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Vivendi's SFR telecom unit to cut 856 jobs

By Leila Abboud and Gwénaëlle Barzic

PARIS (Reuters) - Vivendi's SFR telecom unit plans to cut 856 jobs via a voluntary departure plan, it said on Wednesday, as it restructures to cope with tougher competition in France.

Unions swiftly condemned the move as unacceptable given the more than 3 billion euros ($3.88 billion) in profit that SFR should generate this year, and voiced fears that the cuts were a step towards a sale of France's second-biggest mobile operator.

Vivendi is seeking buyers for its telecoms operations in Morocco and Brazil as part of a strategic overhaul the media-to-telecoms conglomerate hopes will cut debt and revive its flagging share price.

Led by longtime Chairman Jean-Rene Fourtou, Vivendi has since the summer been exploring ways to reduce its exposure to investment-heavy telecoms and focus more on its music and pay-TV businesses.

SFR, long Vivendi's cash cow, has been hit by the arrival of a new low-cost mobile player Iliad, triggering a price war in France. Speculation has swirled around Vivendi's plans for SFR, with French media reports suggesting talks were underway on a tie-up with local cable operator Numericable or a sale to Iliad.

TOUGHER MARKET

Stephane Roussel, SFR's chief executive, acknowledged in an interview that interested parties had approached Vivendi about SFR, but said the group was not out searching for a buyer.

"Although there is a broader reflection on telecoms going on in Vivendi, there is no active initiative on Vivendi's part consisting of going to market to find a buyer for SFR," he said.

"SFR is not for sale. That said, it doesn't mean that nothing will happen. There are potential buyers who are coming to test the waters."

In the meantime, SFR is revamping its fixed and mobile offers and streamlining its organization in an effort to adjust to the tougher market in France.

SFR will cut 1,123 jobs and create another 267 such as on-line sales staff and web community managers.

The newcomer Free Mobile had taken 6.4 percent of the mobile market by the end of the third quarter.

Bouygues Telecom also plans to cut 556 jobs to cope with the fallout from Free Mobile, while market leader France Telecom is counting on retirements to slowly pare the size of its workforce in the coming years.

Shares in Vivendi were 0.5 percent higher at 16.40 euros by 11:29 a.m. EDT, in line with France's blue-chip CAC 40 index. The stock is little changed since the start of the year.

Vivendi's chief financial officer recently promised action on the strategic review in the "coming quarters".

SFR unions said workers were being made the victims of the executives' plans.

"Vivendi has already announced to its worker representatives that its telecom units were no longer seen as a growth engine and that the group was looking for buyers," five unions wrote in a joint statement on Wednesday.

"Vivendi is sacrificing its workers on the altar of profits to make SFR more attractive and sell it for a higher price."

(Editing by James Regan and Helen Massy-Beresford)

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