Patrick Drahi, head of Altice, parent of Numericable, will be able to heave a sigh of relief. The Competition Authority has given its approval subject to conditions, on Monday, October 27th, to the marriage between the cable operator and the second French operator SFR, formerly owned by Vivendi. This decision crowns a few soap opera twists, which began with the battle over the fate of SFR, sought after by Bouygues. It’s finally Numericable who had won the game, provided they obtain the blessing of the regulatory authority, extremely vigilant with respect to the consolidation of the French telecom sector.
But the “yes” granted by the institution of the Rue de l’Echelle is subject to provisions negotiated “until Friday night”, so that the new entity would not disrupt the balance of the competition, it must preserve not only attractiveness of price for consumers, but also the ability of operators to invest in their network. By the admission of the President of the Authority, Bruno Lasserre, Numericable proved “extremely cooperative” and made proposals which have the advantage of being “verifiable”. These should be run for five years, renewable once.
Give a boost to ultra-fast broadband
Numericable, which has a considerable lead on the cable – and thus on the ultra-fast broadband – compared to other operators, will first open its cable network to other operators either white label for virtual operators or by eligible operators “able to develop their own box” access “bitstream” (renting a very high speed access), which already Bouygues Télecom had. Those other operators have time to upgrade while offering, meanwhile, a range of very high speed fixed packages to their customers. There is a payment imposed on them to differentiate themselves by offering Numericable prices and services.
Avoid a duopoly in the offerings for companies in the ultra-fast broadband
In order to prevent the new SFR-Numericable entity from suppressing other businesses, which would result in narrowing the choice down to SFR-Numericable and Orange offers (70% of the market now), Numericable agrees to sell the copper network Completel, Altice operator “B to B”, parent of Numericable.
Boost mobile offering in the Indian Ocean
To avoid too much capacity of Numericable in Reunion and Mayotte, it undertakes to sell the mobile business of its local operator Outremer Telecom. The goal is to eliminate a potential “conglomerate lever” for Altice, and to ensure that people in these areas do not pay over the odds for their mobile plan.
Buyers are already found, says the Competition Authority. The finalist will be selected by Numericable and approved by the Authority.
Eliminate any potential conflict of interest between Vivendi and Numericable
Vivendi is retaining a minority stake in the new entity, it may appoint directors to the board of the group. The point that is problems might arise from the perspective of regulation, as the two groups compete on pay TV. It was the most difficult to negotiate that point, says Bruno Lasserre, because they had to “ensure that competition does not suffer because of an exchange of information between the cable platform and the satellite platform.” To do this, the principle of a “Chinese Wall” was accepted by Numericable: specifically, any exchange of information on the subject is prohibited between the two parties. “If these issues are discussed at a board of directors, the directors of Vivendi will have to leave the room,” mentioned as an example the President of the Authority.
Notified October 30 stakeholders, the opinion of the Competition Authority opens the way for the finalization of the marriage between the two companies. This should be effective by the end of the year.
The merger between SFR and Numericable is already being felt in the accounts of the latter. The cable operator has published Monday, October 27, a net loss of 94.4 million euros in the third quarter, against a profit of 12.8 million a year earlier. This loss is put down to financing of the purchase of the operator.
This loss is well excepted, says Numericable in its official statement, the group “generated during the first nine months a net profit of €121.4 million”. Gross operating income (EBITDA) for the third quarter was registered at 4.7% increase to €155.9 million. From July to September, Numericable saw its sales increase by 4% to €331.7 million, while its base of consumer subscribers increased from 3% to 1.71 million people.