French construction and telecommunications group Bouygues, has offered €10.5 billion cash for Vivendi’s SFR unit, setting up a bidding war with billionaire Patrick Drahi’s Altice group and potentially creating a phone carrier to rival Orange.

Bouygues said its offer, which includes assets at the Bouygues Telecom unit and is fully backed by financing from HSBC, would generate additional revenue and cost savings of about €10 billion. A separate proposal by Altice, Drahi’s cable holding company, values SFR at about $20 billion through a mixture of debt, cash and equity.

If Vivendi accepts either bid, it would have to scrap a plan to distribute SFR stock to shareholders. A disposal of France’s second-largest mobile-phone company, which Vivendi took full control of in 2011, would represent a shift toward media assets including Canal+ and Universal Music Group under Vincent Bollore, who is set to replace Jean-Rene Fourtou as chairman this year.

Bouyges would certainly face regulatory challenge to a bid as it would emerge with around 21 million subscribers, closing in on Orange. Under the Bouygues proposal, the company would get 49 per cent of the new entity, while Vivendi would have 46 per cent, with JCDecaux – a minority shareholder of Bouygues and the outdoor advertising company — holding the rest.

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