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Vodafone, Vivendi in Talks on Vizzavi Portal

European wireless operator Vodafone Group PLC may buy out struggling media giant Vivendi Universal's stake in their joint-venture portal Vizzavi and phase it out, according to a report in today's Wall Street Journal.

Vodafone could pay as much as US $148 million (150 million Euro), anonymous sources told the newspaper. It also said the amount would cover offices, equipment and certain Vizzavi wireless Internet services that could be used by Vodafone subsidiaries.

In a joint statement Monday, the companies confirmed they are in discussions concerning the future shareholding structure of their joint venture.

"These discussions may lead to an offer by Vodafone to acquire all or a part of Vivendi's shareholding in Vizzavi. However, as a result of these discussions, certain filings are being made with competition authorities in various territories," the statement said. "This does not indicate the conclusion of any discussions currently taking place, and no further comment will be made by either party unless and until such a conclusion is reached."

Launched in 2000, Vizzavi was designed as a mobile, PC and interactive TV portal it would offer along with Vodafone's new color screen mobile phones as well as with high-speed Internet connections on desktops. Both companies had invested more than 1 billion Euro into the venture, the Journal report said.

The deal, which reportedly could be struck as soon as this week, would help Vivendi unload some of its debt but would also mark a retreat from Internet strategies for both companies.

If a deal is reached, Vodafone would be expected to phase out the Vizzavi brand while Vodafone would be expected to merge part of the portal's operations with its wireless subsidiaries in Vizzavi's eight markets, anonymous sources familiar with the situation told the Journal.

Analysts have long cited the venture as a cash drain on both companies and late last week, Vivendi's management, looking to unload media properties in order to help it raise cash and avoid a bankruptcy filing, said it had stopped investing in the venture. The Journal report said Vizzavi alone lost about (US) $377 million in 2001. Vivendi's Internet division, VUNet, which housed the Vizzavi portal, lost an estimated (US) $205 million in earnings before interest, taxes, depreciation and amortization costs in 2001.

In addition to Vizzavi, the VUNet unit also houses gaming properties which include Flipside.com, uproar.com, iWin.com and virtualvegas.com and online education site education.com, as well as music site MP3.com.

The news comes as Vodafone and other European mobile-phone companies put the brakes on their investments in third-generation, or 3G, technology that has been promised as a new way of delivering broadband-speed to mobile devices. The Vizzavi portal was seen as a key part of that investment strategy. The Vizzavi portal was also looking like an obstacle to the Vodafone's growth, the report said.

Subsdiary operators of Vodafone, each of which own about 20 percent of Vizzavi and use the venture for content delivery, had complained that the unit's services could be developed on their own, people close to Vizzavi told the Journal.

Vivendi has already taken a US $1.07 billion (1.1 billion Euro) write down on the value of its telecommunications and Internet assets, much of which involved the Vizzavi assets, sources told the Journal. The charge was included in an overall asset impairment charge of US $10.7 billion (11 billion Euro) for the first half.