Earlier this year, the telecom operator discussed a merger with its UK competitor. But the state shareholder refused to go any further.
The great regret of the CEO of Orange is called Vodafone. Just a year ago, Stéphane Richard attempted yet another marriage with a competitor to create a European giant. According to several close sources, discussions have arisen between Orange and the British Vodafone in view of a merger between equals. They were performed “at the highest level,” explains a source. They lasted more than six months, between the summer of 2020 and the beginning of 2021. At the time, the talks were facilitated by valuations close to € 30 billion each. A project of “marriage between equals was the sine qua non condition for it to be accepted politically,” adds another source.
Orange’s chief executive saw in this merger the creation of a European telecommunications leader with 85 billion euros in turnover, surpassing the leader Deutsche Telekom. A project with Vodafone had the advantage of being very complementary in terms of geographical location. It is among the leaders in Great Britain, Germany, Italy and Hungary. For its part, Orange is strong in France, Belgium, Poland and Romania. Spain is the only country where the two operators have encountered competition problems, while Orange is second and Vodafone third, behind the historic operator Telefonica. Together, they could have created a single pan-European actor present in most countries on the continent.
A giant in Africa
Another great asset, this alliance would have created an undisputed giant in Africa, consolidating their two very strong positions. Orange is a leader in 18 French-speaking African countries (Senegal, Ivory Coast, Cameroon, etc.) and Vodafone in eight English-speaking countries such as South Africa and Kenya.
Discussions continued for several months as the two groups worked on different capital schemes. First, a global rapprochement of the two operators. But he ran into government problems between French and British interests. And the listing of the future group in London would have created heavy legal constraints.
To avoid these pitfalls, Orange and Vodafone have also studied “engagement” rather than marriage, consisting of the merger of their subsidiaries of telecommunications operators in Africa. This “minimal” option would at least have allowed the foundations to be laid for a wider rapprochement for later. It would also have paved the way for a listing on the stock exchange of this new African telecommunications giant, which would have benefited Orange shares, which have suffered from the covid crisis.
“The discussions have gone far enough for Orange to talk about it with the state,” deciphered a source close to the group. But that’s where it all stopped … The State, 23% shareholder of Orange, immediately stopped the project. “Vodafone did not want to give up on governance, explains a source close to Bercy. It was out of the question for the Orange office to go to London”. In reality, the state seemed ready to study the idea of a headquarters in a neutral country, such as the Netherlands.
A textbook case that already exists for Airbus and Stellantis, two groups in which the State is also a shareholder. Public authorities were also not in favor of launching Orange in a major operation a few months before the trial verdict of Stéphane Richard in the Tapie affair. “On paper, this project made sense, recognizes this source close to the state. Vodafone is the only one with which Orange can make a merger between equals.”
Easier to join networks
This is the whole Orange problem today. Because Deutsche Telekom’s valuation has exploded in recent years, led by its US subsidiary T-Mobile. Its German counterpart weighs three times more on the stock market. The Orange CEO had also attempted several times, between 2014 and 2016, to marry the German operator when the two groups showed similar values.
Internally, many Orange executives do not approve of these great projects that Stéphane Richard has always wanted to carry out. Rather, they are campaigning for more sober infrastructure alliances by bringing together the thousands of link antennas in their networks. An argument that is all the more realistic since Vodafone has just listed its subsidiary of the Vantage Towers network, which is worth 15 billion euros! “We could do with Vodafone what Bouygues and SFR did by combining their relay antennas,” explains a source close to Orange. It is also rumored that the contacts between the two operators will continue on this aspect …