Iliad in talks to merge Free Mobile with Bouygues Telecom

Iliad SA, the owner of French telecom unit Free Mobile, is in talks on a possible acquisition of its bigger rival Bouygues Telecom, Le Parisien yesterday reported.

The move comes just days after Bouygues, the third-largest mobile operator in France, lost a month-long bidding battle for Vivendi's telecom unit SFR Group SA to Numericable, a cable company controlled by the billionaire Patrick Drahi. (See: Vivendi agrees to sell telecom unit SFR to Numericable in an over $23-bn deal)

Orange SA is the biggest mobile operator in France by subscribers, followed by SFR, Bouygues Telecom and Free Mobile.

Free Mobile, is willing to pay €5 billion for Bouygues, but the larger rival is seeking €8 billion ($11 billion), the report said.

Iliad, founded by billionaire entrepreneur Xavier Niel, aims to get Bouygues Telecom's spectrum and network infrastructure, which it currently buys from Orange for €500 million - €700 million each year.

Along with spectrum and network infrastructure, Free Mobile, the smallest of the three bigger mobile operators, will also get Bouygues Telecom's 11.2 million mobile customers and 1.9 million fixed-line customers.

Bouygues, run by the scion of the family-owned construction-to-media group Martin Bouygues, had last month said it would sell some of its wireless spectrum and transmission network to Free Mobile for around €1.8 billion ($2.5 billion) in order to ease antitrust concerns if it was able to clinch the SFR deal.

The paper also said that Bouygues had also approached Telefonica about a possible sale, in order to put pressure on Free Mobile.

Bouygues is looking to exit since it will not be able to compete with Orange and SFR/Numericable, as well as with its smaller rival, Free Mobile, which is a low-cost discount operator.

Free Mobile, which holds a 12 per cent share in French telecom market, has 5 million customers, while Orange has 27 million customers, SFR 20.7 million, SFR and Bouygues Télécom 11.2 million.