OREANDA-NEWS. An acquisition of Bouygues Telecom by Numericable-SFR could benefit all the major French telecom operators by reducing competition for customers and spectrum, but is likely to face more hurdles than similar consolidation in other European countries, Fitch Ratings says.

The proposed EUR10bn deal would reduce the number of French telecom mobile operators to four from three, ostensibly mirroring the consolidation that has already happened in Germany, Ireland and Austria. But similar deals have generally involved the combination of smaller operators by market share, resulting in relatively few remedial requirements, such as the forced sale of spectrum or assets.

Numericable-SFR's proposed deal would combine the No. 2 and No. 4 telecoms operators in France, increasing the potential need for cooperation from market leader Orange and more recent mobile entrant Iliad to achieve anti-trust regulatory approval. Press reports have suggested Iliad could support the deal by agreeing to acquire spectrum and some network base-stations, while Orange could take on some of Bouygues' staff to reduce the potential for government objections due to job losses.

As the companies involved are domestically focused, with little or no revenue from outside France, regulatory approval for the deal could rest with the French anti-trust authorities. Previous deals approved by the European anti-trust regulator therefore may not set a strong precedent for whether the deal is approved or what remedies are required. There could also be opposition from within the French government. Media reports over the weekend quoted French Minister of the Economy Emmanuel Macron as saying the timing was not right for consolidation.

But for the operators a quick deal could be particularly beneficial due to France's upcoming spectrum auction. The French telecoms regulator has submitted its draft proposals, setting a reserve price of EUR2.5bn on the 700MHz spectrum it is due to sell in 4Q15. The government plans to auction six blocks of spectrum in the 700MHz range and the eventual cost could be significantly lower if only three bidders are competing. The German spectrum auctions have just been completed. Of the EUR5.08bn spent by the three German mobile operators, EUR1.0bn was spent on six blocks of 700MHz spectrum (reserve prices totalled EUR450m).

Consolidation would also ease competition for customers, which has led to costly price wars. These have largely ended in the mobile segment, but have continued for fixed-line telecoms, where Bouygues has been trying to expand. All four major French telecoms operators offer fixed and mobile services. Increasing focus on bundled offerings mean that competition in one service area has often spilled over into others.