A $20 billion battle for control of a mobile phone operator is
testing President Francois Hollande's willingness to let market
economics work, while worrying consumer advocates about competition.
A $20 billion battle for control of a French mobile phone
operator is testing the limits of President Francois Hollande's
willingness to let market economics work, while alarming consumer
advocates who worry that the government's favored solution would
Whatever the outcome, the winner will be one of the two
billionaires vying to acquire SFR, the mobile unit of the Vivendi
media and entertainment conglomerate, with 21 million cellphone
subscribers. Only the mobile carrier Orange, with about 27 million
subscribers, is bigger.
Leading one team of bidders, and the government's favored
contestant, is Martin Bouygues, the scion of one of France's biggest
family fortunes and boss of the country's No.3 mobile player,
Bouygues Telecom, with 11 million customers.
His rival is Patrick Drahi, an enigmatic French-Israeli
entrepreneur who controls the largest French cable television
operator and is seeking to break into the mobile market.
The outcome could be decided as soon as Friday when Jean-Rene
Fourtou, Vivendi's chairman and chief executive, meets with his
colleagues on the board to consider the rival offers.
The deal would be "by far" the largest ever in the French
telecommunications sector, according to Frederic Boulan, an analyst
in the London office of Nomura, the financial services group.
From the start, Arnaud Montebourg, the outspoken Socialist Party
stalwart who was named economy minister on Wednesday in a shake-up
after last weekend's local elections, has made it clear that he
opposes the bid from Mr. Drahi.
Mr. Drahi's holding company, Altice, is based in Luxembourg.
Besides its being foreign, it is financed with an extensive amount
of debt that Mr. Montebourg deems dangerous.
Mr. Montebourg has also cast suspicion on Mr. Drahi's personal
finances, and French media reported that the Finance Ministry had
begun investigating his tax status.
Mr. Montebourg, seen as being on the left of the Socialist Party
spectrum, has said the state wants to reduce the number of mobile
operators to three from four, because the current market competition
is so cutthroat that it endangers jobs and the companies' ability to
finance new investment. His critics say he has seemed less concerned
about the possible anticompetitive impact of reducing the number of
As evidence of the government's backing, the state-owned finance
business Caisse des Depots et Consignations is ponying up 300
million euros, or $411 million, to back Mr. Bouygues's offer. Two of
France's wealthiest families, Pinault and Decaux, have also rallied
to his side.
For all the commotion, the deals are actually very similar. Both
Bouygues Telecom and Mr. Drahi's cable business, Altice-
Numericable, are offering about $20 billion in a combination of cash
and shares for SFR. And both would leave Vivendi with a significant
minority stake in the merged entity.
But there are crucial differences.
A company created from a combination of Altice-Numericable and
SFR would have shares traded on the market. That would enable
Vivendi -- which wants to sell SFR as quickly as possible -- to
easily unload its residual stake. And a lack of overlapping
operations means the deal would be unlikely to encounter trouble
with antitrust regulators.
In contrast, a combined Bouygues Telecom-SFR would not be
publicly traded, making it harder for Vivendi to dispose of its
stake. And there is a risk that antitrust regulators would demand
significant asset sales because of the overlap between the two
companies' mobile operations.
If Bouygues hopes to win, it will need to reassure Vivendi on its
ability to exit from the minority stake, according to people close
to the negotiations. …