Telecom shares slump as Bouygues-Orange deal collapses

Shares in French group Bouygues slumped almost 15 per cent to €30 in early trading

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European telecoms stocks have collapsed after a deal to create France’s biggest telecoms group has failed.

Talks over Orange's planned takeover of Bouygues Telecom ended last Friday amid disagreement with the French government over the €10 million merger.

Shares in French group Bouygues slumped almost 15 per cent to €30 in early trading and were heading for their worst day in 17 years. Orange was down 5.3 per cent.

MarketWatch (MarketWatch)

Other French telecom firms also dropped sharply, with Iliad down 14 per cent, SFR down 14 per cent and Altice down 14 per cent.

The news also sent BT shares down 1.1 per cent and Vodafone down 0.5 per cent, although they later recovered some of those losses.

The proposed tie-up was widely seen as a make-or-break chance to reduce the number of telecoms groups to three from four in France and prop up profits, which have been depressed since the arrival of low-cost operator Iliad.

Berenberg downgraded Bouygues to “sell” and cut its target price for the stock to €30 from €40.

“We believe this was one of the last chances for consolidation within the French telecoms market. France will remain a competitive four-player market, with a high capex burden as the market moves to fibre,” Berenberg analysts said.

In the UK, BT has been cleared to buy mobile phone operator EE in a tie-up worth £12.5 billion.

The Competition and Markets Authority has ruled that the merger “was not expected to result in a substantial lessening of competition in any market in the UK”.

Additional reporting by Reuters