Which billionaires are vying to buy this telecoms company?

By Leila Abboud and Gwénaëlle Barzic, Reuters

Posted at Mar 06 2014 10:07 AM | Updated as of Mar 07 2014 10:42 PM

A woman walks past a 4G sign in a Bouygues Telecom company shop in Nice, France. Photo by Eric Gaillard, Reuters

PARIS - Two French billionaires are vying to buy telecoms carrier SFR while a third watches closely from the sidelines. A fourth could be the kingmaker.

SFR's owner, Vivendi, confirmed receipt of two offers for France's second-biggest telecom group on Wednesday.

The bidders are cable operator Numericable - backed by Patrick Drahi, number 215 on Forbes' billionaires list - and Bouygues - the family company of Martin Bouygues, Forbes' billionaire number 408.

Xavier Niel, the founder of low-cost telco Iliad and Forbes' number 162, could also crash the party with a late bid, or swoop in for Bouygues instead if it fails to win the bidding.

Holding the hopes of his fellow tycoons in his hands is corporate raider and industrialist Vincent Bollore - the vice-chairman of Vivendi's board, its second-largest shareholder, and tagged 183rd billionaire by Forbes.

Although Bollore has kept quiet since the bidding for SFR began in earnest two weeks ago, people close to him say he will weigh in on the board's debate on whether to sell SFR now, or pursue Vivendi's original plan to spin off the unit this summer.

For Patrick Drahi, the 50 year-old, Moroccan-born entrepreneur who controls Numericable and some mobile businesses in Israel through Altice SA, getting hold of SFR would be the biggest prize of two decades of building and deal-making in cable.

A combination of Numericable and SFR would create a stronger number two to compete with leader Orange and challenger Iliad, whose arrival to the mobile arena started the vicious price war that helped convince Vivendi it wanted out of telecoms.

Numericable's superfast broadband lines would complement SFR's fixed network and cut the hundreds of millions SFR would have had to invest in fibre broadband lines into French homes.

Nine banks have committed up to 12 billion euros to finance Drahi's bid, sources told Reuters on Wednesday. Numericable's offer for SFR is expected around 14.75 billion euros in cash and shares, with Vivendi retaining a 32 percent stake in the new company, sources earlier said.

With the financing tied up, Drahi, who was a relative unknown in Paris business and political circles before his move for SFR, is now trying to catch up in the lobbying race.

An engineer by training who divides his time between Geneva and Israel, Drahi has hired an influential local spin doctor and met with several government ministers.

To win support for his bid, Drahi has pledged not to cut jobs if he buys SFR, a key concern for the French government.

His rival bidder, Martin Bouygues, is more established in the lobbying game, and has called in his own heavyweight PR adviser. He will need all his influence to overcome the antitrust issues that could derail his bid if the government worries that a SFR-Bouygues combination would simply be too dominant.

Bouygues met with French President Francois Hollande last week to discuss the telecom business, and people close to him have argued that Bouygues Telecom is a safer buyer for SFR than Numericable.

Bouygues' bid will be financed with cash, debt, and shares in the new company, and will not require a capital increase, said two people close to the deal.

According to a report on Le Figaro newspaper's web site, Bouygues said it could reap 10 billion euros in synergies from the SFR combination and would leave Vivendi with a 40 percent stake, bringing its offer to a value "above 15 billion euros".

One thing is sure, analysts say. Bouygues, which is third-place in mobile with roughly 18 percent share to SFR's 30, needs to bulk up if it is to survive in the tough French market.

It has lost customers to Iliad's Free Mobile service and in disadvantaged by not having much of its own fixed or broadband infrastructure at a time when customers increasingly want all-inclusive bundled offers. Bouygues actually relies on a partnership with Numericable to be able to sell Internet access.

"Bouygues looks extremely vulnerable to us," wrote Jerry Dellis, analyst at Jefferies. "Failure to secure SFR would leave it chronically challenged with a strengthened competitor in fixed and still struggling to hold its own in a brutal four-player mobile market."

If Martin Bouygues misses out on SFR, he could be forced into the arms of Iliad's Xavier Niel. A tie-up of the third and fourth-biggest mobile operators would pose fewer antitrust issues, but the two men have long traded barbs in the media and may find it difficult to work together.

A person close to the situation said Martin Bouygues does not have much of a choice. He needs to try to get SFR or risk selling out to Niel at a bargain basement price for a telecom group he spent nearly two decades building.

"Billionaires never want to face another billionaire in a deal negotiation with a weak hand," said the person.