Vodafone talks to buy out Vizzavi

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LONDON, England (Reuters) -- Vodafone Group said on Monday it was discussing a possible buyout of Internet portal Vizzavi from its French ally Vivendi Universal, a move that would free the indebted media firm from a venture it had soured on long ago.

The much-touted move, which comes as Vivendi, the world's second-largest media company struggles to stave off a cash crisis, could breathe fresh life into an Internet portal designed for mobile phones and personal and handheld computers, which some analysts dismissed as worthless.

"These discussions may lead to an offer by Vodafone to acquire all or a part of Vivendi's shareholding in Vizzavi," the groups said in a joint statement released in London and Paris.

At 1452 GMT, shares in Vodafone, Europe's largest mobile phone operator, were trading up nearly six percent at 1.06 pounds ($1.63).

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For Vivendi, the news packed a symbolic punch, improving already impressive share gains in Paris. At 1452 GMT, its shares soared above 20 percent to 11.20 euros ($11.02).

Vodafone and Vivendi have invested more than one billion euros in Vizzavi since they set it up in 2000.

But heavily indebted Vivendi announced last week it was freezing all further investments in the business as it launches one of the most radical restructuring plans in European media history.

A sell-off is not expected to net Vivendi much. Analysts suggested a price tag for the 50 percent stake in Vizzavi would fetch no more than 150 million euros. That would be a small part of the 10 billion euros the company seeks to raise over the next two years through the sale of a variety of media assets.

Vizzavi is seen as more valuable to Vodafone ahead of its launch of a new range of mobile Internet services. Under a two-year management rotation policy, the cellphone giant already is set to take the helm around September in a move likely to help boost Vizzavi's position in a languishing market.

Vizzavi, which has 6.5 million subscribers, is facing tough competition from the likes of well-financed rivals such as BT Group Plc's Genie and T-Motion, owned by Deutsche Telekom subsidiaries T-Mobile and T-Online.

Despite attracting millions of customers and establishing one of the better known brand names in the nascent sector, Vizzavi became synonymous with the shortcomings of Wireless Application Protocol, or WAP, the clunky technology it used to beam text-based news and other content to mobile phone users.

The two companies continued to invest heavily in the venture even as it became clear that it couldn't live up to the early predictions that it would be like having an Internet connection on a mobile phone.

Even though Vodafone shares rose on news of a possible takeover, some analysts still questioned the wisdom of such a move.

"The investment so far is not a good enough reason to keep it going as it is," one technology analyst said of Vodafone's apparent willingness to assume full control of the venture.

Vizzavi was the cornerstone of ousted Vivendi CEO Jean-Marie Messier's vision of building an entertainment empire to rival AOL Time Warner, beaming movies, music, email and other services via mobile phones, personal computers, PDAs and eventually digital TV.

But after the Internet bubble popped, investors grew increasingly sceptical about the long-term viability of the multi-access portal, which has a name meaning "face-to-face." Indeed, many were soon predicting it would fall on its face.

Nevertheless, Messier pinned Vivendi's strategy on the venture and even last year remained committed to a separate listing by the end of 2003. People close to Vizzavi always said Messier was more enthusiastic about the venture than Vodafone's Sir Christopher Gent.

Vizzavi made a 386 million euro loss last year, effectively wiping out the profits of Universal Pictures in one of its best years ever.