French competition authority to rule on Orange-Bouygues merger

The merger would not need to go to the European Commission because Orange's business is concentrated in France, people with knowledge of the matter told the Financial Times.

Orange confirmed earlier this month that is has renewed discussions with the Bouygues Group with a view to merging with Bouygues Telecom.

The French government will be keen to see a French buyer for Bouygues Telecom, said telecoms expert Frédéric Ichay of Pinsent Masons, the law firm behind Out-Law.com.

Bouygues telecom has been struggling financially, Ichay said, and needs a partner. Parent company Bouygues rejected  an offer from Altice subsidiary Numericable SFR for its Bouygues Telecom unit in June last year, "and Orange is probably the only one who can do this now", Ichay said.

The deal is likely to involve an exchange of shares, without involving too much cash, Ichay said. Informal discussions are likely to have already begun with competition authorities, he said.

BT was given clearance this month to complete its planned £12.5 billion takeover of EE from Orange and Deutsche Telekom by the UK's Competition and Markets Authority.

Last year, the chief executive of the UK's telecoms regulator questioned whether telecoms companies need to grow through mergers and acquisitions to be able to invest in next-generation infrastructure.

In a speech at the London School of Economics and Political Science, Sharon White said that although consolidation can deliver benefits such as "improving economies of scale and making it easier to finance investment", Ofcom's experience has been that "competition, not consolidation, drives investment and delivers low prices".