French mobile merger falls through

After months of intense negotiations regarding a possible merger, two of France's four mobile network operators - Orange and Bouygues Telecom - have broken off talks.

"I don't know what happened, but it's dead," a source close to Bouygues told French newspaper "Le Figaro" on Friday.

Orange later confirmed the report. "Following in-depth discussions, Orange's board of directors concluded that an agreement for a merger with Bouygues Telecom couldn't be found," it said in a statement.

"In a market where the possibility of a consolidation has become ruled out for a long time to come, Bouygues Telecom will carry on with its stand alone strategy," Bouygues said on its part.

The two companies had officially entered negotiations in January, after months of rumors that they were in talks. A deal was expected to have a volume reaching up to 10 billion euros.

Sticking points

Insiders said that the two sides struggled to agree on each other's valuation.

A person familiar to the talks spoke of the state's insistence on valuing Orange at higher than market value. Orange, France's largest mobile provider, is the sucessor to France's national phone operator. The government still owns 23 percent of the company.

"It got so complex that it failed," another source said. "We ended up with a monster of a deal that contained too large uncertainties concerning competition and in the end Bouygues found it too risky."

The possibility of a consolidation caused a stir among consumer advocates, as a merger between Orange and Bouygues would represent 60 percent of the French mobile market. Competition authorities may have blocked the move, had it come about.

This was the fifth attempt by French mobile operators to conslidate in the past two years.

jtm/ tko (AFP, dpa, Reuters)