Vodafone Group Chief Executive Chris Gent cast fresh doubt on Thursday about whether French media group Vivendi would sell its stake in Cegetel in the current depressed telecoms market. Sources said last week that Vivendi Universal and Europe’s largest mobile phone operator had held friendly talks about Vodafone buying the rest of Cegetel, which controls 80 percent of French mobile phone operator SFR.

Insight

It’s widely acknowledged that the most sensible home for SFR is with Vodafone. The British operator will gain control of an attractive market position and Vivendi will receive a cash injection to lift it from the mire of its current liquidity crisis. However, the arcane machinations of French boardroom culture may yet conspire to defy a logical outcome.

Vodafone enjoys a better reputation with investors than most network operators because of its comparitively strong balance sheet. Chris Gent knows that it would be foolish to risk losing this support by squandering resources on filling a gap in its pan-European portfolio. An acquisition makes good strategic sense, but not, as Vodafone says, ‘at any price’.

There is a degree of gamesmanship afoot here. Vivendi is playing its cards close to its chest, making public statements that it is still reviewing which assets it is planning to sell. The idea is to drive up the potential price it can extract from potential acquisitors when it finally does decide where it wants to place the for sale signs. In turn, Gent is playing down the importance of controlling SFR, in part to reassure investors he is not planning a spending spree and in part to damp any hopes of a hefty premium if Vivendi does sell.