Vodafone unit plans to buy French rival

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The Independent Online

SFR, the French mobile operator jointly owned by Vodafone and Vivendi, has agreed to increase its stake in its fixed-line rival Neuf Cegetel to 70 per cent and plans to buy out the company as it looks to strengthen its position to better compete with France Telecom.

SFR, in which Vodafone owns a 44 per cent stake, has agreed to buy a 29 per cent stake in Neuf Cegetel from Louis Dreyfus, a commodities trading company, for €2bn (1.44bn), equating to €34.50 per share. Once regulators approve the buyout of the fixed-line telecoms company's second largest shareholder, SFR intends to offer the remaining shareholders €36.50, valuing the entire buyout at €4.45bn.

The deal has been driven by Vivendi, the French media conglomerate that owns a majority stake in SFR as well as Universal Music, the world's largest music company, and Universal Studios, the film production company. The Neuf Cegetel deal, which has Vodafone's blessing, comes hot on the heels of its acquisition of Activision, the video games developer, which created the world's largest computer games producer.

Jean-Bernard Lvy, the chief executive of Vivendi, said he is still keen to buy Vodafone's stake in SFR and also wants to buy out minority shareholders in the French pay-TV company Canal Plus. Vodafone has previously said that it wants to increase its stake in SFR, but has recently sold out of a number of European markets to focus on emerging markets.

The Neuf Cegetel buyout represents the end of a successful listing of the business which was created when Cegetel, France Telecom's main rival in the fixed-line sector, merged with Neuf in 2005. The company was listed in October 2006 and has risen 66 per cent over the past year, partly on takeover speculation. However, Dimitri Kallianiotis, an analyst with Citi, said SFR may need to raise its offer toward the €40-a-share mark to complete the buyout.

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