Outsider Drahi says French meritocracy helped him win SFR

PARIS, April 7 Mon Apr 7, 2014 1:17pm EDT

PARIS, April 7 (Reuters) - Patrick Drahi, the Franco-Israeli billionaire who won a bidding war for media group Vivendi's SFR telecoms unit at the weekend, was quick on Monday to forgive a French establishment that just two weeks ago was trying to knock him out of the race.

Drahi's Numericable, France's biggest cable company, emerged the winner of a lengthy takeover battle on Saturday when Vivendi's board approved his 13.5-billion-euro ($18.5 billion) offer despite a sweetened, last-ditch bid from fellow tycoon Martin Bouygues.

The decision capped months of lobbying by all sides during which then Industry Minister Arnaud Montebourg had publicly thrown his weight behind Bouygues' offer.

"I was educated at Republican schools where hard work is duly rewarded," Drahi, who immigrated to France from Morocco at 15 and later attended the elite Ecole Polytechnique mathematics and engineering school, told journalists at.

"That's the sort of reasoning that won the day, as well as our emphasis on longevity."

Drahi said he never seriously doubted his chances of winning SFR despite the fact that Vivendi had accepted to review a surprise counterbid from Bouygues, a conglomerate which has its own telecoms business, during a two-week period of exclusive negotiations with Numericable.

"I am a big believer in fate," he said. "I was fairly comfortable with this deal, which I'd been preparing for a long time, and I thought that if fate didn't smile at me now it would do in two or three years' time."

Drahi added that he planned to meet Montebourg, who has since been promoted to the role of Economy Minister after a government reshuffle.

Just two weeks ago the odds appeared to be stacked firmly against Drahi.

Xavier Niel, founder of low-cost mobile phone operator Iliad who would benefit if a rival bid from Bouygues succeeded, had criticised Drahi for skirting taxes with his Altice holding company based in Amsterdam and homes in Geneva and Tel Aviv.

Montebourg had spoken out repeatedly in favour of Bouygues to say that offer was better for France because it would cut the number of mobile players from four to three.

But despite the obstacles, Vivendi said on Saturday it had picked Numericable as the better bid in terms of business logic, commitment to preserving jobs, chances of regulatory approval and long-term value.

FRENCH 'CABLE COWBOY'

Working with a handful of lieutenants, who have helped him build an empire of cable and television companies from the Dominican Republic to Belgium, Drahi deliberately kept a low profile. He met with regulators and ministers to explain his plan for SFR, France's second-biggest telecom carrier and employer of 9,000, and ignored the media hubbub.

"Patrick has been working on this project for years," said Numericable executive Jerome Yomtov. "He was very calm."

A person who worked with him for years commended Drahi on the SFR achievement: "This is somebody who is not from the French establishment, who had to have an enormous amount of determination to get where he is now."

Born in Casablanca, Morocco, Drahi moved to southern France at age 15 with his parents who were mathematics teachers. He soon distinguished himself as a science student, and was selected for the military Ecole Polytechnique.

There he rubbed shoulders with old French family scions and donned a military uniform at Bastille Day parades. It was his first exposure to the French establishment whose codes and traditions he eventually learned to master.

His first job was at consumer electronics conglomerate Philips in a lab working on fibre optics, but Drahi soon set out to be an entrepreneur in the nascent cable sector.

With the backing of an American partner, he went from town to town in southern France lobbying mayors to let him dig up their streets to install cable lines to deliver television. He focused on areas left out of France's state cable programme and soon built up a patchwork of networks.

Eventually Drahi sold his company to UPC, a U.S. cable giant owned by his idol billionaire John C. Malone, the so-called "Cable Cowboy" who built up a telecom empire in the early 1970s.

He shrewdly asked to be paid in shares of UPC and went to Geneva to work for UPC, settling there with his wife. They have four children, scattered today in Lausanne, Tel Aviv and Bristol. Drahi gathers them in Geneva each Friday for dinner.

Just before the dotcom bubble burst, Drahi sold his UPC shares for about 40 million euros and left the company.

In 2001 he created Altice, an Amsterdam-based holding company, and started buying up cable companies in France, Belgium, and Luxembourg, slowly gaining critical mass.

Numericable was born at this time, and eventually grew to become France's biggest cable company with a network covering two-thirds of households.

Drahi brought in private equity funds Carlyle and Cinven to help fund Numericable's development. Saddled with high debts, the company was slow to upgrade its network to deliver high-speed broadband and around 2002 faced a torrent of customer complaints for poor service and billing errors.

Once Numericable was back on the rails, Drahi began to hunt for acquisitions in cable outside France. His first buy was a cable company in Israel called HOT. The country soon became a second home for Drahi, who is well-known in business circles and an active philanthropist there. In 2013 he branched into content by founding I24, an international news channel broadcast in English, French and Arabic.

The battle for SFR brought him back to France. He first approached Vivendi about SFR in 2012 but was rebuffed over disagreements about price. He then pursued stock market listings of Numericable and Altice aiming to make another run at SFR.

At home he encountered obstacles he did not face elsewhere. As the pressure mounted in the SFR fight, people close to Drahi acknowledge that the criticism got to him and left him feeling like an outsider.

Bernard Mourad, an investment banker at Morgan Stanley who worked on the Numericable deal, said Drahi told his team to keep their heads down.

"He told us to keep working," said Mourad. "He did not want us to use the methods used by some of our competitors." ($1 = 0.7303 Euros) (Reporting By Nicholas Vinocur; Editing by Andrew Callus and Giles Elgood)

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