Virgin Mobile France changes hands for €325m

There's no end to upheaval in France's mobile market in sight, as Numericable agrees to swallow the MVNO.
Written by Anne Morris, Contributor

The consolidation of France's mobile sector stepped up a gear this week after it was revealed that Numericable had successfully concluded talks with Carphone Warehouse and the Virgin Group to buy their respective stakes in Virgin Mobile France.

Altice, the investment company which owns Numericable, and Carphone Warehouse confirmed the acquisition. The deal will see the French cable company buy Omer Telecom (also known as OMEA Telecom), which operates under the Virgin Mobile brand in France, for €325m.

The offer was originally made in May, and talks have been ongoing since then. The transaction is still subject to the approval of the French Competition Authority.

This latest acquisition represents a further overhaul of a market that has already seen a number of important changes in recent months.

Vivendi recently agreed to sell its telecoms unit SFR to Altice, which now plans to merge the fixed and mobile company with Numericable to form a new powerhouse in the French market. Altice recently signed a definitive agreement with Vivendi on the purchase.

Now, Numericable is not only merging with SFR, but also swallowing up an MVNO. With 1.7 million subscribers as well as an LTE offering, Virgin Mobile has been a reasonably competitive rival to France's four main mobile network operators.

With regard to SFR, Vivendi ultimately decided to sell to Altice despite intense lobbying by the Bouygues Group, which had wanted to buy SFR to shore up its Bouygues Telecom unit.

Indeed, Bouygues Telecom has suffered the most from the cheap mobile deals introduced by Iliad-owned Free Mobile in January 2012, and incurred an operating loss of €19m in the first quarter of 2014.

The choice of Altice also riled Orange, because a merger between SFR and Numericable would not achieve its hoped-for goal of returning the French market to three mobile network operators, rather than the four that currently operate in the country.

The French government has also continued to stress that it is seeking further consolidation of the French mobile market by encouraging the operators to come to an accord in order to reduce competition and save jobs.

After talks to merge with either Orange or Iliad were inconclusive, Bouygues Telecom now says it plans to cut 1,516 jobs. However, analysts from investment banking firm Jefferies have suggested that Bouygues Telecom's "aggressive plan" was designed to bring consolidation to a head, and believe that a merger with one of its rivals is still very much on the agenda.

In the meantime, Bouygues Telecom appears to have fired the starting gun for what the government had hoped to avoid: a price war on the fixed telecoms market. The operator has just revealed it will offer super high-speed fibre broadband, television and fixed phone calls for €25.99 per month.

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