Like Orange and Bouygues Telecom, Free believes that current European regulations hinder the possibility of reducing the number of operators in France to three. At present, acquiring SFR, even partially, is not feasible.
As SFR struggles with significant debt and a substantial loss of subscribers, particularly in the mobile sector, the perennial question emerges: could an operator seek to acquire it, even partially? In an interview with Capital (September issue) during the presentation of its half-year results, Xavier Niel expressed the impossibility of pursuing such consolidation given the present circumstances:
“I believe that the competition authorities, both European and French, would block it. The European guideline is to maintain four operators per country in a functioning market. For instance, in Italy, we even have five! In France, it is set at four. The guideline is unequivocal. So no, we cannot acquire SFR today, not even partially. To grow in France, other companies must pursue acquisitions; that is not our case. We continue to achieve 10% organic growth each year.” he explained.
The same sentiment was echoed by Bouygues Telecom, surveyed during the summer of 2023 in a manner similar to Free, as they engaged with Patrick Drahi’s group regarding a potential partial acquisition. Bouygues Telecom has clearly stated last November that a merger with SFR is indeed impossible, and so is any consolidation in France. “Consolidation is a dream for everyone. The critical issue is that it is not feasible due to the strict stance of the Competition Authority; moving from four to three operators is not realistic,” Olivier Roussat, the CEO of the Bouygues group, had remarked at that time. For several months now, Orange and other European telecom giants have been advocating for a regulatory change and further consolidation. They are calling for a new approach to merger control. “The threshold for consolidation in national markets is excessively high,” estimates the historic operator, which this year managed to merge its operations in Spain with Masmovil.
Xavier Niel: “Today, Free cannot buy SFR”
Free, along with Orange and Bouygues Telecom, believes that European regulations currently prevent a shift to three operators in France. Acquiring SFR, even partially, is impossible in today’s market.
The Current Landscape of Telecom Industry in France
The telecommunications industry in France is facing significant challenges, particularly for SFR. Recently burdened with substantial debt and a steep decline in subscribers, especially within its mobile segment, SFR raises the perennial question: could another operator attempt to acquire it, even partially? In a recent interview with Capital, Xavier Niel articulated the current barriers to any such consolidation.
Xavier Niel’s Perspective on Consolidation
“I think that the competition authorities, both European and French, would not allow it. The European doctrine is four operators per country in a functional market. Take Italy: we are even five there now! In France, it is four. The doctrine is four. So no, today we cannot buy SFR, even in part. To grow in France, others have the obligation to make acquisitions: this is not our case. We still have 10% organic growth per year,” Niel explained during the interview.
Challenges Faced by SFR
As one of France’s primary telecom operators, SFR’s struggles are not unique but a reflection of broader market dynamics. The company is grappling with:
- High Levels of Debt: SFR is currently navigating through significant financial liabilities.
- Loss of Subscribers: A notable outflow of mobile subscribers has contributed to its precarious position.
- Regulatory Hurdles: As outlined by industry leaders, current competition laws deter significant shifts in operator number.
Bouygues Telecom’s Position
Bouygues Telecom echoes Niel’s perspective. In interviews conducted in the summer of 2023, the company reaffirmed its stance against a potential SFR consolidation.
CEO’s Comments on the Situation
Olivier Roussat, CEO of Bouygues, stated, “Consolidation is everyone’s dream, but it’s not possible because of the harshness of the Competition Authority. It’s not realistic to go from four to three operators in France.” This aligns with the viewpoint expressed by other industry leaders, as Orange and other major telecom companies have been pushing for regulatory changes and greater consolidation within the market.
European Regulatory Environment
The European regulatory framework is key to understanding the telecom acquisition landscape in France. The current stance mandates a minimum of four operators to ensure adequate competition. This doctrine has arguably been a stumbling block for potential mergers and acquisitions.
Comparison with Other Markets
| Country | Number of Operators | Market Characteristics |
|---|---|---|
| France | 4 | High competition and diverse offerings |
| Italy | 5 | Recent increases in market share through consolidation |
| Germany | 4 | Strong presence of network-sharing agreements |
| Spain | 3 | High consolidation post-mergers |
Calls for Regulatory Change
Major operators, including Orange, have called for a reevaluation of the merger control measures that currently exist. Their argument centers around the belief that “The bar for consolidation in national markets is too high.” This sentiment was echoed after Orange’s merger with Masmovil to create Spain’s leading telecom operator.
Potential Benefits of Relaxing Regulations
- Increased Investment: Operators might be more willing to invest in infrastructure.
- Aggressive Market Strategies: Lower regulatory barriers could foster competitive strategies.
- Enhanced Services: Greater consolidation could lead to better service offerings for consumers.
Future Expectations for SFR and the Telecom Sector
Given the landscape described, what does the future hold for SFR? As subscriber numbers dwindle and pressure mounts to advance, SFR must strategically navigate these challenges. Meanwhile, other operators like Free and Bouygues may need to focus on organic growth, as highlighted by Niel’s assertion regarding their current trajectory.
Recommendations for Stakeholders
- Focus on Innovation: Telecom companies must prioritize technological advancements and customer satisfaction.
- Strategic Partnerships: Operators should seek partnerships to enhance service delivery without incurring regulatory penalties.
- Advocacy for Regulatory Reform: Engage with authorities to address the barriers to restructuring within the industry.
This article was reprinted on the Univers FreeBox website