France is the battleground for a new telecommunications war

Last week, everything was very different in the mobile landscape in France. France’sdisruptive telecom company Free was about to make the best strategic move I had ever seen. Yet, it all fell apart today. While it’s a boring industry, the acquisition of SFR is a story of secret agreements and betrayals. SFR is about to get acquired by Altice for $16.4 billion in cash. Vivendi will still hold 32 percent of the new entity. It’s a great deal for Vivendi who has been looking into a potential sale for months.

When Franco-Israeli telecoms billionaire Patrick Drahi entered the race to acquire Vivendi’s SFR (VIV.PA), his powerful rivals seemed to suddenly agree on a common goal: keeping him out. Fellow tycoon Martin Bouygues, whose conglomerate has telecoms to construction holdings in France, mounted a late bid for SFR against Drahi’s Numericable (NUME.PA) and rallied strong connections in the government. Xavier Niel, founder of low-cost operator Iliad (ILD.PA) who would benefit if a rival bid from Bouygues (BOUY.PA) succeeded, slammed Drahi for skirting taxes with his company based in Amsterdam and homes in Geneva and Tel Aviv. On Friday as Vivendi’s board prepared to weigh the bids, France’s Industry Minister Arnaud Montebourg went on morning radio to slam Drahi’s bid as too leveraged and bad for France.