French telecoms groups to test EU merger rules with $23.5 billion SFR deal (updated)
UPDATE 2-French telecoms groups to test EU merger rules with $23.5 billion SFR deal Adds context on antitrust approvals in paragraphs 4-7, CEO quotes, graphics throughout
By Gianluca Lo Nostro
PARIS, June 8 (Reuters) - French telecoms groups Bouygues BOUY.PA, Orange ORAN.PA and Iliad-owned Free face a complex antitrust review of their planned $23.5 billion takeover of SFR, executives said on Monday, in what will be a test of regulators' willingness to support consolidation in the sector.
The trio of bidders said on Saturday they had agreed to buy Altice France's SFR for €20.35 billion ($23.45 billion), including debt, in what would be one of the biggest European telecoms deals in recent years if approved.
Under the deal, the companies will share out SFR's assets, with Bouygues taking the largest, or about 52% of the carved-out revenue, Iliad taking 27% and Orange 21%.
But the buyers now face a complicated review by regulators, which is set to get underway in coming days and could last for more than a year.
Each suitor must notify competition authorities in its jurisdiction.
Orange and Bouygues will file in France, where they generate more than two-thirds of their EU-wide turnover. That makes them exempt from mandatory notification to the European Commission under EU merger rules.
Iliad, on the other hand, does not meet that threshold and will file in Brussels with the European Commission. Both regulators will then agree who will lead the merger review
"What's important for us is to have one authority in the driving seat to make sure the process is efficient," Orange CEO Christel Heydemann told analysts on a call, adding that the company had strong relationships with both the French and EU watchdogs.
Clarity on which body would have final oversight will become clear "in a matter of weeks", Heydemann added.
POSITIVE SIGN
A break-up of SFR would reduce the number of mobile network operators in France to three from four, challenging European Union regulators' long-held red line to maintain four operators per country in Europe.
Heydemann said the company was ready to discuss behavioural remedies, citing the Vodafone-Three merger in Britain as an example that convinced regulators.
"We conceived this transaction more in the spirit of what was done in England, i.e. a true consolidation from four to three operators, with efficiency gains that are reflected in the synergy figures," she said.
Orange expects more than €500 million in annual cost synergies from the acquisition.
EU authorities have imposed tough remedies and blocked telecoms deals to protect competition, but a 2024 report on the bloc's competitiveness urged regulators to ease their stance and focus instead on helping businesses gain scale to better compete with foreign rivals.
Iliad CEO Thomas Reynaud told reporters that proposed EU merger rule overhauls could be seen as a "positive sign" for the deal.
In April, the EU proposed looser merger rules to spur dealmaking in Europe, though antitrust chief Teresa Ribera warned not to expect blank cheques for big deals.
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(Reporting by Gianluca Lo Nostro; Writing by Dominique Patton; Editing by Sudip Kar-Gupta, Emelia Sithole-Matarise and Susan Fenton)