Europe: Vodafone, Vivendi vie for Cegetel

Global Finance, Dec 2002 by Platt, Gordon

UK-based Vodafone Group, Europe's largest mobile phone company, is locked in a battle with debt-laden Vivendi Universal of France for control of Cegetel, the French phone company.The real prize is SFR, France's second-largest mobile operator, which is controlled by Cegetel.

Vodafone is seeking SFR to fill a gap in its panEuropean mobile system, while Vivendi is trying to hold on to its 44% stake in Cegetel to maintain its French identity and cash flow as it struggles with

a $19 billion debt burden. Vodafone currently owns a 15% interest in Cegetel and a 20% interest in SFR, giving it a combined economic interest in SFR of 31.9%.

Vodafone's German subsidiary has offered to buy a 26% stake in Cegetel from BT Group, as well as a 15% interest from SBC Communications of the United States.The acquisitions, if successful, would boost Vodafone's interest in Cegetel to 56% and in SFR to 64.5%, giving it control of both companies.

Meanwhile,Vodafone's German unit, formerly Mannesmann, renewed an offer of E6.77 billion to Vivendi for its entire interests in Cegetel, representing the same price per share agreed with BT and SBC.Vivendi has until December 10 to decide whether to accept Vodafone's bid for its Cegetel holding or to make a rival bid for BT's and SBC's stakes.

New York-based rating agency Moody's Investors Services warned that if Vivendi increased its holding in Cegetel, it might downgrade Vivendi's credit standing again. Moody's said that by rejecting an earlier offer from Vodafone,Vivendi had missed a good opportunity to reduce its debt.

Vivendi, a water utility that evolved into a global media and entertainment group, piled up debt during an acquisition spree under former chairman and CEO Jean-Marie Messier, who was ousted in July. Vivendi announced last month that it was exiting the water business after being barred from buying Southern Water in, Britain.