Report: France’s Free Mobile in talks to buy rival Bouygues Telecom

Free Mobile has already kicked off a price war in France with its ultra-cheap mobile voice and data plans. It could be looking to lead a consolidation drive in its home country as well. According to a report in Le Parisien,Free’s parent company Iliad is in discussions with Bouygues Telecom to buy out its wireless operations, haggling over a price somewhere between €5 billion (USD $6.9 billion) and €8 billion ($11 billion).
Free’s aggressive pricing is already putting pressure on French mobile operators. Vivendi decided to sell off SFR, France’s third-largest carrier, to cable provider Numericable. Bouygues was in the running to buy SFR as well, but failing to win the prize, it appears to have become an acquisition target itself.

Free Mobile has kicked of a French Revolution of its own  (source: The Louvre)

Free Mobile has kicked of a French Revolution of its own (source: The Louvre)

If the deal goes through, Free would gain access to a nationwide mobile voice and data network, something it has so far managed to do without. Free has adopted a Wi-Fi-first strategy by turning Iliad customers’ broadband gateways into hybrid public-private hotspots. The idea is to move as much mobile traffic as possible onto these those Wi-Fi nodes to avoid the cost of using expensive cellular networks. Wi-Fi-first is a strategy that virtual operators Republic Wireless and Scratch Wireless have adopted in the U.S., and it may even wind up being the path that Comcast(s cmsca) and Google(s goog) use to get into the mobile carrier business.
Free is augmenting that Wi-Fi network with home femtocells and strategically placed cellular towers, but it’s also tapping Orange’s(s oran) cellular networks through a wholesale agreement to fill in the many gaps in between.
Buying Bouygues means Free would no longer need Orange, which as the largest carrier in France is also Free’s biggest competitor. But by running its own extensive cellular network, Free’s operational and infrastructure costs would increase enormously. Free’s lean Wi-Fi-first strategy would wind getting much more bulbous.