Vodafone agrees £7bn SFR sale to Vivendi

City A.M. Reporter
Vodafone emerged on top after it finally sold its stake in France's SFR to Vivendi which, like other recent buyers, paid a full price to secure control in a major realignment of the telecoms sector.

The long-awaited €7.95bn (£7bn) deal came just two weeks after Deutsche Telekom agreed to sell out of the US for $39bn and after Vodafone itself agreed to buy out its Indian partner for a hefty price.

Analysts said the price Vivendi paid for SFR was at the higher end of expectations.

This recent activity reflects a move by telecom firms to divest minority assets they do not control, concentrate on their core markets and return more money to shareholders who are aware of the low growth prospects in mature countries.

Vodafone, Deutsche Telekom both pledged multi-billion euro share buybacks after their deals, while Vivendi also signalled that the SFR buyout would lead to an increase in its dividend.

The deals also reflect the fact there are fewer acquisition targets in high-growth emerging markets, leading Europe's telecom giants to turn their focus to more mundane matters such as managing their home markets and improving balance sheets.

Consultants PRTM said such deals showed telecom firms were now more interested in national depth than global reach.

Robin Bienenstock, analyst at Sanford Bernstein, said Vodafone and Deutsche Telekom's deals both reflected a desire to exit countries where they were weak or in a non-controlling position to focus on markets where they were stronger.

"You're going to see a massive portfolio cleanup among telecom operators because they need capital to reinvest in their core networks," she explained. "The only way to do that is to jettison the weak stuff and plough money into the markets where you are stronger – this is a scale game.