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UPDATE 1-SFR and Bouygues see network sharing savings by 2017-18
February 3, 2014 / 12:16 PM / 4 years ago

UPDATE 1-SFR and Bouygues see network sharing savings by 2017-18

* Network sharing aims to help carriers amid price war

* SFR to save 200 mln euros a year at end of rollout

* Bouygues to save 100 mln euros a year

* 11,500 shared mobile sites by 2017-2018, cuts 7,000 sites (Adds details, analysts, shares)

By Leila Abboud and Gwénaëlle Barzic

PARIS, Feb 3 (Reuters) - French telecom operators Vivendi and Bouygues Telecom expect to reap 300 million euros ($405 million) a year in cost savings by 2017-2018 from a project to share a mobile network outside urban areas, they said on Monday.

Europe’s telecom operators have turned to network sharing as a way to cope with intense price competition driving down profit margins in major markets. In Britain, Telefonica and Vodafone have agreed to share 18,500 mobile towers, while Orange and Deutsche Telekom have similar accords in Poland and elsewhere in Eastern Europe.

In France, the need to share networks has been driven by a two year price war sparked by the arrival of low-cost player Iliad to the mobile market. Mergers among the four mobile operators, which would also massively cut costs, are off the table for now because of opposition from competition regulators which fear higher prices for consumers.

Once the regulators’ stance became clear last year, Vivendi’s SFR, which is France’s second-largest mobile carrier after Orange, and third-place Bouygues began talks on network sharing in July.

The deal they have now struck will allow Vivendi to save 200 million euros a year from 2017-2018, while Bouygues will save about 100 million euros per year.

The carriers will create a joint venture company to operate 11,500 mobile towers covering 57 percent of the population, eliminating 7,000 towers between them. They will share cell sites and antennas but not spectrum or core elements of the network, which they say will allow them to offer differentiated services to consumers.

Initially, the two operators will have to spend hundreds of millions of euros to take down mobile antennas, so the savings will take time to materialise, said SFR Chief Executive Officer Jean-Yves Charlier.

“Our combined capital expenditures will increase in the coming years while we design and deploy the shared network, but will come down afterwards,” he explained at a press conference.

The network sharing project would not preclude or complicate mergers among telecom operators later if the regulators’ stance changes, said Charlier. “The legal structure of the joint venture would remain even if a merger were to take place at one of the participating companies,” he said.

There are no plans for SFR and Bouygues to expand their cooperation to other areas, such as joint procurement of handsets or back office work, said Charlier.

France’s upstart mobile operator, Iliad, earlier asked to join SFR and Bouygues’ alliance, but has so far been rebuffed. On Monday, Bouygues Telecom CEO Olivier Roussat did not close the door completely to Iliad, adding that adding other parties was legally possible given the joint venture’s structure.

“Nevertheless, it took us nearly six months just to agree on this project, so adding a third to the mix could be complex,” he said.

Bouygues shares were down 1.8 percent to 27.88 euros at 1132 GMT, while Vivendi’s were down 1.1 percent to 19.72 euros. The Stoxx 600 Europe Telecom index was down 1.3 percent.

UBS analysts estimated the network sharing deal was worth 1.1 billion euros, or 0.90 euro per share, in net present value (NPV) to Vivendi. Societe Generale estimated the deal was worth 710 million euros in NPV for Bouygues Telecom, or 2.20 euros per share.

$1 = 0.7415 euros Additional reporting by Dominique Vidalon; Editing by Mark Potter

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