LONDON (Reuters) - Shares in French group Bouygues (>> BOUYGUES) slumped 15 percent and were heading for their worst day in 17 years after talks between the firm and Orange (>> ORANGE SA) on a deal to create a dominant telecoms operator collapsed.

Orange fell 5.2 percent. Other French telecom firms also fell sharply, with Iliad (>> ILIAD) down 12.7 percent, SFR (>> Numericable Group) down 14 percent and Altice (>> ALTICE) dropping 15 percent.

The STOXX Europe 600 Telecommunications index <.SXKP> was down 1.5 percent, the top sectoral decliner, after falling to a one month low following the failure on Friday of the proposed 10 billion euro ($11.4 billion) cash-and-share deal.

The proposed tie-up was widely seen as a make-or-break chance to reduce the number of telecoms groups to three from four in France and prop up profits, which have been depressed since the arrival of low-cost operator Iliad.

"Orange had set clear conditions that were not met. Bouygues sees four reasons for the failure, of which execution risk and governance are the key ones, while a compromise could have been reached on valuation and employee protection," Deutsche Bank analysts said in a note.

(Reporting by Atul Prakash; Editing by Keith Weir)

Stocks treated in this article : BOUYGUES, ORANGE SA, ILIAD, Numericable Group, ALTICE