A photo taken from the city of Issy-les-Moulineaux in June 2012 shows a building of the French mobile telecommunications operator Bouygues Telecom, and in the background the city of Paris with the Eiffel tower. Bouygues Telecom announced yesterday that it will lay-off 1.516 employees out of 9,000.

Reuters/Paris

 

France’s third-placed mobile operator Bouygues Telecom plans to get rid of 17% of its staff, or some 1,516 workers, in a bid to cut costs to ensure its independence in a turbulent market where prices fell by one-third last year.

Olivier Roussat, who heads the telecoms arm of the family-controlled conglomerate, also acknowledged that sale talks held with potential buyers — low-cost player Iliad and leader Orange — were no longer ongoing.

Instead Bouygues was charting a solo course with the job cut plan aimed at saving €300mn a year by end of 2015, and an expansion in fixed broadband to fuel growth.

“Obviously the talks did not succeed otherwise we would not present this plan to remain independent,” said Roussat, declining to give reasons for the failure of the negotiations.

“We are cutting costs to survive in a four-player market.”

Bouygues shares accelerated losses to fall 6.5% at 14:32GMT as investors’ hopes for consolidation deflated. Orange was down 3.3% and Iliad 7.7%.

Iliad’s arrival to the mobile arena in January 2012 sparked the price war now driving the pressure to consolidate. Mobile prices fell 27% last year and 11% in 2012, according to the telecoms regulator.

Because of its smaller size, Bouygues has been hardest hit. Its mobile market share declined by three percentage points and its operating margin fell to 15% in the first quarter from 22% in the same period in 2011.

Bouygues Telecom has been the focus of deal speculation since April, when it lost a bidding war for number two French operator Vivendi’s SFR to cable operator Numericable.

Martin Bouygues, the son of the founder of the construction-to-television group, threw his political clout behind the SFR effort, yet fell short despite winning government support.

The tycoon may eventually be convinced to sell the company, sector bankers earlier told Reuters, but still has high price expectations. Bouygues wanted a valuation of €8bn as a starting point for talks with Iliad, whose initial informal offer was between €4bn and €5bn.

Even as French telecoms operators position themselves for possible consolidation, competition continues to intensify.

Bouygues in March took the price war to the fixed broadband market with a TV, Internet and fixed line phone bundle at €19.99 a month — a move analyst saw as taking aim at Iliad, whose similar offers start at €29.99 a month.

Bouygues’ new commercial strategy will focus even more on the fixed market, an area where it has long trailed behind rivals. It plans to build more nodes known as NRAs into its network to offer broadband directly to 16mn homes from 12mn today instead of renting lines from Orange.

It will also invest more in faster fibre broadband lines.

Bouygues said its capital expenditures on its network would remain stable at around €500mn a year.

Instead Bouygues’ workforce of 9,000 will bear the brunt of cost-cutting. Back office jobs like marketing and information technology will be targeted, while the roughly 4,500 people employed in customer service and stores will remain untouched.

Unlike in 2012 when Bouygues trimmed staff by 542 people via a voluntary departures, some people will be forced to leave in this round of lay-offs.

The sector’s difficulties has led executives from all the major telecom companies to call for the market to go back down to three mobile players from four since Iliad’s arrival.

France’s top competition regulator Bruno Lassere no longer opposes such consolidation, and Industry Minister Arnaud Montebourg has openly called for it to calm what he calls “destructive competition”.

Speaking at a press briefing on Wednesday, Lassere said he had held discussions with all the operators in recent months as they considered various tie-ups.

“I cannot give them a formal opinion, but can provide my views and map out the potential risks,” said Lassere.

Having four operators is certainly better for consumers than three, said Lassere, but more important than the number is preserving an aggressive “maverick” who forces price cuts.

“The telecoms market is at a turning point... If consolidation is inevitable, then we should prepare for it and negotiate it effectively. The worst outcome would be that one of the actors simply disappears because it can no longer survive.”

Bouygues shares were down 6.4% at 1418 GMT. They have risen almost 25% this year boosted by a recovery in the construction and roads business and potential asset sales.