Bidders for Vivendi unit court Morocco's government

PARIS/LONDON Mon Apr 8, 2013 9:39am EDT

The logo of Vivendi is seen during the company's 2008 annual results presentation in Paris March 2, 2009. REUTERS/Charles Platiau

The logo of Vivendi is seen during the company's 2008 annual results presentation in Paris March 2, 2009.

Credit: Reuters/Charles Platiau

PARIS/LONDON (Reuters) - Maneuvering in Vivendi's (VIV.PA) auction of its Moroccan telecoms business is intensifying as three suitors lobby the kingdom's government ahead of a bidding deadline at the end of April.

Since Maroc Telecom (IAM.CS) is 30 percent owned by the state, the kingdom has the final say in Vivendi's eventual choice of buyer for a 53 percent stake worth around $6 billion. As a result, regional politics, culture and even language will influence the outcome.

A deal is crucial for Vivendi, whose management is due to face shareholders at an April 30 meeting with little to show for a year of efforts to reduce exposure to telecoms, focus more on media and cut debt.

The French group has already failed in attempts to sell video game unit Activision Blizzard (ATVI.O) and Brazil telecom GVT. Pulling off a Maroc Telecom sale will decide the next move in its strategic overhaul.

Ooredoo QTEL.QA, formerly named Qtel and backed by Qatar's oil and gas wealth, has deployed lobbyists in Morocco with pledges to pour money into unrelated infrastructure projects to benefit the kingdom, said two people familiar with the process.

The pitch could appeal to the north African kingdom, whose economy has struggled lately because of reliance on trade with the euro zone and flagging tourism.

Morocco, ruled by the Arab world's longest-serving dynasty, lacks the oil riches of the younger Gulf monarchies.

Etisalat ETEL.AD is appealing to Morocco's sense of prestige with a promise to make Maroc Telecom the flagship of its African operations and deploy Maroc Telecom executives throughout the continent, said the two people.

The group owned by the United Arab Emirates would fold its underperforming West Africa business, known as Atlantique, into Maroc Telecom and use that as its leading brand in the region.

Korea's KT Corp. (030200.KS), on its first major foray overseas, is working on sharing up to 40 percent of the Maroc Telecom stake with local partners to help it navigate the country, mitigate risk and finance the bid, three sources said.

It was not immediately clear if Ooredoo or Etisalat were also in talks with local partners, although the people familiar with the bidding process said such a scenario was possible.

"The Moroccans will be part of the deal one way or another," said one of the people.

The second person said the eventual winner would have to strike a balance between Vivendi's priorities and Morocco's ambitions for one of its largest companies that controls strategically important communications infrastructure.

"Vivendi is only interested in getting the highest price, while Morocco wants a party that will invest in the long term to develop Maroc Telecom, create jobs and act in a way that generally benefits the country," said the person.

A source from Morocco's finance ministry downplayed the importance of political considerations on the deal. "Obviously we have our word to say because we want someone whom will invest more and more in infrastructure," the ministry source said. "This is the only requirement."

NECK AND NECK

People involved in the sale say Etisalat and Qtel are running neck and neck in the auction and both have the financial firepower to back their bids.

Etisalat has lined up an $8 billion dual-tranche loan facility to finance its bid, bankers working on the deal said. Qtel is also in the advanced stages of negotiating a financing package with banks.

Although they lack the deep pockets of the other bidders, the Koreans plan to bring in locals for contacts and know-how could work in their favor, said one person. Three other sources said the cultural gap between the Koreans and the Moroccans was significant and had hampered KT's bid in recent months.

A KT Corp spokeswoman said it was still reviewing whether to submit a final bid and declined to comment on partners.

Maroc Telecom offers fixed-line, mobile and Internet services in the kingdom and is one of Africa's top telecom firms, with units in Burkina Faso, Gabon, Mali and Mauritania.

The buyer will inherit a firm that has been a reliable cash machine for Vivendi but has seen slower growth in recent years, analysts say, although there is growth potential in sub-Saharan Africa, where sales and profits rose last year.

Group sales in 2012 fell 1.8 percent to 2.7 billion euros, while EBITA fell 9.4 percent to 987 million euros.

Vivendi will emphasize progress on the Maroc Telecom sale at the April 30 shareholder meeting, said the second person. "It will either announce exclusive talks with a bidder or boast about the very serious and strong offers they've received."

A Vivendi spokesman said of the sale: "The process is moving along and we are confident of a positive outcome."

PALACE POLITICS

Progress on the sale has been slowed by the political tinge to the proceedings, said the sources. Important factors, such as pledges of deeper trade ties, may not be in the bid documents.

Morocco's relationship with Qatar was strained during the Arab Spring uprisings by state-owned news channel Al Jazeera's coverage of the political unrest and, more recently, by a perception that Qatar has aided the rise of the Muslim Brotherhood in Egypt and elsewhere in the region.

"The Moroccan palace has political and security concerns about the rise of the Muslim Brotherhood in the region, which are shared by the Emiratis, so in that respect the two are aligned," said Neil Partrick, a Middle East analyst affiliated with LSE's Kuwait Gulf Programme.

But the kingdom has come increasingly to rely on the wealthier Gulf states for trade and aid, so will not want to alienate Qatar or the United Arab Emirates.

Morocco's King Mohammed went on a tour of Gulf Arab states last October to drum up economic support for a $90-billion economy heavily exposed to the debt-scarred euro zone through trade, tourism and migrant remittances.

Along with Saudi Arabia, UAE and Kuwait, Qatar pledged to invest $2.5 billion in the kingdom's tourism sector, with payments expected early this year.

"The Qataris have been extremely aggressive, not just on the telco side but overall with their investment strategy (in the region), compared with Abu Dhabi, which has taken a cautious stance," one senior telecoms banker.

"If you are the Moroccan government seeking to raise funds to boost the economy, you may prefer to align with the Qataris now. The money is clearly there."

The state will decide later whether to retain all of its 30 percent stake, one person familiar with the process said, and may tender 5-10 percent of its shares if the deal is attractive.

($1 = 0.7679 euros)

(Reporting by Leila Abboud in Paris, Sophie Sassard in London, Aziz el Yaakoubi in Rabat, and Dinesh Nair in Dubai; Additional reporting by Christian Plumb and Miyoung Kim; Editing by Tom Pfeiffer)

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