Bouygues denies speculation over French telecoms consolidation

PARIS (Reuters) - French telecoms and construction group Bouygues (BOUY.PA) has denied fresh speculation that merger talks have resumed between the country's four telecoms operators.

The speculation, which lifted shares of Bouygues, Orange (ORAN.PA), Iliad (ILD.PA), Altice (ATCAS.AS) and its French unit SFR Group (SFRGR.PA), was sparked by a report in newsletter La Lettre de l'Expansion of a resumption in negotiations with the aim of cutting the number of operators from four to three.

Under that scenario, Bouygues' telecoms arm would be the target and would be divided up among Orange, Iliad and SFR, La Lettre de l'Expansion said without citing sources.

"Bouygues denies any talks with other operators over a possible consolidation of the telecoms sector," a Bouygues spokesman said on Tuesday.

Officials at SFR, Orange, Iliad and Altice were not immediately available for comment.

The French telecoms sector has been awash with merger speculation ever since the round of merger talks between the four French operators failed in April last year, ending an attempt to ease a price war that has hit margins since the arrival of Iliad's low-cost Free Mobile services in 2012.

La Lettre de L'Expansion said that tycoon Patrick Drahi, owner of Altice, was the initiator of the talks this time and that billionaire Xavier Niel, the boss of Iliad, would be less demanding than during the previous talks, which had focused on Orange buying Bouygues Telecom.

Bouygues shares were up 2.5 percent at 0954 GMT, having retreated slightly from earlier gains of more than 3 percent. Orange was up by close to 1 percent, Iliad rose 3.3 percent and Altice advanced by 1.1 percent.

Benoit de Broissia, an analyst at French investment firm Keren Finance, said the consolidation speculation was realistic, given that it would result in cost savings and could get cleared by antitrust authorities.

However, he added that Bouygues would first have to be prepared to sell its Bouygues Telecom unit.

"On paper, it looks feasible, but first of all you’d need to make sure that Bouygues would be prepared to sell,” said Broissia, whose firm owns shares in Iliad, Bouygues and Orange.

(Reporting by Dominique Vidalon and Sudip Kar-Gupta; Editing by David Goodman)