Will Orange succeed in swallowing Bouygues Telecom? The new telecoms soap opera is just starting. But the discussions to buy the second by the first, initiated before Christmas, reach a critical point. The two parties have entered the loop Free and Numericable-SFR (owned by Patrick Drahi, Libération shareholder), who will let this week know what their requirements are.

For the operation to succeed, all this small world is indeed condemned to hear. Because the Competition Authority will not let go the constitution of a dominant player. Moreover, the state, which holds 23% of Orange, will ensure both its shareholder interests and that the investment in ultra-fast broadband, the priority of the government in place, does not suffer from four to three players in the market.

After the possible acquisition of Bouygues Telecom for an amount estimated at 10 billion euros, Orange will be forced to sell its rivals frequencies, antennas, shops, or even customers. The question of employment is also to be solved: nearly 7,000 employees are concerned at Bouygues Telecom.

“The discussions are complex and the journey fraught with pitfalls,” says one of the leaders involved. The tone is nevertheless positive. To listen to the murmurs of each other, under the seal of confidentiality, the deal is on track. “This is the first time there is consensus, coward another. Nobody is left out. And everyone has an interest in the market being pacified a bit. “ An overview of what each of the four operators can gain from it.

Orange, the cubits

The CEO of Orange plays it to relax when he evokes the prospect of an absorption of Bouygues Telecom. One is “rather relaxed”, explained Stéphane Richard mid-January after having repeated that he was the one who had the “least need” of a consolidation. So why does it want it? In 2014, the owner of the already archidominant historical operator in France approached Bouygues, it is now the latter who is the plaintiff. For Richard, the issue is the critical size in a market in concentration in Europe, controlled by a handful of behemoths in the United States or China. Ending this anachronism is urgent, he argues, if we want to build European digital heavyweights, which Orange wants to be part of. If he says that “prices will remain low,” the passage of four to three players would be the advantage for Orange to end the war in this area. What better margins and give him free rein to beef up his investments, already the most important today.

His model is that of a “competition by infrastructure”, much more “viable” to three that four convergent fixed-mobile operators in France, he explains. In other words a competition on services and networks of better quality rather than an overbidding on the lowest prices, which he deems deadly for the entire sector and which resulted in a 50% drop in rates. since 2012.

Bouygues Telecom, an idea behind the head

It is little to say that Bouygues Telecom has suffered from the price war that began in 2012. Between the first nine months of 2011 and the same period in 2015, its turnover has melted by 1 billion euros. Its operating margin, which is its pre-tax profit, dividend and investment level, plunged seven points. Despite a slight rebound in recent months, Martin Bouygues knows he has fallen below the waterline. In the long run, it is untenable. The company he created twenty-two years ago is in danger of sinking. It must be saved, and if possible with honors. For him, it’s a matter of pride.

He missed the acquisition of SFR, won by Drahi in 2014, and refused to sell to the same Drahi in 2015. In 2016, the son of Francis Bouygues, often mocked to be an heir by his rivals, has turned to Orange. Resigned? Not only. The man, more cunning than his good-natured face, would like to make him look, has an idea behind his head. He is about to give up his baby for a few billion euros in cash and a stake in Orange. We are talking about 10% to 15% of the capital, which would make him the second largest shareholder of the company behind the state. While waiting to be the first, if the public power comes one day to disengage. While he was cornered, Martin Bouygues could, therefore, find himself in a position of strength in one of the largest telecommunications operators on the planet. A behemoth achieving 40 billion euros in turnover, that its CEO, Stéphane Richard wants to launch the assault on Europe and Africa. There are economic failures that end worse.

Numericable-SFR, relief

Six months ago, Patrick Drahi, eyeing Bouygues Telecom, was curtly dismissed by Martin Bouygues. “Everything is not for sale,” had justified the heir, who said he dreaded that the operation ends in a social butcher shop or that it caps before it takes place, for lack of funding. Implied: I have no confidence in Drahi. The offer of the latter, however, valued Bouygues Telecom to 10 billion euros. The same amount that Orange offers today … Obviously, everything is not for sale, and especially not anyone.

But, Bouygues needs to get along with Drahi if he wants to go to the end of the deal with Orange. To convince the Autorité de la concurrence, it must necessarily sell assets (frequencies, shops, customers). At what price? “Bouygues did not want our 10 billion? No way we spend one euro to help him this time, “ says a leader of Altice, revenge. Behind the language bravado, a message: Drahi will write as few zeroes as possible on his check. He will not, however, venture to ruin everything. “It’s a good operation for everyone,” concedes his entourage. A move to three operators would relieve Numericable-SFR, which has lost 1.2 million customers in the mobile. The parent company, Altice, needs its French operator to raise cash and repay a debt of 48 billion- great post to read. Because the markets are worried: the share price of Altice has lost 60% since July.

Free, the time trial

The thunderous arrival of Free on the mobile market at the beginning of 2012 upset the sector, and there is nothing that could please the hacker, Xavier Niel. Breaking the price, the founder of Iliad, the parent company, was perfectly successful: four years later, his company is installed in the landscape, with 11 million mobile customers, and its market capitalization has more than doubled. It exceeds 12 billion euros. And the fortune of its first shareholder has exploded … The breakthrough of Niel is all the more fantastic that he did without a mobile network. Since the beginning, it has rented Orange’s infrastructures and passed the traffic generated in 2G and 3G by its customers. This roaming agreement gave him the means to accomplish his blitzkrieg. But it will end gradually from 2018, according to the wish of Arcep, the regulatory authority of the sector.

By then, Free will have deployed its network. If it has accelerated its investments in recent months, especially in 4G, it remains a race against the clock – he is particularly struggling on 3G. Aware that the schedule is tight, Niel has been pushing for consolidation for two years. He made successive alliances with everyone and agreed to put up to nearly $ 2 billion to play the facilitator. The acquisition of Bouygues by Orange could allow him to achieve his ends. He remains nevertheless greedy. “Out of the question that the operation leads to a duopoly made up of Orange and SFR in a number of customers,” warns one of his relatives. In other words, Free wants to fill his subscriber portfolio in the story. Not sure rivals are giving him this new gift.