Vodafone frustrates Vivendi with SFR bid

Vodafone yesterday launched an audacious 13.07bn euro (£8.3bn) pre-emptive strike against struggling Franco-American media conglomerate Vivendi in the battle for France's second largest mobile phone network SFR.

Vodafone has agreed to pay 6.3bn euros in cash for the stakes in fixed line operator Cegetel, which controls SFR, owned by BT and US telecoms group SBC Communications. The two deals would leave Vivendi as a minority shareholder in Cegetel and plug a gap in Vodafone's global network.

Vodafone would end up with 65% of SFR, which has 13m subscribers, and management control of Cegetel, which also has a fixed line telecoms business, with a 56% stake.

Vodafone, the world's largest mobile phone company, has also offered Vivendi 6.77bn euros for its 44% stake in Cegetel. Vivendi has until October 30 to accept the deal and analysts remain divided on the French company's next move. Vivendi can block Vodafone's takeover but it must match the offer made to BT by November 10, under the terms of the Cegetel shareholder agreement.

Vivendi must offer SBC an extra 300m euros for its stake under the terms of a joint venture vehicle - Transtel - set up by former Vivendi chief Jean-Marie Messier several years ago amid fears that the French company could lose control of cash cow SFR.

French bankers said last night that Vivendi, with debts of about 19bn euros, would have difficulty raising enough to match Vodafone's offer, which will give BT and SBC an up-front cash payment.

"Vivendi do seem to be rather over a barrel," said John Tysoe, analyst at WestLB Panmure. "Vodafone's timing has invariably been very, very good and today is no exception."

Vodafone chief executive Sir Christopher Gent said yesterday he had met new Vivendi boss Jean-René Fourtou and held a further "straightforward and candid" telephone conversation with him recently.

"We did say that the other parties were willing sellers and we would talk to them but we were not in the business of bidding people up," he said.

"Would we increase our position if they made a counter-proposal? The short answer is no. We think this is a decent price."

Vodafone insiders suggested that his comments are a warning to Vivendi not to try a counter-bid to raise the price tag on its own slice of the business.

One investment banker suggested last night that Vivendi is likely to launch a face-saving exercise, trying to extract a bit more money from Vodafone in return for handing over full control of SFR. Such strong-arm tactics are likely to receive short shrift from Vodafone's senior management.

Any extra cash that Vivendi can squeeze out of Vodafone would also be owed to BT and SBC under the terms of the Cegetel shareholder's agreement provided a deal is concluded within nine months.