Patrick Drahi

A Dig At The Bidding Discourse between Altice and Bouygue

June 22, 2015 - Written By Vidur Sethi

Altice, the Luxembourg based multinational telecoms company, founded and headed by the French billionaire Patrick Drahi has made a big move. Drahi, the CEO of Altice has offered a bid to buy Bouygues Telecom for about €10 billion. Bouygues S.A. founded by Francis Bouygues is an industrial group that specializes in construction, real estate development, media and telecommunications. It is Listed on Euronext Paris exchange, a blue chip in the CAC 40 stock market index, Bouygues had over approximately 130,000 employees in 80 countries, generating €32.7 billion in revenue. The merging proposal has been made by Drahi to create a carrier to win a competitive lead over Orange which is the longest standing market leader. The Shares in Bouygues have already shown a trajectory of 13% in early trading in Paris, ever since the offer has been made.

Xavier Niel, the CEO of Iliad S.A. (again a French provider of telecommunication services) offered for a merge with Bouygues a year ago and was refused. Martin Bouygues, has said repeatedly in the recent months whilst all the informal discussions regarding this bid. Bouygues, who lost a bidding war for SFR to Drahi last year has called the offer uninvited and, for now no negotiations are seen coming. However, what Drahi is offering Bouygues can be seen in a different light altogether, because money matters! Finance analyst believe that the worth of Bouygues is between 5 and 6.5 billion euros, making Drahi’s 10 billion euro bid a munificent one for a company that has been facing losses since Iliad’s assault on the mobile market. Its even higher than the joint bid offered by Orange and Iliad last year, which was turned down.

The advantages of this merge are of paramount significance for Numericable SFR. Buying Bouygues will lead to massive cost savings by cutting and rationalizing stores. It has the capacity to potentially calm a brutal price war that has begun in France since 2012 after the Low cost operator Iliad’s ILD entered the mobile market. The deal would vault SFR ahead of Orange in terms of subscribers.

This merging deal is similar to what AT&T, T-Mobile and Sprint have seen in the US. The French Economy Minister, Emanuel Macron has opposed the merger owing to the fact the deal will take Europe’s third-largest telecoms market from four to three players. “The consequences of consolidation are negative in these respects, as several recent cases in Europe have proven. The time isn’t right for opportunistic mergers that could benefit some but aren’t in the public interest,” said Mr. Macron. The French Government has thus already signaled its opposition to this proposal which will have an impact on the investments in communications, infrastructure and employment. Moreover, the state’s preparation to auction off 4G mobile spectrum this summer and its hope of counting on raising at least 2.5 billion euros that has already been earmarked for the military budget, will consequently suffer if the deal is made. It will result in one less bidder for the 700 megahertz spectrum, lowering the proceeds for the state.

Drahi, who has returned his focus back to Europe after Altice agreed to acquire control of U.S. cable provider Suddenlink Communications in a deal valued at more than $9 billion in May, has a vision to expand his empire, stretching it out from France, Israel and Portugal to the Caribbean. Bouygues said its board would meet on Tuesday to discuss the bid.