Neuf Cegetel prepares ground for €3bn IPO

Neuf Cegetel is preparing to launch one of the largest initial public offerings in Europe this year in a flotation expected to value the French telecoms group at about €3bn ($3.6bn), including debt.

The group, created last year from the merger of Neuf Telecom and Vivendi Universal’s Cegetel, is conducting a beauty parade of investment bankers to handle the flotation.

The group is due to make a decision next month. Goldman Sachs, BNP Paribas and Credit Suisse First Boston all have stakes in Neuf Cegetel and will be among the favourites to underwrite the IPO, which is slated for the second half of the year and provisionally for September.

Neuf Cegetel is 28 per cent owned by Louis Dreyfus, the family-owned conglomerate, with a similar-sized stake to SFR, which is in turn controlled by Vivendi.

Other shareholders include Suez, Belgacom, Telecom Italia and a clutch of private equity groups including the buy-out units of Credit Suisse, Goldman Sachs and Wendel Investissement of France.

The capital structure could yet change. Belgacom, the Belgian incumbent operator that has a 6 per cent stake in Neuf Cegetel, said last month it was interested in the possibility of buying the whole group, but recognised that leading shareholders seemed determined to proceed with an IPO.

Meanwhile, Jean-Bernard Levy, Vivendi’s chief executive, told La Tribune newspaper that he wanted to increase SFR’s stake in Neuf Cegetel if shares became available. “It is important for SFR, on the strategic and commercial level, to have a strong partner in fixed telephony,” he said.

Neuf Cegetel generates sales of about €3bn and competes in fixed-line telephone and internet services. Along with rival Iliad, Neuf Cegetel has been successful in luring residential customers from France Telecom with its bundled services.

The competitive climate this week contributed to the incumbent announcing 17,000 job cuts.

Most Neuf Cegetel revenue though comes from selling network access to third-party telecoms operators and supplying telecoms services to companies. A plan of voluntary redundancies for 600 staff was introduced in December and is under way.

One reason for not proceeding with an immediate IPO amid favourable market conditions is a desire to finish the restructuring following the merger and produce results satisfactory enough to act as a foundation for marketing Neuf Cegetel to potential investors.

The IPO plan comes in what is expected to be a strong year for large French flotations, with the part-privatisation of Aéroports de Paris and the return to the stock market of Legrand, the electrical equipment group.