Vivendi bought out Telefónica stake in Telecom Italia while dropping shares in SFR and Maroc Telecom
French media giant Vivendi announced on June 25 plans to increase its stake in Telecom Italia to 14.9%, making it the telecommunication company’s largest shareholder.
Vivendi recently purchased some additional shares and also struck a deal with Telefónica, which was previously Telecom Italia’s largest investor.
The move was puzzling to some, considering Vivendi in recent months sold off its stakes in SFR and Maroc Telecom, effectively exiting the telecommunications sector. To some analysts, the Telecom Italia stake increase represented a return to the sector.
However, Deadline.com reports that the main motivation behind the move could simply be the enhanced pipeline distribution it gives the company. Deadline wrote: “Vivendi is now in prime position to move forward more actively with creating a pan-European OTT rival that not only stands up to Netflix. It could well dominate it in certain markets.”
Vivendi also supports Telecom Italia exploring a sale of its Brazilian business, TIM Brasil, according to Bloomberg. A sale of the unit, with a market value of about $8 billion, would let the carrier focus on Italy, where Vivendi is seeking to become stronger.
While the market in Italy may be stabilizing, growth prospects in Brazil are on the decline, reports The Wall Street Journal. At one time, Telecom Italia benefited from being a big player in Brazil, but while Telecom Italia’s domestic revenue dropped 6.6% last year, Brazil revenue dropped 2.1%, on a comparable basis.
Telecom Italia has struggled to record durable growth at home as it deals with a sluggish economy and increased competition. Plus, it has $29.8 billion in debt, although much of it is long-term. Ratings agency Moody’s said the outlook for the company’s creditworthiness is negative.
The Telecom Italia investment is the first in a series of deals by Vivendi Chairman Vincent Bollore to reinforce his company’s presence more broadly in southern Europe, according to Bloomberg.
Boosting its stake in Telecom Italia gives the French company an ally with “extensive broadband and wireless networks and tens of millions of customers,” reported Bloomberg. The company has said it is seeking partners to help distribute its sports programs, TV series and music.
The Telecom Italia investment is an opportunity “to be present and to expand in a market with significant growth prospects and a very strong appetite for quality content,” Vivendi said in an e-mailed statement to Bloomberg. “Vivendi intends to support Telecom Italia over the long term.”
