Telecom Italia will sell its stake in French mobile operator Bouygues Telecom.
Telecom Italia has decided to sell its 10.8% stake in France’s Bouygues Telecom, the country’s third-largest mobile operator. The other minority shareholders in the company, including utility E.ON, advertising group JCDecaux and bank BNP, are also rumored to be looking to sell.
Industrial group Bouygues, which already owns 54% of the telco, has pre-emption rights over these shares. It is also viewed as the likeliest buyer, mostly because there are limited advantages to other players in taking a minority position in the operator. Cable & Wireless sold its Bouygues Telecom stake in 1999; Telecom Italia’s exit will leave Bouygues without any external partners in the telecoms industry.
The European mobile market is consolidating, as players such as Vodafone, T-Mobile and Orange establish brands and presences throughout the continent. As brand image and international roaming both become more important in the industry, such reach gets more and more useful.
Bouygues cannot do this, and has been losing market share over the last few months. So far, unlike its domestic rivals SFR/Cegetel (owned by Vivendi and Vodafone) and Orange, it has not bid for a 3G mobile license. Effectively, it is falling further behind its competitors in every way. However, it is still profitable, and analysts value it at around E6-7 billion.
There are two routes Bouygues Telecom could go down. One is entrenchment – becoming a cut-price, France-only mobile operator, offering basic services and not focusing on branding. Renting capacity to mobile virtual network operators (MVNOs) would also be a good move. They will be companies with strong brand names and content, making France’s other operators reluctant to deal with them.
An alternative could still be to sell out to an international group. The telecoms business has little in common with Bouygues’ construction interests, and major groups including T-Mobile and Telefonica currently have no presence in the French market. But the parent company will be likely to hang on for a good price, leaving such a deal some time away.
