Orange S.A. ORAN, the largest telecom operator in France, recently divested an 80% stake of its video sharing portal – Dailymotion to French media behemoth Vivendi S.A. The total value of the deal was €217 million (around $237 million). Orange retains the ownership of the remaining 20% stake.
At present, Dailymotion is the second largest Internet-based video sharing platform after Google Inc. GOOGL controlled YouTube. Currently, on an average, Dailymotion generates approximately 139 million unique visitors per month compared with 1 billion visitors of YouTube. In 2014, total revenue garnered by Dailymotion was €64 million. Since its inception in 2005, the company is yet to achieve profitability. Orange acquired Dailymotion in two phases (2011 and 2013) for a total consideration of €120 million.
At first, Orange had negotiated with Hong Kong-based telecom operator PCCW Group for the sale of a 49% stake in the online video portal. However, the French government, an important stake holder of Orange, strongly argued for a European buyer. Consequently, the PCCW Group opted out of the negotiation process. Also, in 2013, the government of France had turned down a proposal from Yahoo! Inc. YHOO for a 75% stake in Dailymotion.
In Mar 2015, Orange revealed the details of its 5-year strategic project called “Essential2020”. Under this plan, the company will revamp its business model to suit the needs of the different segments of its clientele. We believe that the decision to divest a majority stake in Dailymotion is part of the company’s business restructuring process.
Just about a week ago, Orange received shareholder approval to acquire Jazztel Plc. Jazztel is a leading provider of broadband services along with fixed-line and mobile phone services to enterprises and consumer markets in Spain. After the completion of the deal, Orange will become a formidable player in Spain capable of taking on Telefonica SA TEF and Vodafone Group Plc. VOD. Orange currently carries a Zacks Rank #3 (Hold).
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