French telecom incumbent
) is reportedly in talks with Bouygues Telecom over a possible
merger that will subsequently bring down the total number of
operators within the country from four to three. However, Orange
might face significant antitrust hurdles in its attempt to buy the
third largest wireless carrier in France.
Per the deal, Orange will pay €6.0 billion ($8.2 billion) for
Bouygues Telecom, while its parent company Bouygues and majority
shareholder JCDecaux could end up with a 10% stake in Orange by
selling in return for shares.
Notably, the telecom space in France recently saw a
consolidation after Vivendi's SFR was acquired by Altice. Bouygues
Telecom ended up losing the battle to Altice after five rounds of
aggressive bidding for the second largest mobile carrier, SFR.
Although Bouygues Telecom was trying to consolidate, it also became
a potential target for Iliad, which made an offer of €4.0 to €5.0
billion ($5.6 to $6.8 billion) for the former.
If Orange finally succeeds in acquiring Bouygues Telecom, the
French behemoth will be able to add 11.064 million subscribers to
its already impressive base of 239.4 million subscribers.
The French telecom market saw a vicious price war after lliad's
Free Mobile service came up with a competitive tariff offering. The
deal, if finalized, will see the integration of Orange's low-cost
brand Sosh with Bouygues Telecom's B&YOU, thus strengthening
the combined entity's position against Iliad.
However, Bouygues Telecom needs to restructure its business as
it continues to grapple under a stiff competitive scenario within
the domestic market. Meanwhile, Orange recently declared
disappointing first quarter results with both revenues and EBITDA
registering a 3.8% drop, owing to revenue declines in most of the
Orange currently carries a Zacks Rank #4 (Sell). Other stocks
worth considering within this sector are
Level 3 Communications Inc.
Nippon Telegraph and Telephone Corp.
). Level 3 currently sports a Zacks Rank #1 (Strong Buy), while
Nippon and KT Corp carry a Zacks Rank #2 (Buy).
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