Vivendi SA (VIV) is in exclusive talks to sell its stake in Moroccan phone company Maroc Telecom SA to Emirates Telecommunications Corp. (ETISALAT) for 4.2 billion euros ($5.5 billion) as the French company sharpens its focus on media.
The offer values Vivendi’s 53 percent stake at 3.9 billion euros, or 92.6 dirhams per Maroc Telecom share, Emirates Telecommunications, known as Etisalat, said today in a statement. Etisalat would also pay 310 million euros for a dividend that Vivendi was set to receive from Maroc Telecom. BNP Paribas SA is advising Etisalat on the purchase.
Vivendi, which also owns phone assets in France and Brazil, is seeking to shift the focus of its business from telecommunications to content: music company Universal Music Group, video-game publisher Activision Blizzard Inc. (ATVI) and pay-TV provider Canal Plus. Reaching a deal on Maroc Telecom will help Vivendi Chairman Jean-Rene Fourtou show investors he can deliver on asset sales, a promise he made more than a year ago.
The deal “should see the restructuring story gain momentum,” Ian Whittaker, an analyst at Liberum Capital Ltd., said in a note to investors. It marks “the first concrete steps of the restructuring program.”
Vivendi rose 2.4 percent to 16.08 euros in Paris trading. Etisalat rose 1.3 percent to 11.95 dirhams in Abu Dhabi. Maroc Telecom shares dropped 9.4 percent in Casablanca, closing at 90.2 dirhams.
A deal would give Etisalat, based in Abu Dhabi, control over the largest mobile carrier in Morocco. Etisalat said it has secured the commitment from a syndicate of local and international banks to finance the transaction.
“We would not have gone all the way, spent time and effort over the last few months, if we were not confident that this would work,” Etisalat Chief Strategy Officer Daniel Ritz said today in a telephone interview. “We have negotiated both the price and all contractual conditions; as far as Vivendi is concerned, we’re done.”
Etisalat’s second-quarter net income rose 5.9 percent to 1.98 billion dirhams ($539 million) as revenue climbed 20 percent to 9.88 billion dirhams, the company said in a statement today. Sales from international operations jumped 50 percent to 3.5 billion dirhams.
Qatar’s Ooredoo, formerly known as Qatar Telecom, withdrew its offer for Maroc Telecom in June because of what it called a “lengthy” sale process. Vivendi had wanted as much as 5 billion euros for the holding, one person briefed on the matter said in June.
Vivendi and Etisalat plan to close the deal by the end of the year, subject to regulatory approvals. Lazard Ltd. and Credit Agricole SA are advising Vivendi.
More than $160 billion in deals for the telecommunications industry have been announced in the last 12 months, according to data compiled by Bloomberg. The median ratio of earnings before interest, taxes, depreciation and amortization to price paid was 5.7 percent. Sanford C. Bernstein analysts said Etisalat valued Maroc Telecom at 6.2 times Ebitda.
Vivendi’s main French telecommunications division, SFR, is under pressure from increased competition. The French phone company is trying to fend off low-cost offers by Iliad SA (ILD) as price wars enter their second year in the French wireless services market. Fourtou has said reinforcing business at SFR is the first step to a possible initial public offering of it.
To save money at SFR, Vivendi entered exclusive talks with Bouygues SA (EN) about reaching an agreement by year-end to share part of their French mobile-phone networks, in an effort to cover more ground for less, according to a statement from the two parent companies.
Discussions about sharing infrastructure will focus on the latest generation of wireless technology, dubbed 4G or LTE, and where to share, according to people familiar with the negotiations who asked not to be named because they’re private.
Early estimates suggest that sharing networks could yield savings from 5 percent to 20 percent in network capital expenditures and operating expenses, the people said. The companies are in talks with regulators to determine where the carriers will be allowed to pool their resources, which will determine how big the economies are, they said.
Representatives at Bouygues Telecom and SFR declined to comment on the network sharing plan beyond the statement.
French telecommunications regulator Arcep conditionally encouraged sharing agreements in the framework for its 4G license accords in 2011, the agency said in a statement noting SFR and Bouygues Telecom’s announcement. A final agreement will need to ensure the operators maintain adequate competitive conditions while giving users better service across the region, Arcep said.
“The resulting entity, however, should also be more competitive thanks to increased network density, faster LTE rollout and better backhaul through the pooling of existing assets,” Claudio Aspesi, an analyst at Sanford C. Bernstein, said in a note to investors.