Vodafone Looses the Battle for France's SFR

Vivendi has beaten Vodafone to control of France's GSM network, SFR. Vivendi has exercised an option to buy British Telecom's 26% stake in Cegetel, which gives it 70% control of the company. Cegetel itself controls 80% of the GSM network, SFR - hence Vivendi now has an effective 56.1% controlling interest in the network.

Vivendi is paying cash for the deal, paying US$2.7 from resources and raising its already substantial debt by a further US$1.3 billion.

Interestingly - a shareholder agreement requires that the majority of Cegetel's profits are paid out as dividends to the shareholders and a minimum retained for reinvestment. Vivendi says that it expects to gain an income of US$550 million from Cegetels' dividend payments this year, rising thereafter.

Assuming that the previously agreed US$2.2 billion cash acquisition of SBC's 15% interest in Cegetel is completed, Vodafone will then increase its economic exposure to Cegetel from 15% to 30% and to SFR from 31.9% to 43.9%. Vodafone will be entitled to appoint 3 directors (as opposed to its existing sole director) to the Cegetel board, leading to greater influence for Vodafone Group over the strategy and operations of Cegetel and SFR.

The acquisition is expected to be enhancing to Vodafone's earnings per share (pre-goodwill amortisation and exceptional items) from the first full year of ownership"

Posted to the site on 4th December 2002