Vivendi Chief Levy Says SFR Transaction With Vodafone May Not Be `Doable'

Vivendi SA Chief Executive Officer Jean-Bernard Levy said his plan to take full control of French mobile operator SFR by buying Vodafone Group Plc’s 44 percent stake may not be doable.

“We have flagged for several years our interest,” Levy said in an interview today. “Vodafone has not flagged its interest at this stage. I do not know if a transaction is doable or not; it takes two guys to shake hands.”

Vivendi, which today raised its full-year outlook after posting a better-than-expected first-half profit, wants to add Vodafone’s holding to its 56 percent stake in SFR. The efforts are part of a strategy to consolidate holdings in French units, including SFR, the country’s second-biggest mobile-phone company, and Canal Plus France, the largest domestic pay- television operator.

The Vodafone stake is worth about 7.2 billion euros ($9.2 billion), CreditSights analysts Mark Chapman and Chris Ucko estimated this year. Vodafone Chairman John Bond in June said the world’s biggest mobile-phone company is reviewing its holdings in SFR and U.S. wireless company Verizon Wireless.

Levy today said SFR was among the key drivers of the company’s first-half profit growth. Profit rose 4 percent to 1.53 billion euros, compared with an estimate of 1.49 billion euros, according to the average of eight analysts surveyed by Bloomberg. Full-year adjusted net income, or profit excluding one-time gains and some costs, will exceed that in 2009 at Vivendi and dividend payments will remain steady next year, the company said today.

Shares Rise

“Forecast upgrades, confirmed dividend, defensive business model and cheap valuation (are) all compelling in a bearish market,” Conor O’Shea, an analyst at Kepler Capital Markets in Paris, wrote in a note to investors.

Vivendi shares rose 5 percent, the most since May 10, closing at 19.33 euros in Paris.

In the first half, sales climbed 6.1 percent to 13.98 billion euros. SFR, which generates about 45 percent of Vivendi’s revenue, increased sales by 1.8 percent to 6.25 billion euros.

In July, Vivendi failed to reach a deal with Lagardere SCA to purchase a 20 percent stake in Canal Plus France, which would have given it full control of the pay-TV unit. Lagardere is now preparing an initial public offering of the stake.

Vivendi’s last major acquisition was its $4.18 billion purchase of Brazilian telecom operator GVT Holding SA in 2009, beating out a rival bid from Spain’s Telefonica SA. GVT’s growth and profitability were “well above the acquisition business plan,” Vivendi said today.

Legal Issues

While Brazilian securities regulators are investigating the GVT transaction, Vivendi hasn’t set aside funds for a possible fine and is confident it did nothing wrong, Levy said.

Brazilian newspaper Valor Economico reported in June that the country’s telecommunications regulator had accused Vivendi of buying options in GVT without giving details about the contracts. The newspaper said the French company may have misled investors and Telefonica into believing it had bought control of the phone company before it had done so.

Vivendi is still dealing with legal complications that date back to former CEO Jean-Marie Messier, who was ousted in a boardroom coup in 2002. In January a New York judge found the company liable for misleading statements under Messier, as part of a class-action, or group lawsuit, prompting Vivendi to set aside 550 million euros to cover possible damages.

The company may benefit from a U.S. Supreme Court ruling that limits non-U.S. investors’ participation in class-action lawsuits. More than two-thirds of the plaintiffs in the New York case are based outside the U.S., according to Vivendi.

Vivendi will reduce its 550 million-euro provision against losses from the class action “as soon as the judge in charge of the Vivendi case rules favorably” on the issue of participation by non-U.S. shareholders, the company said today.

To contact the reporter on this story: Matthew Campbell in London via mcampbell39@bloomberg.net.

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