The French and UK press have been fascinated this week in the details around the break-up of the merger between Orange and Bouygues Telecoms. Faultline last week wrote a lengthy piece on just how the French go about this sort of merger, and these subsequent stories show us to be on the money. It was not about Orange and Bouygues agreeing terms, but getting Free and SFR-Numericable to agree terms under which they would buy disposals which the French government were insisting upon.
Can you imagine getting Comcast and Time Warner Cable in a room to do a merger deal, but also having to get the FCC, Charter Communications and AT&T agreeing to do their part to make a deal happen? It just wouldn’t pass muster.
The London Financial Times has as good a “fly on the wall” treatment as any, painting the personalities and their respective clashes, in Technicolor detail.
Essentially the deal was frail before other parties got involved, and impossible once the egos of the respective leaders of Ilaid’s Free and Altice’s SFR-Numericable, came together.
The upshot is that every one of the major four telco/cellco operators has tried to merger with the other, and none of the deals proved possible. Instead, while everyone in finance knows that four operators are too many for France, if one of them is the disruptor Free, France is stuck with that many, and each will return home and recharge their respective plans to bankrupt one another.
In the short term this will be good for consumers, but bad for investors and share prices in the telecom sector began tumbling as soon as the deal was off the table.
The outcome for this market is that at least one operator will be targeted with offers from the others trying to beat it into submission. Orange will remain aloof and unaffected; Free will rely on disruptively low pricing while SFR-Numericable relies on having the fastest broadband lines, and Bouygues will either find a plan, or rapidly shrink and be forced back to the table at far lower prices – something we don’t see happening for a few years now.