Vodafone and Vivendi on verge of acquiring troubled assets

The suggested swap of Vodafone Turkey for T-Mobile UK could be announced this week as Vodafone and Deutsche Telekom finalise the deal to exchange their respective, but problematic, cell phone operations.

The deal would see Vodafone walking away from Turkey having spent US$4.55 billion in 2005 acquiring Telsim, and having invested heavily in network upgrades since then to hold onto second place. However, Vodafone recently took a US$890 million writedown against its Turkish operations, and perhaps believes that, with mobile penetration at over 90 per cent, the chances for success are now limited.

Deutsche Telekom, the promoter of the asset swap idea, is reported to be wanting around US$4.2 billion for T-Mobile UK (six times T-Mobile UK's EBITDA) believing that Vodafone Turkey would fit well into its Eastern Mediterranean strategy.

Meanwhile, the French conglomerate Vivendi has--after issuing strident denials, admitted that it is negotiating to acquire a majority stake in Zain's African operations. Vivendi is said to have made an informal offer to Zain this week, which valued the African assets at US$10 billion-US$11 billion, to acquire between a 51 and 65 per cent shareholding.

However, Zain, which entered the African market by acquiring Celtel in 2005 for US$3.36 billion--and has continued to invest and acquire in the region ever since--would appear to be experiencing some ‘turbulence' and has been forced to reduce staffing levels, rush through outsourcing plans and hurriedly launch management initiatives.

While Vivendi has commented that a move into Africa would fit with its strategy of seeking growth opportunities in emerging markets, the suggested price for Zain's portfolio of between US$10 billion and US$12 billion might be too expensive. Jean-Bernard Levy, Vivendi's CEO, has stressed that the deal to acquire Zain's African operation was uncertain, due to the company "attaching the utmost importance to keeping its credit rating and its dividends at their current levels."

For more on this story:
Telecom.com and Zawya

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