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Jean-Bernard Levy, chairman and CEO of Vivendi, gives a news conference on Oct. 24, 2006 in New York.


The reign of Vivendi SA chief executive officer Jean-Bernard Levy ended on Thursday in a strategy dispute with the French telecoms and media conglomerate's supervisory board, paving the way for possible disposals to shake up its flagging share price.

Vivendi, whose shares are at nine-year lows, has been reviewing its conglomerate structure and seeking ideas on how to reverse the stock slump, while its SFR telecom business has been hammered by fresh competition in the French mobile market since January.

"It's not Jean-Bernard's record, it's not the situation at Vivendi, it's not even the situation at SFR that's the problem, it's the future of the group," one person familiar with the matter said, speaking on condition of anonymity.

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Mr. Levy's departure followed a supervisory board meeting on Thursday and a two-day meeting of top management last weekend at which the group's strategy was in focus.

Vivendi cited "a divergence of views on the strategic development of the group" for Mr. Levy's resignation.

Another source familiar with the matter said Mr. Levy had been fighting to keep the group together. "As soon as you believed that Vivendi would even do one thing, even the smallest one like selling one asset, then he cannot be the one doing that," the second source said.

Vivendi has mature telecoms businesses in France and Morocco generating nearly 60 per cent of operating profits, while growth is coming from Brazilian telecom GVT and video games maker Activision Blizzard, plus smaller pay-TV and music units.

Vivendi's telecom, video games, music and pay-TV businesses are seen as having little in common.

"Jean-Bernard Levy's departure clearly makes the divestiture scenario more probable," said Gilles Guibout, a fund manager at AXA Investment Management in Paris. "The question is whether he couldn't have taken tougher steps earlier."

In late March, Mr. Levy and board chairman Jean-Rene Fourtou expressed dismay with the company's share price in a letter to shareholders and said questioning the scope of the group's activities was "not taboo."

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Vivendi shares, which had lost 18 per cent so far this year as of Wednesday, gained 5.5 per cent to close at €14.19, giving the company a market value of €18.3-billion ($22.7-billion U.S.).

With the stock trading at seven times estimated 2013 earnings and a dividend yield of 7.5 per cent, the valuation is "low but not extreme" compared with telecoms operators, while the outlook for most of its businesses is difficult, Goldman Sachs analysts said in a note to investors.

Disposals could help to narrow the discount on Vivendi's shares because of its conglomerate status, the analysts said, adding that there were "a limited number of trade buyers for each of the businesses".

Financial sources said last month that bankers were working on proposals ranging from selling individual business units, such as Maroc Telecom worth some €5.4-billion, to carving up the company with telecoms on one side and media on the other.

The second source familiar with the matter said he viewed Activision, with a market capitalization of $13-billion, as the best candidate for a sale.

The group will now be in the hands of Jean-Francois Dubos, who joined Vivendi predecessor Compagnie Generale des Eaux in 1991 and has been general counsel since 1994.

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In addition, the telecom industry veteran Mr. Levy poached from Vodafone and on whom he was betting to turn around SFR, Michel Combes, will no longer move to Vivendi. Instead, Vivendi human resources chief Stephane Roussel will take up the role.

Mr. Levy forced out the former chief of SFR earlier this year for not adequately coping with the arrival of new mobile competitor Iliad's Free Mobile. He took over the reins himself in the meantime. SFR has long been Vivendi's cash cow.

Mr. Levy's departure is the latest twist in a long history of upheaval at the group, which traces its roots back to 1853, when Napoleon III founded La Compagnie Generale des Eaux as a public utility to supply water to the city of Lyon.

Among Mr. Levy's most prominent predecessors was Jean-Marie Messier, who was ousted in 2002 after the company posted a net loss of €23-billion, France's worst-ever corporate loss at the time.

Mr. Messier masterminded a debt-fuelled buying binge, but Vivendi later had to take huge write-downs on those acquisitions as the value of its media assets tumbled in a bear-market rout.

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