Bloomberg News

Vivendi’s SFR Cuts Ad Spending Amid Strategy Review

March 29, 2012

An advertising poster for SFR is seen at a metro station in Paris. Photographer: Balint Porneczi/Bloomberg

An advertising poster for SFR is seen at a metro station in Paris. Photographer: Balint Porneczi/Bloomberg

Vivendi SA (VIV) CEO Jean-Bernard Levy will cut ad spending at the SFR mobile-phone unit and slow store openings while he develops a new strategy for the business, according to a presentation to unions.

Levy met SFR workers representatives yesterday as the company briefed them about the business plan review, according to documents obtained by Bloomberg News. SFR has until June 6 to meet the unions again and present the results. SFR is halting more than 100 projects until a new strategy has been determined, according to the document.

Levy may also publicly unveil the plans before the end of June, according to two people familiar with the matter. SFR spokesman Nicolas Chatin declined to comment.

Vivendi, which took over the SFR venture from Vodafone Group Plc (VOD) for almost 8 billion euros ($10.6 billion) last year, began an examination of the wireless division last month as the mobile-phone division is losing customers to French discounter Iliad SA. (ILD) Paris-based Vivendi said this week that Levy will head SFR after Frank Esser, the unit’s chief of more than 11 years, stepped down.

SFR will adapt its structure, capital expenditure and operational costs to market conditions, Levy has said. The company has also frozen hirings and research at SFR.

Vivendi declined as much as 1.5 percent to 13.61 euros in Paris trading and was down 1.1 percent as of 4:21 p.m.

Shrinking Value

Vivendi’s market capitalization has shrunk by more than 30 percent since it agreed in April last year to buy Vodafonee’s 44 percent stake in SFR. At 17.2 billion euros, Vivendi, which also owns the world’s biggest music and video-game companies, is worth less than the 18 billion euros it valued the SFR unit alone a year ago.

Levy takes on the additional role as Vivendi pledges to take a break from making any big acquisitions to focus on reducing debt. His predecessor, Jean-Marie Messier, went on a $77 billion acquisition binge to transform a water utility into a global media giant. Since taking over, Levy has dismantled Messier’s empire and expanded in new directions, making selective purchases, including Brazilian phone company GVT Holding (GVTT3) SA in 2009, to drive growth.

SFR lost 208,000 subscribers as of March 1, less than two months after competitor Iliad, founded by French entrepreneur Xavier Niel, started selling mobile-phone packages at a discounted price. Iliad has captured as many as 2 million French mobile customers according to regulator Arcep.

The new competition has prompted Vivendi to forecast an earnings slump until 2013. The company said it will have to adjust its costs structure to offset a projected decline in earnings before interest, taxes, depreciation and amortization of as much as 570 million euros at SFR in 2012.

To contact the reporter on this story: Marie Mawad in Paris at mmawad1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


American Apparel's Future
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus