The French telecom market is a fascinating battlefield. Four major players jostle for supremacy, each wielding a unique arsenal of strategies. Bouygues Telecom, the perennial underdog, has consistently impressed with its tenacity and focus on quality. Their recent full-year results showcase this, with impressive gains in fixed line subscriptions and a reputation for network excellence. However, a closer look at their recent announcement – the potential acquisition of La Poste Mobile – reveals a calculated gamble that could backfire spectacularly.

On the surface, acquiring La Poste Mobile seems like a no-brainer. It's the last large Mobile Virtual Network Operator (MVNO) standing, boasting 2.3 million subscribers and a strong brand presence, particularly in rural areas. Bouygues Telecom promises this acquisition will strengthen their position in both the mobile and fixed business, all while boosting their EBITDA after leasing. The allure of adding 2.3 million mobile customers to their existing 15.5 million is undeniably tempting.

The projected €140 million per annum EBITDA contribution from 2028 onwards further sweetens the pot. However, this seemingly idyllic acquisition hinges on a critical factor: SFR's preemption rights. As the current 49% owner of La Poste Mobile, SFR has the power to snatch this prize right out of Bouygues Telecom's grasp.

Will SFR Exercise Its Preemption Right?

The question then becomes, will SFR exercise its preemption right? Here's where things get interesting. Bouygues Telecom has confidently stated they believe SFR won't take this step. But is this confidence justified?

SFR's motivations are multi-layered. On one hand, losing La Poste Mobile means losing 2.3 million subscribers – a blow to any operator, especially in a market with slowing growth. On the other hand, exercising their preemption right comes with a hefty €950 million price tag. This represents a substantial investment in a market segment characterized by shrinking margins and increasingly fierce competition on the low-end.

The Financial Puzzle

Let's delve deeper into the financials. Bouygues Telecom highlights the low integration costs for La Poste Mobile – estimated between €50 million and €100 million – as a key advantage over their previous EIT acquisition, which incurred costs exceeding €300 million. While this seems logical, a critical question emerges: how does Bouygues Telecom plan to achieve the projected €140 million EBITDA contribution by 2028, when La Poste Mobile's current EBITDA stands at a paltry €7 million?

This discrepancy is alarming. Bouygues Telecom vaguely attributes this gain to the elimination of SFR's wholesale contract and "the present contract." This lack of clarity raises a red flag. Are there hidden synergies Bouygues Telecom isn't disclosing? Or are they banking on unrealistic assumptions about ARPU growth and cost savings?

Bouygues Telecom's Two-Pronged Bet

The answer might lie in Bouygues Telecom's own evolving strategy. They acknowledge that mobile ARPU has stabilized, driven by customers migrating towards cheaper plans. In the fixed line segment, however, they project significant ARPU growth, buoyed by their strong network performance and the ongoing shift to fiber.

It's possible Bouygues Telecom is betting on replicating this fixed-line success with La Poste Mobile's customers. They plan to offer these customers a new fixed offering, leveraging La Poste's brand trust and deep penetration in rural areas. The potential for capturing a significant chunk of this previously untapped market could be driving their optimistic projections.

The Risks and Rewards

However, this strategy carries significant risks. The fixed-line market, while growing, is also becoming increasingly competitive, with new entrants challenging the incumbents. Bouygues Telecom's historical success in fiber doesn't guarantee future dominance.

Furthermore, their assumption about La Poste Mobile's fixed-line potential might be overly optimistic. Rural areas, while representing a vast potential market, are also characterized by lower ARPU and higher infrastructure costs.

Bouygues Telecom is essentially making a two-pronged bet. They're betting on SFR not exercising its preemption rights, and they're betting on their ability to transform La Poste Mobile's customer base into a fixed-line powerhouse.

If both bets pay off, this acquisition could be a masterstroke, solidifying Bouygues Telecom's position in the French market. However, if either bet falters, the consequences could be significant.

SFR, despite the financial burden, might see the strategic value of retaining La Poste Mobile and thwarting their competitor's ambitions. Alternatively, La Poste Mobile's fixed-line conversion might prove less lucrative than anticipated, leaving Bouygues Telecom with a costly and underperforming asset.

Analyzing Bouygues Telecom's Performance

Mobile vs. Fixed ARPU Growth

The La Poste Mobile acquisition is a high-stakes gamble for Bouygues Telecom. Their future success hinges on a complex interplay of market dynamics, competitor actions, and their own strategic execution. Only time will tell if this gamble will lead them to market dominance or a costly defeat.

"Fun Fact: La Poste, the parent company of La Poste Mobile, is the French national postal service. It has a long and storied history, dating back to 1576! This deep-rooted presence in France, coupled with its extensive network, especially in rural areas, provides La Poste Mobile with a unique advantage in the French telecom market."