Vivendi to Mull Spin-off of French Telecom Arm Amid Focus on Media Businesses

Vivendi CEO Jean-Francois Dubos
Vivendi CEO Jean-Francois Dubos
 

LONDON - Media and telecom company Vivendi announced two deals this week that will flood its corporate coffers with around $13.7 billion in cash.

But one of its top executives on Friday signaled it could sell additional telecom businesses to focus on Universal Music Group and French pay TV firm Canal Plus in line with previously announced plans to concentrate on its media businesses.

Earlier in the week, Vivendi had said it would start exclusive talks to seal a sale of its 53 percent stake in Maroc Telecom for around $5.5 billion to Etisalat, a telecom giant from the United Arab Emirates. And late Thursday, it struck a deal to sell the majority of its 61 percent stake in video game firm Activision Blizzard for $8.2 billion.

That has left analysts wondering how the company, led by CEO Jean-Francois Dubos and chairman Jean-Rene Fourtou, would spend the cash and whether it could sell its remaining telecom businesses.

Vivendi said early Friday that it would for now focus on paying down some of its $17 billion in debt once it gets the money from the Activision deal.

"The board then will have to work on a plan to see what we do with the rest of the proceeds," CFO Philippe Capron told analysts during a conference call on Friday afternoon when asked if acquisitions were in the cards. "It strengthens our financial flexibility."

He added that "we do not have any significant acquisitions" on the radar right now.

The CFO then also signaled that further telecom disposals could be in the company's future.

"One possibility, among others, is that we engineer a split of the company with [French telecom arm] SFR being taken out of the perimeter," Capron said, hinting at a possible IPO.

He added that Brazilian broadband firm GVT could also be put on the block again down the line. "The GVT process could be started again" under the right circumstances, he told analysts. "That would leave us to start regrowing the group again around Universal Music and Canal [Plus]."

Of course, a 12 percent stake in Activision that Vivendi is retaining is also likely to be sold in the coming years.

UBS analyst Polo Tang estimated that Vivendi would "need to retain about a third  of the [Activision] proceeds to keep [debt] leverage unchanged." He added: "We expect [the rest] to be used for share buybacks/M&A to bulk up the media side of the business."

Sanford C. Bernstein analyst Claudio Aspesi suggested that Vivendi could buy out French media firm Lagardere, which owns a 20 percent stake in Canal+ France to get full ownership.

"I'm not sure about any other targets - nothing in media has synergies with the current portfolio," Aspesi said.

In a report earlier in the day, the analyst had argued: "The disposal of most of its Activision stake leaves a media-only strategy confused and shrunk. A France-only strategy could be more attractive."

He explained: "Activision seemed to us like the obvious place to reinvest some of the proceeds from the divestiture of other divisions." And he added: "We regret Vivendi did not recently dispose of Universal Music Group [after an $8.5 billion offer from Japan's Softbank] and follow our recommendation to pursue France-only strategy."

But Capron said the Activision sale made sense, even though the gaming firm was part of Vivendi's media and entertainment portfolio. "We decided...we didn't have enough potential synergies with the rest of the group," he said, highlighting that at other media and entertainment conglomerates "you usually don't see any games divisions."

Emphasizing that this was no negative judgment on Activision, he said "the ambition we had in media did not necessarily entail hanging on to a majority stake in Activision Blizzard."

He also highlighted that Maroc Telecom and Activision were similar in one regard - Vivendi did not own 100 percent of either.

Vivendi's stock rose Friday after the Activision deal news. As of Friday afternoon Paris time, the stock was up 2.6 percent.

E-mail: Georg.Szalai@THR.com
Twitter:
@georgszalai
 

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