It wasn't long ago that Vivendi Universal was on its way to transforming itself into a glitzy media-and-entertainment conglomerate that controls a Hollywood studio, theme parks and the world's largest music company.
Now, its future may lie with a less glamorous product: the telephone.
Vivendi on Tuesday gave the clearest signal yet that it may seek to become a bigger player in the telecommunications business when executives announced that the company has lined up $1.3 billion in financing as it considers expanding its stake in Cegetel, which owns lucrative French mobile phone company SFR.
The reason for Vivendi's apparently growing interest in telecom is clear: Cegetel, which has 16 million subscribers, has been a cash cow for Vivendi. That was underscored Tuesday when Vivendi reported that Cegetel's operating income grew 64% to $456 million in the third quarter, accounting for one-third of Vivendi's operating profit.
In contrast, Vivendi Universal Entertainment saw its operating income fall 30% to $220 million in the third quarter, reflecting a thinner slate of movies, declines in theme park attendance and weakness at the USA cable network. Universal Music Group's operating income dropped 89% to $15.8 million, which the company mostly blamed on higher recording and artists' costs.
The maneuvering for possible control of Cegetel comes as new Vivendi Chief Executive Jean-Rene Fourtou seeks to define a new future for his beleaguered company.
As recently as September, he vowed that Vivendi would remain an entertainment and media company with a sizable stake in telecom. But some analysts question whether Vivendi might in fact seek to restructure itself as primarily a telecom business that maintains a stake in entertainment and media.
Although Fourtou has until Dec. 10 to indicate whether he'll go forward with the Cegetel purchase, "it would seem like Vivendi is going to end up being a telecom company," said New York money manager Dennis Leibowitz.
One thing is certain, some say: Fourtou no longer has the luxury of rebuffing bids for the U.S. entertainment group such as the $13-billion offer made recently by Los Angeles mogul Marvin Davis.
"It definitely puts more pressure on Fourtou and raises the possibility of an outright sale," said Paul Kim, an analyst with Kaufman Bros.
