouygues in Orange and the scale of Bouygues' representation on the enlarged board of Orange remained unresolved, sources said.
The 10-billion-euro price tag set by billionaire Martin Bouygues for Bouygues Telecom, which he founded in 1994, is considered too high by several parties involved and there are talks about a standstill provision to cap Bouygues' stake in Orange, another source said.
Orange's top management is starting to question Bouygues' will to sell its telecom division, one source said.
Martin Bouygues has rebuffed several offers in recent years for Bouygues Telecom, insisting the unit could prosper on its own.
In June 2015, Bouygues shunned a 10-billion-euro offer from rival tycoon Patrick Drahi.
Shares in France's four telecom operators were down in early trading.
Orange was down 2.05 percent while Bouygues was off 3.8 percent and the biggest loser among French blue chips. Iliad (>> ILIAD) was down 2 percent while Numericable-SFR (>> Numericable Group) fell 3.7 percent.
"I was selling Bouygues yesterday. These bid talks often take longer than expected, and the longer they go on, there's always a chance it could unravel," said Rupert Baker, a European equity sales executive at Mirabaud Securities.
(Reporting by Mathieu Rosemain, Gwenaelle Barzic, James Regan, additional reporting by Dominique Vidalon in Paris and Sudip Kar-Gupta in London; editing by Andrew Callus and Jason Neely)
By Mathieu Rosemain and Gwénaëlle Barzic
