France's second largest network operator SFR has notified Neuf Cegetel, in which SFR already holds a 40 per cent stake, of its intention to buy up a controlling interest in the company. This will take the form of another 30 per cent, currently owned by the Louis Dreyfus group.

SRF is owned by Vodafone and Vivendi, with the French media and telecoms company having a controlling (56 per cent) interest, so the acquisition will give Vivendi access to Neuf Cegetel's infrastructure. SFR is already using that to provide backbone connectivity and fixed internet services.

The combined company presents a proper, converged challenge to France Telecom's dominance by offering fixed and mobile telephony, as well as internet access.

Neuf Cegetel currently offers mobile services using SFR's infrastructure, so the companies are already working very closely together.

The deal, which is worth around €5bn, will be financed by debt in SFR and a couple of million euros to be raised by Vivendi when market conditions are right.

They will also need regulatory approval, but given the close relationship between the two companies that's unlikely to be problematic. ®

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