A \u20ac17bn ($20bn) proposal by Bouygues Telecom, the Free-iliad Group, and Orange to acquire \u2018a large part of Altice\u2019s activities\u2019 in France has been rejected.<\/p>\n
Positioned as a means of enabling further investments in fixed and mobile networks (with an inevitable nod to AI), the proposal has been driven by the need for French billionaire Patrick Drahi (who owns 55% of Altice France) to reduce substantial debts.<\/p>\n
The B2B assets would have been largely taken over by Bouygues Telecom as is looks to consolidate its position in the French enterprise market, with some also heading to Free-iliad. B2C activities would have been shared across all bidders.<\/p>\n
The proposal is symptomatic of two clear trends in the European telecoms market: consolidation is required and investment (and margins) are under strain.<\/p>\n
In terms of consolidation, the report on EU competitiveness by Mario Draghi, former European Central Bank President, encouraged consolidation to create stronger competitors.<\/p>\n
The problem is that this argument has been going on for years \u2013 in the 1990s and 2000s there was discussion of mergers between the likes of France Telecom (now Orange) and Deutsche Telekom, as well as between KPN and Belgacom. Obviously, neither happened.<\/p>\n
Sweden\u2019s Telia and Finland\u2019s Sonera did combine, but no-one has been popping champagne corks over its success.<\/p>\n
So, there is an intellectual argument for cross-border consolidation, but cultural, political, and regulatory barriers remain. There are examples of service providers successfully operating across multiple European markets \u2013 for example Orange, Vodafone, and Telef\u00f3nica.<\/p>\n
In fact. They have been instrumental in driving the real consolidation across Europe \u2013 in-country consolidation, combining fixed and mobile assets for both enterprise and consumer customers.<\/p>\n
The \u2019rule of three\u2019 plays strongly here and is becoming more widely accepted (notably in the UK recently with VodafoneThree).<\/p>\n
It means that three competitors can scale and invest in individual markets (even despite tight margins), which will result in sufficient competition to benefit customers.<\/p>\n
This indicates that Altice\/SFR will be broken up in due course. The combination of debt and market forces make it inevitable \u2013 the only questions are about when, for how much, and who gets what assets.<\/p>\n
Maybe one day there will be consolidation across borders, but the barriers remain substantial. Despite being a \u2018single market\u2019 Europe remains a collection of markets. There could be a signature deal that starts a series of others, but then you must imagine the technological, cultural, and political consequences.<\/p>\n
For the foreseeable future, in-market consolidation looks like the most likely activity \u2013 and Altice\/SFR looks like the next in line.<\/p>\n