By Gianluca Lo Nostro and Mathieu Rosemain
(Reuters) -Altice France, the owner of telecoms firm SFR, has rejected a bid from three French rivals, Altice CEO Arthur Dreyfuss told staff in a memo on Wednesday, dealing a blow to investor hopes for consolidation in the European telecoms market.
Bouygues Telecom, Iliad’s Free and Orange said late on Tuesday they had submitted a 17-billion-euro ($19.8 billion) non-binding offer to buy most of Altice France’s assets, valuing the company at 21 billion euros.
The joint bid had boosted stocks in Paris on Wednesday as investors anticipated more sector consolidation even though the French government said it would be vigilant about the deal.
“We confirm that we received an indicative offer last night for part of Altice France’s assets. This offer has been immediately rejected,” said Dreyfuss in a memo to employees seen by Reuters.
BOUYGUES, ORANGE AND ILIAD STAND BY OFFER
Bouygues, Orange and Iliad said on Wednesday in a joint statement they had taken note of the Altice group’s decision to reject their offer, but that they stood by it.
“The three operators remain convinced of the relevance of their bid and of the value of the project they are pursuing for the market and all its stakeholders, customers, employees, creditors and shareholders,” the groups said in a statement.
J.P. Morgan analysts said in a research note that the 17-billion-euro offer was better than expected, as they had previously estimated a standalone value of 16 billion euros, with synergies underpinning a price tag above 20 billion euros.
A source with knowledge of the matter told Reuters in September that anything below that range would be unacceptable for SFR.
Earlier on Wednesday, French Finance Minister Roland Lescure said he was going to be “extremely vigilant” about the deal.
“I’m going to be vigilant about two things: the impact on consumer prices and the impact on the quality of service,” Lescure said in an interview on French radio RTL.
“There’s a competition authority. It’s independent. It’s there to protect consumers, and it will do so,” he said.
The French government is the largest investor in Orange.
BID SPURS EUROPEAN CONSOLIDATION HOPES
Shares of Bouygues, which had touched their highest price in more than seven years earlier in the session, slightly pared gains after Altice’s rejection and closed 9% higher. Orange’s shares rose 3%.
Other French stocks also finished up, with the country’s benchmark CAC 40 index gaining 2%.
SFR is France’s second-largest telecoms provider with more than 19 million mobile subscribers and 6.1 million fibre customers as of June.
France has had four mobile network operators since 2012: Orange, Bouygues, Iliad’s Free, and SFR. Any deal to reduce the number of carriers to three would have to get approval from European or French regulators.
GETTING REGULATORS ON BOARD
The European Commission approved a four-to-three merger in Spain last year, but requested from MasMovil and Orange a package of remedies to create the 18-billion-euro MasOrange operator.
French antitrust agency chief Benoit Coeure said in an interview with daily Les Echos in July that if a deal involving SFR was presented to the regulator, it would examine it without prejudice, but also without ignoring difficulties.
A deal might also trigger consolidation in other markets, with Iliad deciding for a sale of its operations in Italy, said analyst Giorgio Tavolini from Italian brokerage firm Intermonte.
“It would make sense for the group to leave Italy – where it does not generate cash, once spectrum costs are considered, to focus its resources on the French market,” he said in a daily report.
($1 = 0.8593 euros)
(Reporting by Gianluca Lo Nostro and in Gdansk, Elvira Pollina in Milan, Mathieu Rosemain in Paris, additional reporting by Alessandro Parodi in Paris and Dimitri Rhodes in Gdansk; Editing by Dominique Patton, Milla Nissi-Prussak and Barbara Lewis)
