Vivendi to sell Maroc Tel stake to Etisalat for 4.2 billion euros

By Matt Smith

DUBAI (Reuters) - Vivendi has agreed terms to sell its 53 percent stake in Maroc Telecom to the UAE's Etisalat for 4.2 billion euros (3.5 billion pounds), the latest step in the French conglomerate's drive to become more media focused.

Looking to pay down its debts and revive its shares, Vivendi is selling assets such as Maroc Telecom and video games maker Activision Blizzard to concentrate on music and pay-TV businesses that it believes have greater growth potential.

The deal for Maroc Telecom marks a return to acquisitions for Etisalat following a pause to digest some problematic purchases, and gives it a market-leading operator in Morocco as part of a drive to diversify from its home country.

The transaction, which Vivendi said would likely be concluded in early 2014, will see Etisalat pay Vivendi 3.9 billion euros for the stake, plus a further 300 million euros in 2012 dividends from Maroc Telecom, according to separate statements from the buyer and seller on Tuesday.

The sale is subject to various regulatory approvals, with Maroc Telecom also having operations in Burkina Faso, Gabon, Mali and Mauritania, and follows protracted negotiations following Etisalat's initial bid in January. Qatar's Ooredoo withdrew its offer in June.

Morocco's government owns 30 percent of Maroc Telecom, with the remaining 17 percent publicly traded.

"It's coherent with what Vivendi is trying to do with the structure of the group, selling subsidiaries that are inefficiently structured and which take out cash through dividends," said Conor O'Shea, head of media sector research at Kepler Capital Markets in Paris.

"Vivendi is selling a business that is ex-growth and has declining margins with a shareholder set-up that is quite complicated. I would say this was a good sale rather than a good purchase."

Vivendi's next move could be to float struggling domestic telecom unit SFR, having hired banks to prepare a stock market listing, sources told Reuters in October.

ETISALAT EXPANSION

The Maroc deal will be Etisalat's first big purchase this decade after spending about $12.6 billion on foreign acquisitions from 2004 to 2009 that added little to its profits.

The United Arab Emirates' former monopoly already has operations in 15 countries in the Middle East, Asia and Africa, although its home market remains by far the most important, accounting for 65 percent of third-quarter revenue.

Analysts say Etisalat has made a poor return on many of its foreign units because it overpaid in some cases or often bought new licences - or minority stakes in small players - in crowded markets such as India.

The company has changed most of its senior management in recent years, recruiting foreign heads of marketing, finance and strategy, and the Maroc deal - taking control of a market-leading operator within the Arabic-speaking world - suggests it has learned from earlier mistakes.

"The deal does make sense in that it tallies with Etisalat's goal of diversifying away from the UAE, while Maroc Telecom also is a good fit geographically," said Matthew Reed, principal analyst at Informa Telecoms and Media in Dubai.

"There seems to be a plan for Maroc to be the managing unit for all of Etisalat's sub-Saharan units, the idea being that Maroc has done pretty well in that region," he said, referring to Etisalat's operations in Ivory Coast, Benin, Togo, Gabon, Niger and the Central African Republic.

Yet doubts remain over the wisdom of buying into Morocco, one of Africa's most developed telecom markets with 120 percent mobile penetration, three fixed-line and mobile providers and some of the lowest broadband prices on the continent, according to consultants BuddeCom.

Maroc Telecom posted a 4.7 percent drop in consolidated revenue for the nine months to September 30 to 21.47 billion dinars, while its domestic income fell 8.4 percent amid a double-digit drop in its domestic average revenue per user (ARPU), a key industry metric.

"Its business in Morocco seems to be in decline due to fierce competition, while for an emerging market it's also pretty mature, which means there's less growth potential for the sector," added Informa's Reed.

Vivendi's shares were down 0.3 percent at 0945 GMT, while Etisalat's were up 0.4 percent.

(Editing by Dinesh Nair and Mark Potter)