Fourtou Says All Options Open for Vivendi Media Properties

As Vivendi Universal moved ahead with widely anticipated plans to transform itself essentially into a French telecom company, Chief Executive Jean-Rene Fourtou said all options were open on the fate of the U.S. entertainment group.

Fourtou did not spell out those alternatives during a news conference Tuesday in Paris, but sources close to the executive say they include an outright sale to any number of investors, including oil billionaire Marvin Davis, who put the assets in play with a recent offer to buy a controlling stake for $13 billion.

Although Vivendi rebuffed the initial offer, saying its assets were not for sale, the two sides are expected to meet again next month.

“So far, I’ve resigned myself to follow Barry Diller’s entertainment strategy,” Fourtou said, referring to the co-CEO of the U.S. entertainment group.

Diller has been working for months on a plan that would spin off Universal’s movie studio, theme parks and record labels, as well as the USA cable network and Sci-Fi Channel, into a separately traded company.

“Barry has always dreamed of creating a strong media company under the Universal brand,” Fourtou said. “But I allow myself to consider all alternatives.”

The comment left some wondering whether there was a rift between Fourtou and Diller, with whom Fourtou has consulted closely since taking over this summer. But company sources say Fourtou remains friendly with Diller and is merely trying to stress his independence from the media mogul. The two are co-chiefs of the U.S. entertainment unit.

Diller has shrouded his plans for the U.S. assets in secrecy and holds much sway over their future because of a series of restrictions he negotiated when he sold USA’s film and cable businesses to Vivendi this year for $11 billion. Vivendi is trying to renegotiate those restrictions to give it the flexibility to sell the businesses.

“Fourtou is telegraphing that ‘I’m still the CEO here and we’re going to make the decision,’ ” said a source close to the company. “He’s saying, ‘I’ll consider all of Barry’s expertise, but the board has not made up its mind on what to do with entertainment assets.’ ”

That’s been a burning question for investors in the wake of the Davis offer and Vivendi’s moves to become a major player in the telecom business.

On Tuesday, Vivendi said it had reached agreement to pay $4 billion to buy BT Group’s 26% share of Cegetel, bringing Vivendi’s stake in the company it founded in the 1990s to 70%.

Vivendi wants to control Cegetel, which operates the lucrative mobile-phone company SFR, because it is a big moneymaker, contributing one-third of Vivendi’s operating profit in the third quarter.

The deal effectively ends a much-publicized bidding war Vivendi had waged with Britain’s Vodafone, which will end up with 30% of the telecom business.

Cegetel marks Fourtou’s first major deal since he took the helm last summer from Jean-Marie Messier.

The deal has caused some observers to question Fourtou’s long-term strategy. He said as early as September that Vivendi would remain primarily an entertainment and media company. But it is looking increasingly likely that its focus will be on telecom, with a possible investment stake in entertainment.

“It doesn’t make us happy,” said Michael Nathanson, an analyst with Sanford C. Bernstein & Co. “We wanted them to sell the Cegetel stake. It would be a clearer story to be a media company only. Now you have these two disparate parts of the company: telecom and media. It’s still not very clear to me what the strategy is.”

Paul Kim, an analyst with Kaufman Bros., expressed support for the deal, saying that “it makes perfect sense to go after assets that you think could be worth a lot more later on.”