Published On: Thu, Jul 31st, 2014

French Regulators May Block Patrick Drahi’s Deal to Buy SFR for $23 Billion

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The French competition regulator announced yesterday they have decided to undertake an in-depth examination of the planned $23 billion acquisition by Patrick Drahi’s Altice Group of mobile phone unit SFR from the Vivendi Group. The scope of their examination will be to examine whether the merger will, in their view, restrict competition in the mobile phone space in France.

The Autorité de la concurrence said it would consult telecommunications and media regulators as part of its investigation, and consult other marketplace stakeholders, should it determine that remedies are necessary.

In France, the Competition Authority is an independent administrative authority, specializing in the analysis and regulation of the functioning of competition in the French marketplace, for the protection of public economic order.

When the acquisition of France’s second largest mobile phone company SFR was first announced, in April, the French Minister for the Economy, Arnaud Montebourg, was vocally opposed to it, preferring a domestic solution whereby existing French mobile phone company Bouygues would buy SFR instead. He took this position even though it lowered competition by reducing the number of players in the industry from four to three.

The Numericable Group, a subsidiary of the Altice Group, formally filed a merger notification to the Autorité de la Concurrence on June 4, relating to its plan to acquire SFR from the Vivendi Group. After several discussions with the Autorité’s staff, the required information for their consideration was declared to be complete on June 24.

Yesterday the Autorité declared that, after examining the matter, and following an initial consultation of stakeholders in the marketplace, it considers the transaction raises serious competition concerns, thus requiring an in-depth phase two investigation, which will take approximately a little over two months.

The Autorité will now continue to engage in extensive consultations with stakeholders in the marketplace. It will also consider the opinions of other regulators. These include both the telecom regulator, Autorité de régulation des communications électroniques et des postes (ARCEP) and the media regulator, Conseil supérieur de l’audiovisuel (CSA).

The Autorité will also consult stakeholders in the marketplace with respect to remedies that may be deemed necessary should it conclude the merger does impede competition.

While Patrick Drahi may not like this potential monkey wrench thrown into his merger timetable for SFR, it does not represent, in and of itself, a major difficulty for him, unless French political decision makers want to make it so.

The whole thrust of Drahis’s bid for SFR has been that in reality it preserved rather than reduced competition in the mobile phone sector in France. We will now find out how much that really matters to the French government, over the ensuing two months or so, or whether for them a purely domestic solution is what they prefer even at the cost of reducing the number of competitors, as a Bouygues solution would have done.

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