How far will Patrick Drahi? Barely a year after seizing SFR for more than 13 billion euros, the new tycoon cable and telecom is ready to 10-11000000000 euros cash on the table to buy Bouygues Telecom. The parent company, Bouygues, is to meet this afternoon its board of directors to consider this “unsolicited offer”. Nothing says here that Martin Bouygues, who lost the battle for redemption SFR face Drahi in 2014, is ready to sell its telecom subsidiary. “There is no vendor … but it all depends on prices,” points out mischievously an observer. A hard bargaining will engage, without excluding another operator makes up the ante by declaring also bidding to acquire Bouygues Telecom. But the only one to make a cons-offer is none other than the boss of Free, Xavier Niel, Patrick Drahi have rallied to his cause by promising to sell him the mobile network Bouygues …
Xavier Niel, Free pattern. Photo L. Bonaventure. AFP
If he has his way, the boss of Altice (and shareholder of Libération ) would find himself at the head of a group counting more than 22 million subscribers in the mobile and 9 million in the fixed. What compete with the incumbent operator Orange. Quite a gamble, knowing that the operation 100% financed by the banks still would increase its debt by 30 to 40 billion euros. The marriage of Bouygues Telecom and SFR-Numericable also amount to bring the mobile market from four to three operators. What worries consumer groups, as the arrival of Free in 2012 had helped to bring down the prices of packages by 40% on average. But this price war has also broken the back of the smallest of the four operators, namely Bouygues Telecom. Hence the raid Numericable, SFR pattern on the weakest of the band.
mobile telephony market shares
To win the bet, Patrick Drahi has yet to convince Martin Bouygues and, above all, reassure the government. He will then get the green light from the Competition Authority. But markets are already buying operation: Monday evening, the action-Numericable SFR leapt by 14% and 13% of Bouygues. Whatever happens, a big bang is expected in telecommunications.
Martin Bouygues. Photo G. Fuentes. Reuters
Package prices will go up there?
UFC-Que Choisir, no doubt, “the passage of four to three operators always result higher prices. “ and the consumer association to take Austria as an example, where prices have increased 10% in the first quarter that followed the acquisition of an operator. “The employment, investment and the best service to consumers are priorities, for his part, said Minister of Economy, Emmanuel Macron. The consequences of consolidation are these negative ways, as demonstrated by the recent cases in Europe. “ In fact, in France, the arrival of a fourth player on the market in 2012 aka Free, had lower mobile tariffs: -25.6% in 2013 and -13.5% in 2014, according to ARCEP, the industry regulator
The average monthly price of mobile phone package
Sylvain Chevallier, the firm Bearing Point, sees things differently: “There is not necessarily room for four players on the market. This could be different if the prices were higher “ And to predict. ” It is unlikely that prices will rise with this operation. In addition, a market with three actors seems to be a good thing for the investments rising again: more and higher quality 4G, preparing the 5G, accelerating the deployment of fiber … “ Conclusion: “This concentration seems beneficial to the consumer.” Provided that the Competition Authority is keeping watch. A priori, one can count on. At the time when they were three to share the cake mobile, Orange, SFR and Bouygues Telecom had agreed on the prices of their packages on the back of subscribers. In 2005 they were sentenced together with a fine of 534 million euros.
Patrick Drahi he has the means of its ambitions?
He plays Pac-Man in the cable and telecoms with money from banks. In less than a year, this will have financial packages swallowed SFR, Virgin Mobile, Portugal Telecom, but also the US cable operator Suddenlink, bought last month. An acquisition bulimia whose addition dizzy: over 30 billion euros … which could add 10 billion for Bouygues! “We must be careful not to found an empire on the sands of debt,” warned Monday, Finance Minister Michel Sapin, who, like others, is concerned the ability to Patrick Drahi and its Altice group to repay its debts.
The Economist Drahi summarizes the method of a lapidary “borrows, buys, cut ‘ . Taking advantage of the high valuation of the cable assets that multiplies its loan, the businessman grabbed the interest rate shooting window to grow at very low speed. It then distributes the debt on its various assets to avoid (too) exceed the debt ratios generally accepted. Then in good cost-killer, it drastically reduces costs, as SFR, playing background on synergies and economies of scale. What it can now afford Bouygues Telecom. The more he gets rich on paper, the more it can borrow. But the game only running two conditions: must the acquired businesses generate enough growth to pay off their debt and that rates will not rise sharply. Otherwise the built building on the debt and the faith of the markets can collapse. Is not Messier?
Can the government thwart the draft Drahi?
“The state can not do everything,” as Jospin said, and indeed he has no right to veto a deal between private operators: only the competition authority, once the transaction, will have jurisdiction to say yes or no to a potential Numericable-marriage between SFR and Bouygues Telecom. But the government is not totally disarmed. Emmanuel Macron has not denied saying all the evil he thought of such a “deal” before it even happens. On Sunday, the Minister of Economy attacked “a con dation [...] not desirable for the sector” and asked that “general interest “ takes precedence over ” opportunistic reconciliations “ The Prime Minister, Manuel Valls, has also posed five conditions. job retention, quality of service, investment , innovation and assignment of frequencies. Number 1 concern of the government? Whether one attends to thousands of job cuts at Bouygues Telecom (8,800 employees) and Numericable, SFR (10 500). “When you are willing to spend 10 billion is that we are preparing behind to monetize this investment at any price,” is it frowns at Bercy. For Drahi not 36 solutions. Difficult to increase rates when Free still threatens to break the price of mobile. His only leverage is to reduce costs by eliminating “duplicates”. Emmanuel Macron will therefore to dot the “i” to Patrick Drahi, he convened in his office in the late afternoon. It should especially remember him “the Commitments” made by private operators in return for their licenses: including connecting 57% of the population to the very high speed fiber 2020, an investment of 6 to 7 billion euros … “We will be very vigilant that these commitments are met whatever the financial objectives of each other,” is said to Bercy. That Drahi warned.
Orange and Free, winners or losers?
In a market income three operators, the survivors would be strengthened. But the situation is radically different between the incumbent operator, today in leading position, and Free, determined to continue to shake up the industry. If the CEO of Orange, Stéphane Richard, continues to call for a consolidation citing market operators operating at three – China, Korea, Japan -, may be faced with a competitor (LICO-Bouygues) become bigger than it in the mobile. An unprecedented situation. But it is the rise of Free, which is most likely to undermine it. The group of Xavier Niel is ready to redeem the Bouygues mobile network to Patrick Drahi on success of the operation. A trump card knowing that Bouygues displays a geographical coverage of 72% against 33% in 4G Mobile Free. Less profitable than its competitors, Orange could then find themselves caught in a vice between SFR Bouygues-more powerful than him and much more agile and bold Free. Rude perspective.
Stéphane Richard (Orange). Photo E. Piermont. AFP
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