Viv U must blitz to keep Cegetel control

Conglom in hurry to sell publishing arm

PARIS — A nerve-wracking week is looming for Vivendi Universal chief Jean-Rene Fourtou.

The cash-strapped conglom has just days to outmaneuver the U.K.’s Vodafone or lose control of Cegetel, France’s second biggest phone company.

That puts it in a hurry to sell off its publishing arm, Vivendi Universal Publishing. The sale continues to excite passions in France, with some 20 Gallic publishing houses this weekend urging publishing giant Lagardere to renounce its bid for VUP’s French assets.

To cap it all, on Thursday striking workers will assemble in front of Viv U’s Paris headquarters to protest 152 job cuts — more than half the work force — under a reorganization of its central office.

And yet things had been looking good for Viv U on Wednesday, when the conglom announced it had secured an extension to a $1.6 billion credit line to Vivendi Universal Entertainment. On Thursday, Standard and Poor’s raised its CreditWatch status from “negative” to “developing,” which helped the stock price rise more than 10% in Paris.

Since taking over from ousted Viv U topper Jean-Marie Messier, Fourtou has pledged to slash the conglom’s $19 billion debt by raising $10 billion through asset sales over the next two years.

But Fourtou’s bluff was called Thursday when Vodafone slammed nearly $13 billion on the table to raise its stake in Cegetel from15 to 100% — some $6.1 billion for shareholders British Telecom Group and SBC Communications, and the rest for Viv U. Vivendi has not publicly commented on the offer.

But Vodafone’s move forces the conglom to make a major strategic choice, when it least wants to or can afford to.

Either Viv U must put up enough cash to buy BT’s stake — around $4 billion — thereby assuring its control of Cegetel, or let Vodafone nab the lucrative telecom company from under its nose. This year, Cegetel’s money-spinning mobile service, SFR, is expected to post earnings of $2 billion.

Late last week it appeared that Fourtou was having difficulty persuading creditors to lend the conglom the billions needed to safely see off Vodafone.

The banks would like to see some money coming in — i.e., the sale of VUP — before Fourtou starts spending.

Investors feel the same. Rumors that the conglom was going to fork out billions to retain control of Cegetel sent the share price down by as much as 6% Friday.

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