Vivendi Said to Consider Splitting SFR Unit From Media

Vivendi SA is considering splitting off its biggest unit, telecommunications provider SFR, in a move that would transform the French conglomerate into a company focused on its faster-growing media businesses, according to four people with knowledge of the discussions.

Talks to separate SFR, the French wireless business that made up almost 40 percent of Vivendi’s 2012 revenue, have gained momentum since a February board meeting, said one of the people, who requested anonymity because the deliberations aren’t public. Under discussion is a proposal for SFR to ultimately retain most of Vivendi’s debt, which the company is seeking to reduce as it focuses on expanding in media, said the people. No final decision has been made and Vivendi may still settle on an alternative strategy, the people said.

Discussions on separating SFR have intensified after Vivendi failed to sell its Brazilian phone and Internet unit, GVT, because bids came in below the asking price of 8 billion euros ($10.4 billion). Splitting SFR from Vivendi would put an end to a media and telecommunications conglomerate that’s unique in Europe, as mobile-phone operators struggle to increase sales amid tough competition.

“A split will take some time to implement and will be a significant positive especially given the delay in the sale of GVT stake,” said Saeed Baradar, an equity sales specialist at Societe Generale in London.

Maroc Telecom

Vivendi in April 2012 considered segregating media from telecommunications to boost its stock, two months before its board ousted Chief Executive Officer Jean-Bernard Levy. The company then decided to sell assets instead.

Shares of Vivendi jumped as much as 6.2 percent and closed 4.4 percent higher at 16.22 euros in Paris trading.

A separation of the phone from media businesses would take three to five years to complete and would probably happen after a sale of Vivendi’s 53 percent stake in Maroc Telecom SA, the people said. Chairman Jean-Rene Fourtou expects GVT, given time, may find a buyer at the asking price, or remain in the company, the people said. Vivendi may ultimately seek a buyer for SFR as well, they said.

A spokesman for Paris-based Vivendi declined to comment about a potential split of the business.

Vivendi needs to reduce debt before any split, one person said. The most likely and imminent way to achieve that is the Maroc Telecom sale, the person said. Vivendi may choose a buyer for the holding, valued at about $6 billion on the market, within weeks, the people said.

Media Investments

Emirates Telecommunications Corp., the Middle Eastern carrier also known as Etisalat, is a leading contender for the Maroc Telecom stake while Qatar Telecom QSC and South Korea’s KT Corp. are also weighing a purchase, the people said.

Funds raised from any potential sale or spinoff of the phone operations would be used to expand its media businesses, they said.

Vivendi’s media and entertainment assets include Universal Music Group, the world’s biggest record company, video-game maker Activision Blizzard Inc. and pay-television provider Canal Plus. Last year, Vivendi unsuccessfully sought a buyer for its stake in Activision Blizzard.

Vivendi completed the 1.2 billion-pound ($1.8 billion) purchase of EMI Group in September after agreeing to sell off some European assets to meet conditions set by regulators.

‘Fire Sales’

The conglomerate’s phone operations had revenue of 15.7 billion euros last year, or 54 percent of Vivendi’s revenue of 29 billion euros, according to regulatory filings. The divisions contributed about 3.1 billion euros in operating income compared with 2.3 billion euros for the media divisions.

Chief Financial Officer Philippe Capron said last month the company won’t hold “fire sales,” and is in no rush even if some assets take longer to sell.

GVT, which Vivendi acquired for $4.18 billion in 2009 after trumping a bid from Spain’s Telefonica SA, has helped boost revenue growth at the French company. The operation received offers from DirecTV, the largest U.S. satellite-TV provider, and a group of private-equity firms including KKR & Co. and Apax Partners LLP, people familiar with the matter said last week.

Before it's here, it's on the Bloomberg Terminal.