Published On: Tue, Mar 11th, 2014

Patrick Drahi’s Bid Competitor For French Mobile Phone Operator SFR Takes A Preemptive Step It hopes Will Steer Regulatory Outcome Its Way


French upstart mobile phone operator Iliad operates the Free Mobile service in France, that in 2013 severely undercut prices of established operators in the mobile phone sector there. Yesterday, Iliad cut a conditional deal with the third largest French mobile operator Bouygues to buy some of its spectrum and mobile phone assets.

Iliad announced it has signed an agreement for exclusive negotiating rights with Bouygues, and Bouygues Telecom, for the acquisition of a portfolio of some of Bouygues’ mobile frequencies and a portion of its 2G/3G/4G mobile network, for consideration of up to US$ 2.5 billion (Euros 1.8 billion).

The conditional agreement comes as Bouygues, which is the third largest mobile phone operator in France, is seeking to allay anti-trust concerns over its own bid to acquire the second largest operator, La Societé Française du Radiotéléphone, or SFR, from French media giant Vivendi.

Patrick Drahi’s publicly listed cable holding company Altice is also in the running having made a bid for SFR as well, on behalf of its French cable affiliate Numericable, also publicly listed, of which it owns 40%.

As a cross-industry acquisition an Altice bid for SFR, said to be for around US$20 billion, has been thought to be more likely to pass regulatory scrutiny, than one by Bouygues which is in the same business, without effective moves by Bouygues to placate officials in both Paris and Brussels.

The deal with Iliad, therefore, announced yesterday is directed at that issue and will only proceed to a closing in the event that Bouygues actually succeeds in acquiring SFR, and of course upon obtaining any necessary approvals of its own.

If such a deal does goes ahead it would obviously allow Free Mobile to continue its ambitious sales momentum in the French mobile market, and to significantly strengthen its network and its portfolio of frequencies.

Nobody knows yet how Vivendi will jump, or which of the two bids it will choose. Patrick Drahi obviously hopes to be the winner. If he has offered a significant continuing holding to Vivendi, with the possibility of further upside down the road, it is possible he could well be the more compatible partner for Vivendi.

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