Vivendi to Review Bids for Maroc Telecom

4:40 AM PST 04/24/2013 by George Szalai

The French conglomerate, which also owns Universal Music Group, has been mulling a possible sale of its telecom assets to focus on its media and entertainment businesses.

LONDON – With final bids for one of its telecom businesses due this week, French conglomerate Vivendi will review offers that could lead to its first asset sale since deciding to focus on its media and entertainment businesses.

Vivendi last year said that it would consider asset sales to reduce its debt and develop a more focused business portfolio. Observers first expected a sale of the company's majority stake in video game maker Activision Blizzard or its French telecom arms, but so far Vivendi hasn't struck any deals as its management has said it wants to ensure it gets appropriate price tags in any sale.

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The company explored offers for Brazilian broadband provider GVT but abandoned the process earlier this year, saying it would be worth more than suitors, including U.S. satellite TV giant DirecTV, seemed willing to pay.

The company has since been focusing on a possible sale of its 53 percent stake in Maroc Telecom, with two Middle Eastern telecom companies believed to be the remaining suitors after Korean Telecom bowed out of the auction. Final bids are due this week, but it isn't clear how long the company will need to review them.

A Vivendi spokesman declined comment on the process, but sources said no sales announcement or decision is likely at the company's annual shareholder meeting April 30 in Paris.

Vivendi owns such businesses as Universal Music Group, French pay TV operator Canal Plus, telecom firm SFR and others.

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UBS analyst Polo Tang earlier this week said that Mideast media reports suggested that Qatar Telecom, which is bidding against fellow telecom giant Etisalat, has secured a $12 billion loan for its Maroc Telecom bid, among other things. He said the arrangement likely would allow it to value Vivendi’s stake in Maroc Telecom at less than $6.5 billion (€5 billion), while Vivendi is believed to be looking for bids worth $7.2 billion (€5.5 billion). Etisalat's bid could value Vivendi’s 53 percent stake at $6 billion (€4.6 billion), according to Tang.

However, "it is not clear what price Vivendi will achieve/would be willing to sell Maroc, although the end of the disposal process for GVT, Korean Telecom dropping out of the bid for Maroc and the annual meeting happening on April 30 are adding pressure on management to act," he argued. "Under €5.5 billion, we believe the disposal of Maroc is likely to be dilutive. Should the disposal process disappoint, investor attention is likely to switch to weakening earnings momentum and limited credit rating headroom."

Sanford C. Bernstein analyst Claudio Aspesi told THR, though: "Financial markets will see anything above €5 billion as a good price and would likely be disappointed with anything below €4.5 billion."

Jefferies & Co. analyst Will Smith, who has a "buy" rating on Vivendi's stock, titled a recent research report, "The Push for Premium Is Worth the Wait."

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"We have long preferred a sale of Maroc Telecom, which looks increasingly likely," he wrote. "We see little synergies from owning the name within the holding company umbrella, see structural challenges for the business and note increasing capital expenditure requirements as the Moroccan government pushes for better broadband coverage."

Having put the sale of GVT on hold because of lower-than-hoped-for offers, "this is now the second time Vivendi has walked away from a disposal due to price," Smith said. "Philippe Capron, the CFO, has repeatedly indicated they will not 'fire sale' assets. In our opinion, the market is excessively focused on the execution of a divestment, at whatever price."

Meanwhile, debt ratings agency Fitch last week affirmed its credit rating on Vivendi but said it could come under pressure if no asset sale happens this year.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai
 

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