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Telecom shares wobble as big deal fails

BBC News BBC News 4/04/2016
Orange and Bouygues logos © Reuters Orange and Bouygues logos

European telecom stocks have stumbled after a deal to create France's biggest telecoms group collapsed.

French operators Orange and Bouygues Telecom ended talks late on Friday over the reported €10bn (£8bn) merger.

Bouygues shares are on course for their worst fall in 17 years, plunging nearly 15.2% in midday trading, while Orange shares were down 4.4%.

The news initially sent BT shares down 1.1% and Vodafone down 0.5%, although they later recovered those losses.

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The potential merger of Orange with its smaller rival Bouygues was intended to prop up profits and would have reduced the number of mobile operators from four to three in France.

Analysts at Deutsche Bank said Orange had set clear conditions that were not met during talks, while Bouygues identified four reasons for the failure, including execution risk and governance.

"We believe that this was one of the last chances for consolidation within the French telecoms market," analysts at Berenberg said.

The Stoxx index of 600 European telecoms firms was down slightly in afternoon trading, amid heavy falls among other French telecoms stocks.

Iliad and SFR, which had both been in talks to acquire some of Bouygues' assets, shed 15.8% and 17.6% respectively on the Paris stock exchange.

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