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 The two people said the improved bid could take the cash portion of
Bouygues' offer up to as much as 11.4 billion euros ($15.8 billion)
from 10.5 billion last week.
Construction-to-telecom group Bouygues is vying against local cable
operator Numericable <NUME.PA> to buy France's second-biggest
telecom operator in a deal that will overhaul the country's telecom
market.
If Bouygues wins and gets regulatory approval, it would cut the
number of mobile operators back down to three only four years after
low-cost player Iliad <ILD.PA> won a license to join the mobile
club.
Iliad's Free Mobile service, which offers unlimited voice and texts
and 3 gigabytes of data for 19.99 euros, touched off a price war
that led to a 20 percent drop in average revenue per mobile
subscriber in France.
SFR's current owner Vivendi became convinced that it wanted to exit
telecoms to focus on its media businesses because of the damage Free
Mobile has caused. SFR's core operating profit has halved from 2011
levels to 1.07 billion euros, and Vivendi took a 2.4 billion euro
writedown on the unit in February.
For Bouygues, the third-largest mobile carrier, winning SFR would
assure it an independent future and help it gain its own fixed
network to offer broadband services, analysts said. Bouygues Telecom
has been hard hit by Iliad's arrival to mobile, and was free cash
flow negative in 2012 and barely positive in 2013.
A third person close to the deal said Vivendi was expecting an
improved offer from Bouygues before a deadline for bids tonight. On
top of the cash, Bouygues' offer would leave Vivendi with a 46
percent in the combined SFR-Bouygues.
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Numericable's bid is at 10.9 billion euros and a 32 percent stake in
the new entity. Numericable's backer Patrick Drahi said on Wednesday
that he would not raise his bid.
Bouygues got additional firepower on Monday when it agreed to sell
its mobile network and some spectrum to smaller rival Iliad <ILD.PA>
for 1.8 billion euros if its bid for SFR is accepted.
A fourth source explained that Bouygues could find the funds for the
higher bid by using some of the proceeds from the Iliad deal.
Bouygues was not immediately available for comment, while Vivendi
declined to comment.
Vivendi's board is set to meet on Friday to weigh the two bids, as
well as its original plan to spin off SFR into a separate company by
July.
"The Vivendi board will not focus narrowly on one number: It will
look at each bid as a whole, including the pledges to protect jobs
and the two companies' strategy," said the first person. ($1 =
0.7212 Euros)
(Additional reporting by Gwenaelle
Barzic and Matthieu Protard; editing by Andrew Callus and Louise
Heavens)
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