Battle for French telecom supremacy heats up

The battle to make off with Vivendi's SFR unit to create France's top telecoms company heated up Tuesday with a winner in the multi-billion-euro struggle likely to emerge within days.

The result could upend the French mobile sector by reducing the number of operators and ending the fierce competition that has brought considerable drops in prices to consumers.

Cable operator Numericable and the construction and telecoms group Bouygues have both offered more than 10 billion euros ($14 billion) for SFR, which boasts the country's second-largest mobile network and also provides home phone and computer services.

To sway opinion, Numericable's parent company Altice on Tuesday pledged to protect jobs and step up investments, while it turned up pressure by saying its offer would remain on the table only until Friday.

Altice has offered 10.9 billion euros and a 32 percent stake in the new company Numericable-SFR to Vivendi, which has signalled its interest in unloading SFR to focus on its media holdings that include Universal Music.

The company has said it is "convinced that its offer is the most attractive" for Vivendi as well as the entire telecommunications sector.

Numericable does not have a mobile network, so its merger with SFR would leave the sector with four operators.

Altice said its offer would also be best for accelerating development of France's fibre-optic and high-speed 4G mobile networks.

Bouygues Telecom's offer is similar in financial terms: 10.5 billion euros but 46 percent of the new company.

However it has scored political points by making commitments to not only guarantee jobs, but also bring back some of the client service jobs that had been outsourced abroad.

Low prices 'irreversible right'

But its success would result in a reduction from four to three operators, an eventuality that has worried consumers, who have seen mobile prices drop by nearly a third since a fourth network began operating in 2011.

"Going from four to three operators is something which could worry us if no guarantees are put in place," the head of the consumer protection group UFC Que Choisir, Alan Bazot, has told AFP.

Bouygues Telecom has sought to take the sting out by offering to sell its current network infrastructure to Free, the newest operator which is still struggling to build its own network.

The head of France's competition authority, Bruno Lasserre, has said that the offer increases the chances that a merger between Bouygues Telecom and SFR would receive regulatory approval.

Free, which still rents capacity from the leading network Orange but must soon give up this arrangement, has endorsed a Bouygues-SFR tie-up.

The government's industrial redevelopment minister, Arnaud Montebourg, has tried to calm consumers' concerns.

"The time has come for a renaissance in the telecoms sector. I don't believe this will be to the detriment of consumers," he said on RTL radio, saying the drop in prices for mobile calls is an "irreversible right".

Analysts tend to favour the Bouygues tie-up, which would temper the price competition that has eroded profits and reduced funds available for investments.

"It seems to us that there are more synergies between SFR and Bouygues than SFR and Numericable," said one Paris-based analyst.

But a bidding war could get out of hand, the analyst warned.

"Bouygues and Numericable both need this deal and could be led into making an offer that is too high."

Bouygues shares were down 0.26 percent on Tuesday to 32.60 euros, but have climbed by nearly 14 percent since the beginning of the month.

Numericable's share price fell 2.85 percent Tuesday to 24.19 euros, and has dropped by about a fifth since the beginning of the month.