|
 in an industry
damaged by fierce competition, but collapsed on Friday morning with Bouygues deciding not to sell his telecoms business to the former
state monopoly even though he had floated the idea himself four
months earlier.
The fact Bouygues had confirmed that the unprofitable telecom
service provider he founded in 1994 was for sale made his rivals and
Economy Minister Emmanuel Macron think the businessman had decided
he had no choice but to sell, said four people involved in the talks
who spoke to Reuters on Saturday and Sunday.
"It's probably because of this first call that they all tried to rip
him apart," one of the sources who is close to Orange said,
referring to the French government, which owns 23 percent of Orange,
and rivals Iliad and SFR.
For the deal to go through, Iliad and SFR would have had to agree to
buy some Bouygues Telecom assets to ease competition concerns.
Spokespeople for the French Economy Ministry, Orange, Bouygues, SFR
and Iliad declined to comment for this story.
The weeks of deliberations were the best chance in years to take a
contender out of the game and ease competitive pressures that had
hammered profits in the industry and drained the capital needed for
network investments to better serve an increasingly data-driven
economy.
The deal's collapse is a blow not just for the companies but for the
French government.
The perception among Martin Bouygues' rivals that they had the upper
hand proved decisive on March 24 when a stand-off between the
63-year-old businessman and 38-year-old Macron came to a head and
Bouygues stormed out of a meeting at the economy ministry, according
to two of the sources.
Bouygues felt humiliated by Macron's demands, said one of the
sources, who is a banker. The scene highlighted the rocky
relationship between France's Socialist government and Bouygues, who
is godfather to a son of former right-wing president Nicolas Sarkozy.
CONTROL OF ORANGE
The complex telecoms merger, whose price tag Bouygues fixed at 10
billion euros ($11.4 billion) in cash and Orange shares, would have
made the conglomerate the second-biggest shareholder in Orange after
the French state, which would have seen its stake diluted.
For Macron, a former Rothschild & Cie banker, that raised questions
about the role Bouygues would play in Orange which owns and manages
submarine cables that are central to France's surveillance
apparatus, making it a strategic asset for the government.
Macron did not want to be perceived as having let Bouygues gain
control. He wanted the government to keep three seats on the Orange
board and a blocking minority at shareholder meetings, an idea that
Bouygues understood and accepted from the start.
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But Bouygues was not happy with Macron's request to cap his
potential stake in Orange for seven years and give up for 10 years
the double-voting rights he was entitled to as a long-term investor
in Orange, three of the sources said.
"It's criminal to impose such conditions on Bouygues," the banker
said. "It's treating him like a second-class citizen. Any foreign
raider who starts buying Orange shares would get better terms."
Macron and his advisers feared that Bouygues would use the same
tactic as another French billionaire, Vincent Bollore, whose media
company Vivendi quietly expanded its stake in Telecom Italia to
eventually gain control.
FRICTION
Bouygues himself was not present at the discussions between Orange,
Bouygues, Iliad and SFR at the Paris offices of his lawyer
Jean-Michel Darrois where about 40 people gathered in the ten days
preceding the collapse of the deal.
All four companies wanted an agreement to end their price war.
But the talks soured in the final week, according to several people
present, with Bouygues increasingly mistrustful of the two other
players Xavier Niel, the founder of Iliad, and the owner of SFR,
Patrick Drahi.
Bouygues became increasingly wary of the risks to his interests from
the break-up of his telecom assets and the manner of their
distribution among his rivals.
Disagreements over break-up fees and the conditions under which each
party involved would have been able to withdraw from the deal proved
intractable, said several of the sources.
"Niel made concessions but only on the last day," said one of the
sources who is close to Bouygues. "He tried to obtain as much as he
could."
($1 = 0.8782 euros)
(Reporting by Mathieu Rosemain and Sophie Sassard, additional
reporting by Michel Rose and Gwenaelle Barzic; Editing by Tom
Pfeiffer and Anna Willard)
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