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French Mobile Giants Orange and Bouygues Back in Merger Talks

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Orange tries to prove that 4 into 3 will go, after all.Photograph by Carlina Teteris — Getty Images/Flickr RF

Orange SA (ORAN) and the telecoms arm of conglomerate Bouygues SA (BOUYY) have revived talks over a merger that would create a telecoms giant with over half of the country’s fixed-line and mobile markets.

Orange said on Tuesday the talks weren’t time-limited and there was no commitment to any particular outcome, adding it was exploring opportunities in the French telecoms market. Bouygues said in a separate statement it had signed a confidentiality agreement with Orange.

A deal would reduce the number of telecoms firms in France from four to three, raising fears of reduced competition as well as creating a national champion with a potentially unfair amount of leverage over national policy-makers. That matters in a European telecommunications market where much of the nitty-gritty of decision-making, especially on key issues such as net neutrality and privacy, have been jealously guarded by national governments.

French Economy Minister Emmanuel Macron opposed a previous €10 billion ($10.8 billion) bid by European telecoms group Altice SA, majority owner of Numericable-SFR, to buy Bouygues, saying in June it could destroy jobs and risked creating a French operator that was “too big to fail”.

However, he said last month he was not opposed in principle to further deals in the sector.

French telecoms firms have fought a drawn-out price war since low-cost Iliad (ILIAF) joined the market at the start of 2012, leading to sporadic talks about deals. News about the talks lifted the share price of all the major network operators in the country.

Weekly newspaper Le Journal du Dimanche said Orange was looking at buying Bouygues Telecom for €10 billion euros in cash and shares, with Bouygues to receive a 15% stake in Orange valued at €8 billion and the rest in cash.