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    HomeNewsVodafone and Orange merger talks stalled by French government 

    Vodafone and Orange merger talks stalled by French government 

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    Some form of mobile market consolidation inevitable 

    France’s biggest mobile operator Orange and Britain’s Vodafone discussed a merger of equals in talks lasting from mid-2020 to early 2021, according to BFM TV. The scheme was abandoned due to French government opposition.

    However, Orange finance chief Ramon Fernandez said in November that France’s mobile operators will ‘inevitably’ consolidate from four (Orange itself, Bouygues Telecom, Iliad which operates under the Free brand and SFR) to three.

    Recent deals privatisation bids by Iliad and Altice have created the conditions for mergers, Fernandez told Morgan Stanley’s TMT conference.

    Dilemma for merger

    The opposition to a merger with Vodafone came from the French government which owns 23% of Orange, according to BFM TV.

    There were concerns about a loss of control if the headquarters of the new company moved to London, it said. However, a smaller scale alliance could still be on the cards, it said.

    A merger between Orange and Vodafone would have created Europe’s biggest telecom operator with a combined revenue of €85 billion ($96 billion). 

    There have been many suggestions that Vodafone has become more German than English since Germany became its power house in Europe after acquiring Liberty Global’s cable assets.

    APE might change its stake

    Martin Vial, head of the French state shareholding agency APE, has hinted in the past that France could change its stake in Orange.

    Both Vodafone and Orange have expansive coverage in both Europe and Africa. They currently compete in Spain (where both are having something of a difficult time), Romania, Egypt and Democratic Republic of Congo.

    Vodafone Spain had to cut 515 jobs in September, while Orange Spain has made extensive commitments to building infrastructure in a market where margins are increasingly tight.   

    Entente cordiale nixed

    Equity research firm Jefferies said that the reservations among French State officials about a Vodafone merger might be allayed by the departure of Stephane Richard from Orange, who might have been open to an entente cordiale with a UK operator.

    The Netherlands has now been suggested as a compromise HQ location.

    A more selective merger of operations would be more acceptable, according to the financial analyst.  

    Tower and services more acceptable

    In November Vodafone CEO said the UK operator was interested in an infrastructure building partner and speculated that Orange’s tower company Totem  would be a good potential merger partner.

    “Towers (mobile infrastructure) and Spain service companies would be less politically charged scenarios,” said financial analyst Jefferies.

    Orange, Vodafone and the French Finance Ministry have not offered comment on the report.