Investing.com -- J.P. Morgan maintained “overweight” ratings on Orange SA and Bouygues on Friday, arguing both stocks offer double-digit equity free cash flow compound annual growth rates on a standalone basis, even if a long-anticipated break-up of SFR fails to materialize.

Bloomberg reported this week that a revised consortium bid for SFR could materialise within "coming days," after Bouygues, Iliad and Orange completed due diligence in March.

The October 2025 offer of €17 billion for SFR’s core telecoms unit, which the consortium argued implied €21 billion for the whole of SFR, was rejected by the operator.

La Tribune reported the new offer would need to exceed €23.6 billion to bypass newly installed independent board members.

J.P. Morgan analysts set a December 2027 price target of €62 for Bouygues, currently trading at €52.52, and €21 for Orange, trading at €18.09. Bouygues trades on a 13% EFCF yield and 10x price-to-earnings, while Orange’s 2028E EFCF guidance implies an 11% yield.

Separately, Bloomberg reported on April 8 that initial bids for SFR’s fibre unit XpFibre ranged around €8 billion, below Patrick Drahi’s previously targeted €9-10 billion.

J.P. Morgan values XpFibre at 15x EV/EBITDA, implying a €7.6 billion enterprise value and SFR’s 50% equity stake at €1.3 billion, insufficient to cover SFR’s €0.9 billion 2028 and €2.6 billion 2029 debt maturities.

The brokerage estimated run-rate merger synergies from a Bouygues-SFR combination at €1.4 billion annually, representing approximately 9.5% of the combined opex and capex base, consistent with prior European 4-to-3 consolidation deals.

Applying a 50% discount to reflect deal complexity produced a discounted net present value of €6.6 billion and an implied deal value of €20.5 billion for SFR.

On deal perimeter, the original bid split the price as Bouygues 43%, Iliad 30% and Orange 27%. J.P. Morgan said the mathematics screen most favourably for Bouygues, given its weaker fixed-line position and smaller market capitalisation relative to Orange, €10.6 billion enterprise value versus €48.5 billion.

France’s competitive landscape underscores the consolidation rationale. The French telecoms market posted industry revenue declines of 2% in 2025, with a sector return on capital employed of 4%, compared with 2% revenue growth and 12% ROCE in the Netherlands, where KPN trades at approximately 9x EV/EBITDA versus 5.2x for Bouygues.

French regulators have signalled openness. Competition Authority President Benoît Cœuré stated the regulator "would consider the deal without sticking to (their) positions of nine years ago."

The European Commission is targeting new merger guidelines by summer 2026 that give greater weight to "innovation, investment, and resilience of the internal market."