SFR has confirmed being in discussion with mobile subsidiary SFR and Louis Dreyfus group to buy the latter’s 29.5 percent of Neuf Cegetel. Dreyfus will sell the stake for about EUR 5 billion, at around EUR 40 per share for a stock it bought at EUR 22 in October 2006. Les Echos writes that Vivendi seeks competition authority approval to continue to operate its Canal Plus TV and Neuf’s ADSL TV services. Canal Plus, which is 65 percent owned by Vivendi, has 10.4 million subscribers, versus Neuf’s 600,000 ADSL TV users. Vivendi said that it would not sell off Canal Plus and would rather stay at 40.6 percent of Neuf.

SFR’s acquisition of Neuf Cegetel, which would be followed by a public purchase offer, would merge 56 percent Vivendi owned mobile phone operator SFR and Neuf Cegetel, thus creating a giant to challenge France Telecom/Orange. An earlier attempt by Neuf to merge and share the major investment challenge of fibre network deployment with its ISP rival Free got nowhere, so it chose the SFR option. SFR is Neuf’s biggest customers, generating 10 percent of turnover in 2006. Neuf carries SFR’s voice and ADSL traffic. The two companies invest jointly in WiMAX and fibre. SFR and Neuf are also competitors. Neuf has launched an MVNO on SFR, which had 200,000 subscribers in the second quarter. SFR also bought the fixed and internet operations of Tele2 France and now sells its own SFR Box home gateway.

Analysts see Neuf’s merger with SFR as necessary. The merger would give SFR a chance to better compete against Orange, already well entrenched in fixed and mobile. Mobile network operator Bouygues Telecom also intends to enter ADSL.The merger would also allow SFR-Neuf to make the massive investment necessary to deploy a French fibre network to rival Orange’s.

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