French media firm Vivendi has chosen cable group Numericable as the favourite for the sale of its telecom unit SFR.
The decision is a blow to conglomerate Bouygues, which had also bid for SFR.
Vivendi and Numericable will now hold three weeks of exclusive negotiations.
The decision upset France’s industry minister Arnaud Montebourg who has openly sided with Bouygues.
Before Vivendi’s decision was announced he said: “This poses a number of problems. Firstly, because Numericable is a small business in comparison to SFR. It’s a five billion euro business which is borrowing 10 billion to buy a business larger than it is.”
Montebourg backed Bouygues’ bid to calm what he called “destructive competition” that has pushed mobile phone service prices down 20 percent in the past two years.
A deal between Vivendi Bouygues would have cut the number of French mobile operators from four to three, but would have faced competition regulator issues.
That would have slowed down a sale and Vivendi’s board made the choice that was likely to help it exit the cut-throat telecoms market as quickly as possible.
Vivendi has seen profits fall at SFR since the price war in France trigged by the arrival of low-cost newcomer Iliad’s Free service in 2012.