Vivendi, Vodafone Net Pact Hinges on Mannesmann

MUNICH (01/31/2000) - Vodafone AirTouch PLC and French conglomerate Vivendi SA over the weekend announced an alliance that they promise will create one of Europe's key Internet businesses. The largely provisional agreement, however, hinges on the success of Vodafone AirTouch's bid for German conglomerate Mannesmann AG.

Vivendi and Vodafone AirTouch have signed a letter of intent to form an Internet company in which each will own 50 percent, according to a joint statement issued yesterday.

The venture's goal is to establish a portal for the European markets that will give users access to content via a variety of devices, such as television, PCs, mobile phones, fixed-line phones as well as from Internet appliances, the companies said. The portal will give customers access to content and services from Vivendi companies, including pay-television channel Canal+, in which Vivendi owns a majority stake, and Havas, a publisher of text books as well as educational, entertainment and "how-to" software.

The agreement also calls for Vivendi and Vodafone to explore expanding their mobile operations, and to consider developing a pan-European fixed-line network that would combine assets from Vivendi and Mannesmann.

Lastly, the companies said their Internet venture will take an 80 percent share in an early stage wireless Internet fund to be established with Japan's Softbank Corp.

Reading the fine print suggests that the Vivendi-Vodafone deal makes little sense overall if the U.K. mobile carrier's bid for Mannesmann fails. Vivendi and Vodafone's letter of intent calls for them to sign a more detailed contract by June 30, 2000. This will only happen, however, if Vodafone acquires more than 50 percent of Mannesmann, the companies said.

Vodafone announced its offer for the German conglomerate in October, but has not yet convinced Mannesmann Chairman Klaus Esser that the deal is in his company's interest. [See "Mannesmann Fights Vodafone Takeover," Nov. 29,1999.] Mannesmann has reportedly also talked to Vivendi in an attempt to ward off Vodafone's hostile takeover attempt.

Vodafone also promised to sell to Vivendi for "fair value in cash" a further 7.5 percent stake in Cegetel SA, the French mobile and fixed-line telecommunication operator. It can only do that it if acquires Mannesmann, however. The German conglomerate owns 15 percent of Cegetel, and Vivendi already holds a 44 percent stake in the French carrier. With the addition of the 7.5 percent stake offered by Vodafone, Vivendi would become the majority owner in Cegetel.

Cegetel, in turn, owns 80 percent of Societe Francaise du Radiophone (SFR), France's second largest mobile phone carrier. Vodafone AirTouch owns the remainder of SFR.

Finally, Vodafone AirTouch has agreed not to acquire interests in Vivendi without its approval for the next three years. Exceptions to that agreement include if the Mannesmann bid fails, or if a third party bids for or acquires more than 15 percent of Vivendi.

Vodafone AirTouch, in Newbury, England, can be reached via the Web at http://www.vodafone-airtouch-plc.com/. Vivendi, in Paris, is at +33-1-71-71-10-00, or at http://finance.vivendi.com/.Mannesmann, in Düsseldorf, is at +49-211-820-0, or at http://www.mannesmann.de/.

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