French telecoms: mating calls

Is there anything more romantic than Paris in the spring? There is if you are an M&A banker. These cupids have been trying to put French telecoms companies together for years. With four of them vying for customers, the competition is wearing away profitability. Consolidation makes sense.

But statements this week from Numericable/SFR and conglomerate Bouygues - in which both said the market had improved - suggested that matchmaking is some way off.

Bouygues' first-quarter results on Wednesday revealed that its telecoms unit had managed to grow its subscriber numbers in both mobile and fixed line, though at a cost. Average revenue per user has fallen 5 and 13 per cent, respectively, year on year. Earnings before interest, tax, depreciation and amortisation from telecoms did hold up, which is important for pricing these assets. Numericable, controlled by holding company Altice, has been one of the companies mooted as a bidder for Bouygues' business.

But Numericable seems distracted by other projects. On Tuesday, its chief executive Eric Denoyer said the price war in French telecoms had ended. That was good to hear, because in the first quarter all the telecom companies added subscribers in wireless and fixed except Numericable, which lost out on both, says Oddo Securities.

No one is complaining, though. Numericable's cost-cutting efforts so far have pleased the market. Its merger with SFR only closed in late November. It promised it would not cut prices to win new customers. Numericable's share price has risen 11 per cent since Monday's close. Its promise to deliver value not volume (of subscribers) received a sympathetic response from the rest of the French telecom sector as well.

Given the optimistic noises from these two companies, any hope for romance between them or the other two (Orange and Iliad) seems more distant than ever.

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