Orange eyes Telecom Italia, KPN and Belgacom as possible targets

Orange’s senior management has said that Telecom Italia could be among its targets in a future round of consolidation in the European telecoms business.

Gervais Pellissier, who heads the French group’s European operations, said it would be among the possible buyers of several of the continent’s smaller operators — a list that might include Telecom Italia, KPN of the Netherlands and Belgacom of Belgium.

“In the next five years, there will be inter-country or intra-European consolidation,” he told a small group of journalists on Tuesday. “Players who are today playing on a single market or near to a single market, might be purchased by those who are bigger.”

He added: “For sure, one of those might be a target for us.”

Mr Pellissier’s comments come amid rising expectations that Europe will see a reduction in the number of telecoms operators. Like many of the continent’s groups, Orange, Europe’s second-largest service provider by number of subscribers, favours consolidation as a path towards ending falling prices.

Unlike in the US, where revenue per subscriber has risen in recent years, European operators have been battling with falling prices. In its home market, Orange, the market leader, has endured a painful price war since January 2012 when low-cost operator Free burst on to the scene, drastically undercutting competitors.

The comments also come barely two months after Stephane Richard, Orange’s chief executive, said that an alliance with Telecom Italia “would be an attractive European consolidation opportunity” — remarks that he later played down.

Even so, Mr Pellissier said that there was still some way to go before regulators fully supported the idea of consolidation. “The official political speech that the new executive body in Brussels of the Union will be more in favour of consolidation is not completely true,” he said.

“I think the view of the commission on the number of players, at least for most of the market, has not completely changed that four is better than three.”

Yet Mr Pellissier said that consolidation from four providers to three was inevitable in his home market of France. “The situation with four players is not sustainable in the long term,” he said.

For more than a year, industry analysts have been predicting that Bouygues Telecom would eventually be sold. The country’s third-largest operator by subscribers has been hit by the price war harder than its competitors, and free cash flow has fallen to almost zero compared with €406m in 2010.

But Mr Pellissier said that the country’s other groups had vulnerabilities of their own, with fourth-placed Iliad weak on network and spectrum capacity, and second-placed SFR losing market share on mobile customers.

“The only one that is not for sale in the French market is us,” said Mr Pellissier. But he added that Orange would not take a leading role when the consolidation finally came. “The choice is not in our hands,” he said. “It is up to others to decide what to do.”