French media and utilities company Vivendi and the world's biggest mobile phone group, Vodafone AirTouch, yesterday announced a joint venture to become Europe's top Internet business - but only if Vodafone succeeds in a hostile bid for Germany's Mannesmann group.
In a media conference held in Paris, Vivendi chief executive Mr Jean-Marie Messier and his Vodafone counterpart, Mr Chris Gent, said the creation of the 50-50 company would provide highspeed Internet access via television, personal computers, mobile and fixed handsets and personal data appliances.
"We are building here the leading Internet age company in Europe," Mr Messier said.
He said the venture would become "a benchmark brand" by being made default homepage on Vivendi/Vodafone products - a key move to tap into the exploding e-commerce market.
Mr Messier said pooling subscribers to Vivendi's Canal Plus pay-TV network and SFR mobile phone company with Vodafone's subscribers would give the venture 70 million clients immediately, and as many as 100 million in the near future. "This portal will make us stronger than the US [site] Yahoo! in the world," he added.
"Data and Internet services are the biggest growth opportunities of this decade," Mr Gent said, adding that the deal would cut three years off the two companies' Internet strategies to "allow us to accelerate past our competitors".
Neither wished to reveal the name of the new company, which will be introduced soon and listed on the stock market.
Mr Messier said the company would be "rapidly" worth more than €10 billion (£7.9 billion).
But the French chief executive stressed the venture was "an alliance, not a merger", and the two men said that while a letter of intent had been signed, the venture was contingent on Vodafone acquiring more than 50 per cent of mobile phone and industrial group Mannesmann.
That offer, the largest hostile bid ever, values Mannesmann at more than €150 billion. It expires on February 7th.
Mr Klaus Esser, Mannesmann's executive chairman, said yesterday the alliance would carry "risks" for his company and its shareholders.
Mannesmann shareholders should "continue to do nothing if they want to reject Vodafone's insufficient offer and thus escape the rising risks associated with each announcement" from the British group, said Mr Esser.
Both Vodafone and Mannesmann had courted Vivendi over the takeover battle - Vodafone to convince Mannesmann shareholders they would be joining a cutting-edge group with international ambitions, and Mannesmann to help fend off the bid.
Now Vivendi has chosen which side it is on, Mannesmann's hopes of staying out of Vodafone's grasp appear severely reduced.
Mr Messier said: "I think Vodafone is going to win its Mannesmann offer."
The alliance will have other consequences as well. Vodafone already has a 20 per cent stake in Cegetel, Vivendi's telecoms arm, while Mannesmann has 15 per cent.
Mr Messier said Vodafone would sell part of its enlarged stake if it took over Mannesmann and that Vivendi would increase its stake by 7.5 per cent.
