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French telecoms operators Orange, Bouygues and Iliad-owned Free are exploring a carve-up of Patrick Drahi’s rival telco SFR, in what would be a landmark deal to consolidate the country’s mobile market.
Dividing up the group, which would probably be led by Bouygues or Iliad, would result in SFR’s assets being split between the companies, according to two people familiar with the matter.
Blackstone, KKR and Ardian are among the investment groups to have recently held preliminary talks over financing options with SFR’s potential suitors, according to people familiar with the talks.
The potential sale of SFR comes as Drahi has been dismantling the telecoms and media empire he built up via a $60bn debt-fuelled acquisition spree a decade ago. As interest rates have risen, the French-Israeli industrialist has refinanced and restructured the company’s debts and sold off assets to appease creditors.
Drahi is now willing to sell SFR and believes that dismantling it in parts is the best option, both to maximise the price and head off competition issues that would arise if any single French rival tried to buy the whole company, according to people familiar with his thinking.
Analysts at New Street Research estimate SFR, France’s second-largest telco, could be worth €21bn.
A sale of SFR has become more likely since its parent company Altice struck a deal with creditors in February to cut its debt pile from €24bn to €15.5bn.
Orange, Bouygues and Iliad have been working on potential deal scenarios since then, such as what product lines or network assets they would each want to buy, said people close to the matter.
Blackstone is understood to have had initial discussions with Bouygues over financing a deal, according to two people familiar with the matter.
No decisions have been made on how to divide the assets, according to four people familiar with the negotiations, who added there was no certainty a deal would be struck.
But cutting the number of French telecom operators to three from four would create billions of euros in synergies and deliver a profit boost for those remaining, so Orange, Iliad and Bouygues are motivated to seek an agreement.
“For a long time, [the companies] were each in the mindset of saying ‘I want to eat the whole cake’ or ‘I don’t want the other guy to eat the cake’,” said one person involved in the talks over SFR. “Now they’re saying ‘We have to share the cake or no one gets cake’.”
If a deal were to be agreed, it would probably come after the completion of the Altice France restructuring, which is expected in October, according to two people familiar with the matter.
A person familiar with Orange’s thinking said the company was looking to maintain its market leadership in any agreement, while also seeking to acquire some mobile customers as part of the deal.
Iliad, Orange, Bouygues, Blackstone, KKR and Ardian declined to comment.
Altice France said it was “focused on implementing the debt agreement, considering the sale of non-core assets, and continuing to relaunch SFR’s commercial operations and improve service quality”.
France’s telecoms companies are hoping a break-up of SFR will be a palatable form of consolidation for EU competition authorities, which have historically been reluctant to allow mergers because of concerns over price rises for consumers.
There have been several previous attempts to consolidate the French market, including in 2016 when a proposed tie-up between Orange and Bouygues fell through.
The EU has been under pressure to permit more telecoms mergers since Mario Draghi’s 2024 report into European competitiveness, which recommended allowing consolidation to create stronger groups better equipped to invest in network infrastructure.
Russell Waller, analyst at New Street Research, said any deal for SFR had three hurdles: a willing seller, price and regulatory concerns. Waller believes all three could now be cleared.
“Paris will lobby very hard to get the outcome it wants, but ultimately Brussels will have the final decision [on approval],” Waller said.
The French government has said it will monitor any sale of SFR closely given the risk of price increases for consumers, as well as the strategic nature of the telecoms sector. The state is also the largest shareholder in Orange and will have a significant role in how any deal is structured.
Industry minister Marc Ferracci said in a recent interview with CNews that the government would be “concerned” if a foreign buyer approached SFR because of “sovereignty implication”, adding he would be “very vigilant” in reviewing such a case.
