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. 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, a conglomerate that is also a major player in France's construction and media industries.
CEO Martin Bouygues suggested in an interview with Le Figaro that talks with the other operators were the main stumbling block. Orange and Bouygues were in negotiations to sell part of their assets to their two main rivals, Free and SFR, in order to secure regulatory approval for the merger. Bouygues told the paper: "There were four of us at the negotiating tablet, but only three wanted a deal. Clearly one protagonist wanted to acquire the maximum while paying the minimum, and still keeping the right to withdraw." While noting some "very strange" demands from the French government, which appeared to want to relegate Bouygues to a minor shareholder at Orange, Bouygues said the deal could have succeeded if only the four operators had reached an agreement.
Orange and Bouygues each said they will continue with their respective standalone strategies. Bouygues, which already last year rejected a takeover offer from number-two Numericable-SFR, said the possibility of consolidation on the French market now appears impossible for the foreseeable future. Noting its return to growth in 2015, Bouygues said it targets an improvement in its adjusted EBITDA margin to 25 percent next year and to 35 percent over the long term. CEO Martin Bouygues noted that the operator already had a highly optimised cost structure, and with the cash flow and strength of the Bouygues group behind it, the operator could continue to invest and develop.
