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Wireless Infrastructure Newsletter

Orange mulls Bouygues bid, UK IPO June 09 2014

As the French company reshuffles its assets to maximize value, it may bid for France's third cellco, and seek IPO for EE venture

By Caroline Gabriel

French incumbent Orange has been weighing up its subsidiaries around the world, divesting some and acquiring others as it looks to concentrate its efforts where it can generate the best results. Much of its M&A effort in recent times has focused on Africa, but now its eyes are on its European home region too. It sold its Austrian unit to Hutchison 3, but it may mount a bid for France's third cellco, Bouygues, and consider a partial IPO of its UK joint venture, EE.

The French market has been thoroughly shaken up by a price war initiated by new entrant Free Mobile, and second cellco SFR recently agreed to be acquired by cableco Numericable. Bouygues lost out in the race for SFR, and now looks weak and casting around for new partners. It has been linked with Free itself, with MVNO Virgin Mobile, and now with market leader Orange.

Although competition regulators remain generally wary of deals which reduce the number of cellcos - one reason why SFR's parent Vivendi chose Numericable over Bouygues - French players feel there is no room for more than three MNOs in their beleaguered market, and the older operators are trying to build up scale to see off Free.

Orange has hired bankers Lazard and Credit Suisse to look into a possible bid for Bouygyes, reported Reuters.

Meanwhile, other reports said that Orange and its partner Deutsche Telekom would revisit the idea of a public offering for their successful UK joint venture, EE. That could see the company's shares listed on the London stock exchange later this year.

An IPO, or sale of a stake to an additional partner, have been discussed since EE was formed (when it was called Everything Everywhere). This could boost the finances of the debt-laden parents, as they look to invest heavily in 4G networks and emerging markets, while giving EE more freedom of action. CEO Olaf Swantee is known to want more autonomy from the owners.

Orange's CFO Gervais Pellissier told Bloomberg that a stock market listing is still the preferred option, although the owners have not ruled out other choices if a suitable offer is made.

Swantee has been asked to "position EE either on dividend or return or growth," within the next six months, Pellissier told reporters in Paris. "We will decide when we return from vacation." One concern will be the increasing level of competition in the UK, with BT set to re-enter the mobile market and Vodafone investing in wireline and quad play assets. Plans for a previous stock market listing were put on hold earlier this year.

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