[PARIS] Leading French mobile operator Orange said Friday that talks to purchase the rival network owned by industrial group Bouygues had failed.
The company said that "after in-depth discussions, the Board of Directors of Orange has concluded that an agreement regarding a possible consolidation with Bouygues Telecom has not been reached.
"The decision has therefore been taken to end the discussions with Bouygues that have been ongoing since January," Orange said in a statement.
Sources said that the valuation of the two companies was one of the main sticking points in the talks and would have resulted in the number of mobile operators in France dropping to three.
Another was the risks that the deal would be blocked by competition authorities over concerns it could lead to higher prices for consumers.
The two companies announced publicly in January they were holding talks, the second time they have considered a tie-up, and the fifth attempt in two years to consolidate the market where operators have been slashing prices to capture customers.
"Orange will pursue the deployment of its strategic plan, launched in 2015, that is focused on investment in very high-speed broadband networks and providing an unmatched customer experience," said the company, adding its financial targets remain unchanged.
The deal would have seen considerable concentration of the market as Orange held 38.8 per cent of the market at the end of last year, with Bouygues Telecom in third position with 16.3 per cent.
A considerable portion of Bouygues Telecom's network was expected to be immediately sold off by Orange to the other two operators in the market in order to alleviate competition concerns.
The French state, which still owns 23 per cent in Orange, the successor to the national phone operator, played a key role in the outcome of the talks, according to one source.
"The state wanted Orange shares to be valued at a price much higher than at the market" and imposed conditions that were likely to be difficult for the Bouygues group to accept, said the person familiar with the talks.
"It got so complex that it failed," said another source.
"We ended up with a monster of a deal that contained too large uncertainties concerning competition and in the end Bouygues found it too risky."