Bouygues said in a statement that it was unable to secure terms on four important points: what would happen to its employees joining Orange, its stake in Orange and control as a major shareholder, the execution risk of the merger and the valuation of Bouygues Telecom. Bouygues said previously that it wanted at least 10 percent in Orange as partial payment. According to French media, the state, as Orange's largest shareholder with 23 percent, was a determining factor in the discussions, as it was unwilling to bear the burden of expected redundancies nor see its role as 'shareholder of reference' limited by the entry of Bouygues.
Bouygues itself believes that its telecom subsidiary can remain viable in the competitive French market. However, as we have just reported Bouygues was the worst performer in the past year on the mobile market, and with the new aggressive pricing strategies from low-cost brands like SFR Red, Sosh and Bouygues’ own B&You, a return to mobile service revenue growth in France seems unlikely in 2016.
Bouyges has also indicated that it will shake up the fixed market, but it is a small player on the fixed market. All the operators also face significant investments in upgrading broadband networks for higher speeds. As all four operators have both mobile and fixed networks, it can be expected that quad play will become more prevalent as a means of attracting and retaining customers. This could lead to further erosion in mobile ARPU, as often mobile is offered at a reduced price in the bundled packages.
The failure of Bouygues and Orange does not translate into much of a win for the other operators. Much of Altice’s strategy in merging SFR and Numerciable hinged on further consolidation in the market. After already failing in its own attempt to acquire Bouygues and now missing out on some of the assets expected to come on the market from Bouygues, it will have to focus on extracting synergies from its own operations as a means of growth. Orange remains market leader, but will see its target of returning to EBITDA growth under threat as the intense competition puts pressure margins. Free, the source of all the market’s woes, is the only one to gain a bit, mainly in time to catch up with its4G network roll-out.
Most every possible combination of consolidating the French market has now been tried and failed, and no foreign operator is likely to be foolish enough to try and enter this particular marketplace, one of few in Europe to maintain two national-only players (Bouygues and Free). Stuck with the four existing operators, the fierce competition will continue, with the consumer the main winner. Since the entry of Free on the market as the fourth mobile operator, service revenues in France have fallen 19 percent. While the trend has improved somewhat in the past year, all four operators are still faced with the challenge of finding new ways to grow ARPU in order to remain profitable.
