25 Sep 2009

Vivendi's high growth markets strategy and the changes of investors in emerging markets

A couple of weeks ago, French group Vivendi announced a deal with Brazilian broadband operator GVT. The agreement, which is still being finalised, will give Vivendi a 51% stake in the Brazilian company, allowing it to bring the growing operator its expertise of new markets such as IPTV services. According to Jean-Bernard Lévy - Vivendi's chairman - it fits the group's strategy of development in high growth markets.
It's interesting to see Brazil come back to the spotlight as a highly investable market, after a few years when Latin America was not among the top markets with major potential. But I wonder about Vivendi's position regarding Africa. A few weeks ago, the group was the main contender for Zain's African operations, but moved away from the opportunity. Vivendi still owns a majority stake in Maroc Telecom, a major investor in North and West Africa, but will it now focus more on other regions as the next growth opportunity?
In a recent article, my colleague Matt Reed asked whether Africa was losing its appeal for some investors: "Falling ARPUs, rising competition and the recession have certainly forced investors to reappraise African markets, and some have decided that it is time to head for the exit", he says. But despite those challenges it remains an attractive market: "there is still potential in Africa for the realistic investor. Mobile penetration in Africa was just 40.62% at end-June. The arrival of new undersea cables on the coasts of sub-Saharan Africa could foster the emergence of a new generation of data services. And operators in India, for example, manage to run profitable businesses despite very low ARPUs" he adds.
Instead of a sudden lack of interest in Africa's telecommunications market, we may witness a change of the main stakeholders involved in the market: as Zain, but also Telefonica and Portugal Telecom are moving away from the continent (the Spanish and Portugese groups recently sold their stakes in Morocco's Meditel), other groups are moving in or growing their investment portfolios: Indian operators Bharti, Essar and Reliance, French group France Telecom, and Egypt-based Orascom are all making moves in the region.
2009 has been so far a busy year in M&A news in emerging markets, and it looks like it's set to continue.