Telecoms: Martin Bouygues refuses the offer of Patrick Drahi – Le Figaro

Bouygues group’s Board of Directors deems too risky even for a check for € 10 billion.

It is not! Tuesday night, the Bouygues Board of Directors rejected “unanimously” Bouygues Telecom’s bid by Altice, the parent Numericable-SFR. The big wedding, as expected by the sector and by the Exchange, will not take place, despite the 10 billion euros on the table by Patrick Drahi. And, says a source close to the matter, “even an escalation of Patrick Drahi would not give advice”.

The Bouygues group is preparing to continue the adventure of telecommunications, a sector that states promised “a new era of growth”, “worn by the exponential development of digital uses.” Bouygues Telecom hopes to take advantage of its competitive edge in mobile broadband (4G), while it is neck and neck for the leading position in this market with Orange. In the fixed, the group emphasized the progress made, particularly since the launch of its new Bbox Miami. Although it is still far behind its rivals, with only 2.5 million fixed subscribers, 11 million in the mobile.

Settlement risk of the operation

It will have to make significant investment efforts to catch up. Whatever, Martin Bouygues takes the risk. Its board put on a return to a 25% operating margin (EBITDA) in 2017 – which relativiserait the check offered by Altice – then it fell to 10% in the first quarter of 2015. “The bet is bold. To be sustainable and able to finance its investments, an operator must generate at least 30% EBITDA margin, “says a banking source.

” The gamble is bold. To be sustainable and able to finance its investments, an operator must generate at least 30% EBITDA margin “

But if Martin Bouygues said no, it is primarily in the name of execution risk of the operation, in terms of competition law. Altice had nevertheless reached an agreement with Free to resume part of the mobile network and of Bouygues Telecom stores. It did not seem enough to the leaders of Bouygues, given the demands already made by the services of the Competition Authority in 2014, while trying to buy Bouygues SFR to Vivendi. According to a close case, Altice can take on his own authority that the risk of veto incompatible with the operation of the financing negotiated by the holding company with its banks. The Board is therefore confident that this obstacle is “structurally insurmountable” for Patrick Drahi, which had no comment Tuesday.

Frequency Assignment

In addition, the consequences of the 700 MHz frequency assignment which will take place end of 2015 are “not taken into account by the offer,” according to the Bouygues group. Finally, the commitments made by Altice on maintaining employment have not convinced more.

Patrick Drahi commitments had yet also developed in the late afternoon in the minister’s office of the Economy, Emmanuel Macron. The government had largely indicated his skepticism with regard to the operation, fearing a drop in sector investment. The passage from four to three operators raised fears a rise in prices with a less aggressive competition. It would also have given rise to a duopoly between Numericable, SFR and Orange on the corporate market.

The Bouygues group takes the risk that its title heavily punished by the financial markets. On Monday, telecom stocks have accumulated gain of 9 billion euros in one session. After a wait day the stock market response to the refusal may be scathing.