Vodafone Hovers Over SFR

Gent & Co. are waiting for the new grand fromage at Vivendi to settle on a plan of action before bidding for a bigger Gallic stake

July 9, 2002

2 Min Read
Vodafone Hovers Over SFR

Vodafone Group PLC (NYSE: VOD) has reconfirmed its interest in gaining a majority stake in French mobile operator SFR and is waiting patiently to pounce on the 44 percent stake in SFR's parent, Cegetel, currently held by financially-challenged French firm Vivendi Universal.

Confused? Don't be. Cegetel owns 80 percent of SFR, while Vodafone directly owns the remaining 20 percent. Vodafone also currently owns 15 percent of Cegetel, giving it another 12 percent in SFR. Snapping up Vivendi's stake in Cegetel would easily make Vodafone the king of the SFR castle (or roi du château de SFR, in the local lingo).

"We said in our preliminary results in May that if SFR was put up for sale we would be interested, and that remains the case," a Vodafone spokesman tells Unstrung. The spokesman adds that as the management at Vivendi only changed last Wednesday -- Jean-Rene Fourtou took over the reins as chairman and CEO from Jean-Marie Messier -- it is still too early for any divestment decisions to have been made.

Meanwhile, speculation continues as to how much Vodafone would bid for Vivendi's chunk of Cegetel -- the latest guesstimate coming in at about US$4.5 billion.

Making such an acquisition would not present Vodafone with any problems, adds the spokesman, taking exception to Unstrung's recent suggestion (see Vodafone Explains as It Slides) that Vodafone shareholders might balk at a trip to a French fire sale so soon after a whopping annual loss (see Vodafone Turns Deep Red, Focuses on Cost Control). "Investors realize that loss was due to [goodwill] amortization, and that we had free cashflow of £2.4 billion [US$3.5 billion]," he points out. Indeed, as we pointed out at the time. We also noted prominently that Vodafone's annual operating profit was up 35 percent at £7 million (US$10.21 million at the time). And compared with the debt of its peers, Vodafone's is not at all bad at £12 billion (US$17.5 billion). But does that mean tout le monde will be happy with another purchase, even if it was at the bargain end of the scale? Vodafone is obviously confident it has the blessing of its institutional shareholders.

The spokesman was more relaxed when Unstrung suggested (following information from a reliable source) that Vodafone is planning to bump up its stake in Japanese mobile operator J-Phone Co. Ltd., in which it already holds a 69.7 percent stake. "I have heard a lot of suggestions recently, but that's a new one on me. I would call that one extremely speculative," says our friend at Vodafone.

Well, we love to speculate, so we're sticking with it. In the meantime, we'll keep one eye on France and the other on Japan. Just in case.

— Ray Le Maistre, European Editor, Unstrung

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