Vivendi to spin off SFR telecoms unit

Vivendi, the French media and telecommunications group, has confirmed its plan to split in two, as it seeks to shed the conglomerate discount that has long weighed on its share price.

The company said on Tuesday that its supervisory board had approved a project, first aired in September, to spin off its SFR telecommunications company and list it separately on the stock market.

"This plan could take the form of a distribution of SFR shares to Vivendi shareholders on the day of the transaction," the Paris-based company said.

Vivendi, which owns Universal Music Group, the Canal Plus pay TV network and GVT, a Brazilian telecoms provider, also confirmed that Vincent Bollore would become its chairman following the split.

Mr Bollore, who heads his own Bollore industrial group and is Vivendi's biggest shareholder with a 5 per cent stake, will replace Jean-Rene Fourtou, the 74-year-old chairman.

Meanwhile Arnaud de Puyfontaine, chief executive of Hearst Magazines UK, will join Vivendi early next year as its senior executive vice-president responsible for media and content.

The appointment suggests that Mr de Puyfontaine could become a central figure in the media and content side of Vivendi following the spin-off of SFR. The telecoms company last year accounted for about 30 per cent of the group's €5.4bn operating profit.

The group said that the plans, which were announced more than a month sooner than most investors had expected, would be submitted both to regulatory authorities as well as to shareholders - probably during Vivendi's annual meeting next June.

Friday's confirmation of the plan to spin off SFR, and to appoint Mr Bollore as its new chairman, is another step along a profound restructuring path that the group first announced about a year and a half ago, promising that it would have "no taboos".

If approved, the result would produce a smaller, more coherent Vivendi based around music and entertainment. The new media and entertainment portion would have revenue of roughly €12.5bn compared with almost €29bn for the group at the end of last year.

It would also leave it with significantly less net debt, which stood at €13.4bn at the end of last year. Indeed, given the group's two recent asset sales, worth a combined €10bn, and the likelihood that SFR will take on a significant chunk of the remaining debt, the new Vivendi could even be in the market for acquisitions.

Even so, some analysts point out that even after the spin off of SFR, Vivendi would still have a telecoms dimension in the form of GVT, its Brazilian unit, which the group tried and failed to sell earlier this year.

That, some analysts believe, could risk locking in some of the conglomerate discount Vivendi is trying to cast off.

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