(The following statement was released by the rating agency)
LONDON, March 07 (Fitch) Vivendi's credit profile is likely to
benefit more from
a merger of its telecoms business by accepting one of two
competing bids than it
would from spinning off the unit as planned, Fitch Rating says.
Bouygues SA this week offered EUR10.5bn in cash to merge its
unit with Vivendi's SFR, France's second-largest mobile
operator. Altice SA made
a competing EUR11bn cash bid to merge Numericable, the French
operator, with SFR. In both offers, Vivendi would also end up
with a significant
minority stake in the new merged entity.
For incumbent Orange, a merger between SFR and Bouygues Telecom
would be better
than a SFR-Numericable tie-up. Orange's French mobile business
down 10.3%) has been hit by intensive price competition over the
last 18 months.
A reduction of mobile operators to three from four could reduce
intensity, not just in mobile but also in France's fixed market.
Considerable uncertainty surrounds both proposals. A merger
between SFR and
Bouygues Telecom would attract greater regulatory scrutiny as
competition could lead to higher prices for consumers. From an
perspective, the SFR-Numericable tie-up should be less
Numericable does not operate a mobile network. In either case,
we believe it
could take nine to 12 months for regulators to approve a deal.
Minister Arnaud Montebourg has been reported as saying that the
closely scrutinise the impact of the bids on employment and
The prospective mergers in France come as the European
completion of its review of mobile consolidation in Germany and
Ireland. As the
two potential SFR transactions involve French companies, the
not have jurisdiction over them, leaving them to the French
Vivendi is already expected to have a strong balance sheet after
the sale of its
stake in Maroc Telecom, which we expect will be completed in the
months. It ended 2013 with a pro-forma net debt/EBITDA of around
Without SFR, Vivendi's leverage threshold to maintain its 'BBB'
likely be lower than the current 2.5x net debt/EBITDA. In
companies are better suited to sustaining higher leverage than
at the same rating level. Even without selling SFR, Vivendi
would still have
headroom at the 'BBB' rating level to pursue investment strategy
focused on its
Damien Chew, CFA
+44 20 3530 1424
Fitch Ratings Ltd
30 North Colonnade
London E14 5GN
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