Vivendi casts huge Euro ‘Net

Deal hangs on Mannesmann bid

PARIS — Europe’s largest mobile telephone company, Vodafone AirTouch, will partner with French giant Vivendi in an attempt to become the dominant player in the European Internet market.

British-based Vodafone and Vivendi, which holds 49% of pay television giant Canal Plus and 25% of BSkyB, have signed a letter of intent designed to see the creation of a new company, currently code-named MAP (Multi Access Portal), which will be up and running by late June.

The new company will provide subscribers with seamless access to the ‘Net, allowing people to get online via their mobile phones, television or personal computers. Initial estimates are that the partnership will have immediate access to 70 million subscribers, including Canal Plus’ portfolio of 14 million pay TV subs across Europe.

For the deal to go through, however, Vodafone must be successful in its hostile bid for German telephone group Mannesmann. The deadline for Mannesmann’s shareholders to decide whether to accept Vodafone’s advances is Feb. 7. If Vodafone fails, the alliance with Vivendi will not go ahead.

Mannesmann has been desperately courting Vivendi to try to help it block Vodafone. With that possibility now a no-hoper, observers say that Mannesmann shareholders are likely to accept the offer from the British heavyweight.

Echoes of AOL deal

Although both Vivendi chairman Jean-Marie Messier and Vodafone chief exec Chris Gent stressed that their groups are not merging, there are similarities between the alliance and the recent merger of Time Warner and AOL.

A source involved in the negotiations noted, ”The American deal was the marriage of Internet access to content. Vodafone and Vivendi have a massive subscriber base, and Vivendi brings a wad of content, either from Canal Plus or through the publishing interests of (Vivendi-controlled) Havas.”

Messier and Gent’s dream is that in the near future, subscribers will run into one home page — that of the new joint company — however they choose to access the Internet.

Neither Messier nor Gent would reveal financial details of their partnership, although Gent said the new company would likely be the subject of an eventual IPO. Messier said that he thought the company will be worth ”double-digit billions of dollars very soon.”

On the revenue front, the two sides have agreed that ”the gross margin generated by the Web-based services delivered through the Multi Access Portal will be split equally between the new company and the relevant access provider.”

The new company is also expected to be an 80% investor in what it described as a ”new early-stage wireless Internet fund” alongside SoftBank. That fund will be capitalized at $100 million-$150 million.

Mobility move

Speaking in Paris on Sunday, Gent commented, ”This deal will allow us to accelerate our Internet strategy significantly. The real (‘Net) explosion is when access to the Internet via mobile phones takes off, which is why mobile phones are so important.”

Vivendi already has its mobile phone subsid, SFR, which has some 7.7 million French subscribers. If it gets hold of Mannesmann, Vodafone will have 48 million subs worldwide. Vivendi also estimates that by 2001 its Web sites will see 500 million page visits per month.

”We are taking the best of television, the best of mobile telephony, putting it together to be the best in Europe in the Internet age,” Messier said.

On a purely operational front, Vodafone and Vivendi will both nominate senior execs to the new company, with the British appointing the CEO and the French the chief financial officer. Chairmanship of the company will be rotated every two years with Vivendi getting the first stab at the job.

One casualty of the Vodafone/Vivendi partnership could be AOL France. Vivendi and Canal Plus are majority shareholders in the company, but Jean-Marie Messier has been frustrated with its performance and by the fact that it covers only the French territory. Now he says Vivendi will rapidly review its relationship with AOL.

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