Vodafone Sells SFR Stake for $11B

Continuing with its plans to divest minority holdings, Vodafone Group plc (NYSE: VOD) has sold its 44 percent stake in French operator SFR to Vivendi , which already owns the other 56 percent.

Vivendi is paying €7.75 billion (US$11 billion) for the stake. The deal is expected to be completed during the second quarter of this year, at which time Vivendi will pay Vodafone a further €200 million ($284.4 million) dividend. The two companies will continue to work together as partners, having extended their commercial cooperation agreement for a further three years.

The price is higher than some had expected: Reports from just a few weeks ago suggested that Vivendi had reportedly balked at paying more than $9.6 billion for the SFR stake, but Vodafone always looked set to hold out for a price that would meet its stated asset investment strategy. (See Euronews: March 14 and Vodafone Updates Strategy, Profit Outlook.)

The move gives Vivendi total ownership of one of Europe's leading integrated communications service providers, second in its home market only to Orange (NYSE: FTE). At the end of 2010 SFR had 21.3 million mobile customers (33.1 percent market share) and 4.9 million fixed broadband customers (24.3 percent share). The operator, which secured a strong position in the French fixed and enterprise services market with the acquisition of Neuf Cegetel in 2008, reported revenues of €12.6 billion ($17.9 billion) and cash flow (operating income) of almost €2 billion ($2.84 billion) in 2010. (See SFR to Swallow Neuf in $6.4B Deal.)

Vodafone says it will use €4.5 billion ($6.4 billion) of the proceeds to return cash to its investors. That news and the slightly higher-than-expected sale price gave Vodafone's share price a 1.95 percent boost to 182.6 pence on the London Stock Exchange.

Vivendi's stock is up just 0.4 percent on the Paris stock exchange to €20.60.



News of the deal comes only days after Vodafone announced it will spend $5 billion increasing its majority stake in Indian mobile operator Vodafone India . (See Vodafone, NTT Boost India Investments.)

Vodafone's decision to sell to Vivendi ends a tussle for ownership of SFR that dates back to 2002, when Vivendi was recovering from financial difficulties and Vodafone fancied a controlling interest in SFR. (See Vodafone Loses SFR Battle and All Eyes on France.) But in recent times Vivendi has been more keen on taking total control and it always looked like a deal would be done as soon as the French media and communications conglomerate met Vodafone's financial demands. (See Will Vodafone Bid SFR Adieu?.)

— Ray Le Maistre, International Managing Editor, Light Reading