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France's Orange and Bouygues May be in Merger Talks

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Two of France's mobile networks have confirmed that they are separately reviewing options for consolidation in the market, sparking rumours that they are in merger talks.

Although neither Orange nor Bouygues said that they were talking to each other, there had been media reports that some sort of talks were taking place. All that the two companies would says is that they are assessing the opportunities in a changing landscape in the local market.

In its statement, Orange said that it believes that consolidation of the French mobile market would be positive in the long-term for both investment and for the consumer.

Orange is nearly ten times the size of Bouygues Telecom in terms of market capitalisation, mainly due to Orange's landline and overseas subsidiaries. Within the French market, they are two of the larger networks and a merger would trigger a lot of regulatory headaches.

Meanwhile, Bouygues, having recently lost out in an attempt to merge with SFR, is said to be looking for a new partner to shrink the market from four to three networks.

A rumoured bid from Illiad/Free has not emerged, yet.

Bouygues had previously agreed a deal to sell its network infrastructure to Free in order to secure approval for a merger with SFR -- although that was scuppered with Vivendi chose to sell SFR to the cable operator, Numricable instead.

Any deal between Bouygues and Orange would almost certainly see Bouygues renew its agreement with Free, to ensure that Free is able to maintain its place as a viable competitor in the market.

Consolidation in the market has long been expected, as the rapacious competition between four networks has lead to cost cutting and redundancies across the entire industry. The French government, which owns a 27% stake in Orange is both keen on lower prices, but also very keen to avoid redundancies, so may be more willing to approve some level of consolidation that preserves jobs.

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Tags: orange  bouygues telecom  France