Vivendi SA (VIV), which is preparing a spinoff of its French phone business SFR, received an approach about a potential “alliance” between the unit and cable provider Numericable Group SA.
There’s been no formal offer, Paris-based Vivendi and Numericable’s Luxembourg-based parent company said in statements today. Numericable, with a market value of 3.9 billion euros ($5.4 billion), is controlled by Altice SA (ATC), the company founded by billionaire Patrick Drahi. SFR is valued at 12 billion euros by Liberum Capital Ltd. analysts.
European telecommunications operators are seeking to combine as costs rise for building high-speed networks and regulators tighten rules and order cuts in roaming fees. In France, discount carrier Iliad SA (ILD)’s 2 euro-a-month wireless packages have eaten into Vivendi and Orange SA’s profit margins and prompted them to look for savings elsewhere.
While open to the possibility of a merger, Vivendi’s management is skeptical Drahi can deliver a deal superior to that available through a spinoff, people familiar with the matter said, asking not to be named discussing a private matter. In particular, Vivendi’s board is cautious about agreeing to a transaction when the long-term outlook for the French mobile market remains unclear, one of the people said.
Vivendi and Numericable have held talks on and off in the past year without being able to agree on valuation, as Altice makes a renewed push to consolidate telecommunications assets, people familiar with the matter have said.
“I believe cable will consolidate mobile in different countries,” Drahi, who emerged as one of the world’s 200 richest people after Altice’s January initial public offering, said in an interview this month.
A straight sale of SFR, France’s second-largest wireless carrier with 2012 revenue of 11.3 billion euros, would speed up Vivendi’s reorganization around media, music and broadcasting assets. Vivendi’s other assets include pay-TV arm Canal Plus, Universal Music Group and Brazilian broadband provider GVT.
“The Vivendi supervisory board will announce a decision, if necessary, as and when appropriate,” Vivendi said in its statement on Numericable. It is scheduled to release earnings tomorrow.
Altice’s statement late today confirmed contacts “regarding a potential alliance between Numericable and SFR.”
Altice raised about 1.3 billion euros in its IPO, giving Drahi a vehicle for raising capital for possible deals. While the IPO is subject to a so-called share lockup for 180 days, an exception allows Altice to issue new shares starting 45 days after the flotation if the proceeds are used to finance a merger or acquisition, according to regulatory filings.
Altice shares rose 4.1 percent to close at 31.20 euros in Amsterdam, as Numericable added 6.9 percent to 31.50 euros in Paris. Vivendi, which relied on SFR for almost 40 percent of its 2012 revenue, climbed 2 percent to 21.25 euros.
As part of a strategy review that had also led to the ouster of former CEO Jean-Bernard Levy, Vivendi last year agreed to sell its stakes in video-game developer Activision Blizzard Inc. and Maroc Telecom SA for a combined $14 billion.
The company in 2011 took full ownership of SFR by acquiring the 44 percent stake it didn’t already own from Vodafone Group Plc (VOD) for 8 billion euros. That deal, which Levy had flagged as a key goal for Vivendi, occurred just before Iliad’s entry into the mobile market began driving down prices.
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