Vivendi targets mid-2014 for SFR split

Vivendi said it is on track with plans to split off its French telecoms unit SFR by the middle of 2014, as the group pursues its strategy to rid itself of its troublesome telecoms assets and focus on its media business.

After recently agreeing the sale of its 53 per cent stake in Maroc Telecom to Etisalat for €4.2 billion ($5.65 billion) in cash, concluding a process that had been dragging on since both Dubai-based Etisalat and Ooredoo of Qatar submitted bids in April, Vivendi CFO Phillipe Capron said the SFR demerger process is going at a "good pace," according to Reuters.

"Achieving an independent listing for SFR will be beneficial to our shareholders by removing the conglomerate discount and revealing true value and growth potential of our media businesses," Capron said, Reuters reported.

In July, Vivendi also announced the sale of its controlling stake in video games maker Activision Blizzard. Reuters noted that the transactions will enable Vivendi to cut its net debt to €7.2 billion, compared with €13.4 billion at the end of 2012. Debt reduction is a key requirement before the group goes ahead with splitting off SFR from the other businesses, which are Universal Music Group, Canal Plus, and Brazilian telecoms operator GVT.

Analysts have questioned why Vivendi is retaining GVT within the future media-focused group. Capron said the new Vivendi management, which is currently being sought to lead the new media group, would decide the future of the Brazilian company.

"Once the SFR elephant is out of the room, people will start to see that the other media assets are actually generating good growth especially on the bottom line," added Capron, who is leaving Vivendi in January to join Veolia.

SFR has indeed weighed down Vivendi results as a result of the price war in France that has seen the operator struggle to maintain revenue growth. In the first nine months of 2013, SFR recorded a 10.5 per cent drop in revenue, down to €7.616 billion. Vivendi attributed the decline to the impact of price cuts in response to the competitive environment and to tariff cuts imposed by the regulators. Excluding the impact of these tariff cuts, revenue fell by 7.5 per cent.

In the third quarter, Bloomberg noted that SFR's EBITDA fell 38 per cent to €334 million, and sales declined 8.7 per cent to €2.5 billion.

"We are reassured by these results. Despite continued weakness in the quarter, performance at SFR appears to be stabilizing," Sanford C. Bernstein analyst Claudio Aspesi wrote in a note, according to Bloomberg. "Investors are likely to be particularly heartened by a more concrete timeline for the de-merger."

For more:
- see this Reuters article
- see this FT article (sub. req.)
- see this Bloomberg article

Related Articles:
Vivendi to sell Maroc Telecom stake to Etisalat for €4.2B
Vivendi's telecoms exit plan hits a speed bump
SFR shows some glimmers of hope as turnaround continues
Vivendi considers casting SFR adrift as part of group split
Vivendi pushes ahead with plan to offload Maroc Telecom

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