Telecom Stocks Sink After Deal Folds
05 Avril 2016 - 9:03AM
Dow Jones News
(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.
(END) Dow Jones Newswires
April 05, 2016 02:48 ET (06:48 GMT)
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