Orange, Vodafone discussed but abandoned merger idea last year, BFM TV says

PARIS (Reuters) -Orange, France's largest telecoms operator, and Britain's Vodafone discussed a merger of equals between mid-2020 and early 2021 but then abandoned the project due to French opposition, BFM TV reported, quoting sources.

The French state, which owns 23% of Orange, was wary of losing some control and seeing the headquarters of the new company move to London, BFM said, adding that the two firms might still be discussing a smaller scale alliance.

Orange and Vodafone both declined to comment on the report. The French Finance Ministry did not immediately respond to requests for comment.

A merger between Orange and Vodafone would have created Europe's biggest telecom operator with 85 billion euros ($96 billion) of revenues, BFM said.

Martin Vial, head of the French state shareholding agency APE, said this year that France could make changes to its stake in telecoms company Orange in the medium term.

Both companies have extensive operations in Europe in Africa, with competing operations in Spain, Romania, Egypt and Democratic Republic of Congo.

Analysts at Jefferies noted that in relation to the cited objections of the French States, Stephane Richard's departure from Orange had now been confirmed and the Netherlands had been suggested as a compromise headquarters location.

"Still, we think that towers (mobile infrastructure) and Spain service companies would be less politically charged scenarios," they said.

Orange finance chief Ramon Fernandez told the Morgan Stanley TMT conference last month that France would "inevitably" see the number of telecom operators fall from four to three, adding that recent take-private deals by two of them, Iliad and Altice, could improve conditions for a merger.

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(Reporting by Gwenaelle Barzic and Paul Sandle, Writing by Benoit Van Overstraeten; Editing by Edmund Blair and Louise Heavens)