Oct 17 (Reuters) - A 17 billion euro ($19.72 billion)

joint bid by Bouygues Telecom, Iliad-owned Free and

Orange for most of the assets of France's

second-largest telecoms operator SFR could prove an acid test

for Europe's telecoms market.

SFR parent Altice rejected the non-binding offer, which

would see the number of French operators drop to three, but the

bidders want talks with its shareholders, which include

billionaire Patrick Drahi, to try to get a deal done.

However, regulators have long drawn a red line to maintain

four operators per country, resisting pressure for consolidation

to match more dominant U.S. and Asian competitors.

WHAT IS AT STAKE WITH THE BID?

EU antitrust regulators have imposed tough remedies and

outright blocks on telecoms deals that proposed reducing the

number of mobile network operators from four to three in a

single country market, with a view to safeguarding competition

and avoiding price increases.

However, an EU report on the bloc's competitiveness last

year urged regulators to ease a stance that had resulted in a

highly fragmented sector, and instead focus on helping

businesses gain scale and compete with U.S. and Chinese rivals.

This echoed some calls by sector CEOs for the EU to

facilitate mergers by assessing deals on an regional rather

national level and taking into account investment plans.

WHO WOULD REVIEW ANY SFR DEAL?

Acquiring Altice's French assets would likely face a review

by the European Commission, which has 25 working days after a

deal is filed for a first-stage review.

It may extend 35 working days, to consider either proposed

remedies or a member state's request to handle the case.

Most mergers win approval but occasionally the Commission

opens a detailed second-stage investigation for up to 90

additional working days, which it may extend to 105 days.

The Commission would likely focus on preserving competition

across several key segments of the French telecom market and

ensure infrastructure remains accessible to new entrants, ING

analyst Jan Frederik Slijkerman said.

Should a deal be agreed, it will reveal any changes in

thinking at the anti-trust authorities, Berenberg analysts said.

WHAT DOES THE FRENCH GOVERNMENT SAY?

Paris will play a key role in the event of a deal as the

French government is Orange's largest investor.

As a board member, its influence can extend to talks, which

could focus on job protection and the national interest.

Finance minister Roland Lescure said he will be "extremely

vigilant", particularly on prices and service quality.

HOW IS THE FRENCH TELECOMS SECTOR CURRENTLY MADE UP?

France currently has four telecoms operators, with Orange is

the market leader. This means it would only be able only to

acquire the smallest share of SFR, which has 19 million mobile

subscribers and more than 6 million fibre customers.

The French market has undergone many transformations, with

Orange itself being acquired by France Telecom in 2000.

In 2014, Vivendi sold SFR to Drahi's Numericable for 13.4

billion euros in cash and a 20% stake in the combined entity,

forming Altice France, which is now itself a target.

Altice closed a debt restructuring this month which has left

Drahi controlling 55% of Altice France and creditors 45%.

Meanwhile Bouygues Telecom, which is seeking the biggest

slice of Altice's business, has expanded through its acquisition

of La Poste Telecom, adding 2.3 million customers in 2024.

Iliad entered the French market in 2012 under its budget

brand Free, prompting stiff price competition.

The three carriers have proposed acquiring most of SFR's

activities, except for its stakes in fibre assets and those in

French overseas departments and regions.