French Telecom Operators Explore SFR Carve-Up Amid Patrick Drahi's Exit Plans

French telecoms operators Orange, Bouygues, and Iliad-owned free are exploring a carve-up of Patrick Drahi's rival telco SFR. The move follows Altice Europe's acquisition of SFR in 2019, which has led to increased competition in the market. Drahi is the founder of Altice SA and has experience in the telecoms industry.

Investing.com -- Blackstone (NYSE:BX) Inc. is considering a potential joint bid for French telecom operator SFR, owned by billionaire Patrick Drahi, according to Bloomberg [1]. The deal could value SFR at up to €30 billion ($35 billion) including debt. The New York-based investment firm has engaged in early talks with other possible bidders, including SFR competitors, as it evaluates the potential transaction.

The move comes amidst increased competition in the French telecom market following Altice Europe's acquisition of SFR in 2019. Sources familiar with the matter indicate Blackstone would likely partner with another bidder due to the operational requirements of running the Altice France SA-owned carrier [1]. The discussions remain in preliminary stages, and Blackstone might ultimately decide against making an offer. Other private equity firms are also reportedly holding conversations about possible partnerships with French carriers for joint bids on SFR [1].

The telecom landscape in Europe is undergoing a seismic shift, driven by the urgent need to modernize 5G infrastructure and consolidate fragmented markets. At the center of this transformation is SFR, which boasts 30 million customers across France and Spain, with a robust 5G network delivering speeds exceeding 250 Mbps in urban centers like Paris and Marseille [2]. The company's joint venture, Infracos, further amplifies its strategic appeal by managing over 3,500 towers in rural France, providing the backbone for reliable 5G coverage.

The case for telecom consolidation in Europe is compelling. Legacy players like Orange and Bouygues Telecom are under pressure to modernize aging networks, while new entrants like Iliad's Free Mobile focus on price competition. Regulatory shifts are accelerating this trend: the EU's revised merger guidelines emphasize infrastructure investment over market dominance, which could greenlight strategic deals that boost 5G rollout [2].

Blackstone's potential bid for SFR aligns with this vision. By acquiring SFR's 5G assets and infrastructure, Blackstone could partner with telecom operators to accelerate network upgrades. This would not only address coverage gaps in rural areas but also create economies of scale for 5G deployment—critical as Europe races to catch up with the U.S. and Asia [2].

The path to consolidation is fraught with challenges. Regulators are wary of reducing competition, particularly in markets where SFR already faces stiff competition from Orange and Free Mobile. Any Blackstone-led bid would likely require divesting non-core assets (e.g., Infracos) or partnering with regional players to meet antitrust thresholds. Technical hurdles also loom large, with SFR's rural coverage lagging behind its urban performance [2].

For investors, the SFR bid presents both direct and indirect opportunities. Long positions in Orange and Bouygues Telecom could benefit from M&A-driven consolidation. Infrastructure ETFs or sector-specific funds could also be a prudent play, given Blackstone's potential focus on assets like Infracos [2]. Companies like Nokia (NOK) and Ericsson (ERIC) are critical to network modernization and could see increased demand.

Caution is warranted, however. Overvaluation risks persist in crowded telecom stocks, and regulatory delays could prolong uncertainty. Investors should also monitor Altice's debt restructuring progress, as any stumble could derail the SFR sale [2].

References:
[1] https://ng.investing.com/news/stock-market-news/blackstone-explores-joint-bid-for-drahis-sfr-telecom-business-93CH-1996332
[2] https://www.ainvest.com/news/blackstone-sfr-bid-strategic-play-europe-5g-future-2507/