BREAKINGVIEWS-Vivendi starts to take a T out of TMT

Tue Oct 16, 2012 7:51pm IST

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By Quentin Webb

LONDON, Oct 16 (Reuters Breakingviews) - Vivendi (VIV.PA) is taking a “T” out of TMT. The French group was built on the duff notion that telecoms, media and technology assets benefit from common ownership - even if this rarely brings meaningful cost savings or cross-selling opportunities. Now, after ousting Chief Executive Jean-Bernard Levy, nominal chairman and real boss Jean-Rene Fourtou seems keen to shed telecoms assets. But a slimmer Vivendi would still lack coherence.

Fourtou said there would be “no taboos” in his strategic review, but he has been hamstrung by the gulf between holders of the conglomerate’s shares and bonds. Equity owners have long applied a big discount to theoretical “sum of the parts” valuations. But creditors fear that a break-up would leave them holding bonds in a smaller, riskier successor.

So the solution appears to be a piecemeal retreat in telecoms, with proceeds helping pay down net debt of 14 billion euros. Thus, Vivendi is exploring sales of Maroc Telecom (IAM.CS) and GVT in Brazil. Even at home, things could change.

Last year, Vivendi disastrously bought Vodafone out of joint venture SFR at a full price, a few months before Iliad entered the French mobile market with a bang and a brutal price war. Now SFR might be wedded to the smaller Numericable, subject to a suitable dowry from the cable company’s private-equity owners. That seems to make sense on paper: synergies exist. Reports that Vivendi would own just under half the merged group suggest a full exit could follow.

Whatever telecoms assets remain unsold, the remaining group will be focused around what it calls “media”. This encompasses: Universal Music, the world’s largest music company recently swollen by its $1.9 billion purchase of EMI’s recorded-music arm; French pay-TV group Canal Plus; and Activision Blizzard (ATVI.O), the U.S.-listed video games publisher, which has been shopped around inconclusively.

Disciplined sales could well help narrow Vivendi’s conglomerate discount, and a smaller group means top management will have fewer fires to fight. Plus, the arrival of hands-on billionaire Vincent Bollore as a 5 percent shareholder might force the supervisory board to up its game. But the reality remains: no-one could possibly invent this combination from scratch.

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CONTEXT NEWS

- On Oct. 16, French billionaire Vincent Bollore confirmed he increased his ownership of Vivendi, the French communications and media conglomerate, to 5.01 percent. Vivendi said it welcomed the presence of “an industrial, family-owned French group” among its shareholders and proposed Bollore (BOLL.PA) join the company’s supervisory board. In March Forbes estimated Bollore was France’s 12th richest person, with a net worth of $1.6 billion.

- Bollore’s increasing influence comes as Vivendi explores the sale of several key businesses. On Oct. 13, French daily newspaper Le Figaro reported that SFR, Vivendi’s French mobile phone operator, was in talks about tie-up with Numericable, a private-equity backed cable company.

- Vivendi has also hired banks to explore a sale of its majority stake in Maroc Tel and of Brazil’s GVT, according to recent Reuters reports citing people familiar with the situation. Vivendi owns 53 percent of Maroc Tel (IAM.CS), Morocco’s largest telecoms company, and bought GVT, a Brazilian fixed-line, broadband internet and pay-TV provider, in 2009. It also held exploratory talks to offload U.S.-listed video games company Activision Blizzard but found few takers, Reuters reported in July.

- Reuters: Vivendi’s SFR in talks with Numericable [ID:nL5E8LD4KJ]

- Reuters: Billionaire Bollore ups stake in Vivendi, to join board [ID:nL5E8LG142]

Reuters: NEWSMAKER-Bollore repeats history with Vivendi [ID:nL6E8HT80F]

Vivendi statement: link.reuters.com/paf43t

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(Editing by Pierre Briançon and David Evans)

((quentin.webb@thomsonreuters.com))

((Reuters messaging: quentin.webb.thomsonreuters.com@reuters.net)) Keywords: BREAKINGVIEWS VIVENDI/

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