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UPDATE 1-Vivendi, Altice discuss SFR-Numericable deal -sources

Leila Abboud and Gwénaëlle Barzic
Monday, 24 Feb 2014 | 5:03 AM ET

* Tie-up would value SFR at around 15 bln eur -source

* Vivendi would keep 30 pct stake in merged company -source

* Deal could lead to 6 bln eur of synergies

(Recasts with sources, Vivendi comment, shares, analyst note)

PARIS, Feb 24 (Reuters) - French media group Vivendi and cable group Altice are in discussions over a tie-up between mobile operator SFR and cable firm Numericable, sources close to the talks said on Monday.

No agreement has yet been reached but the proposal being discussed would value SFR, a unit of Vivendi, at around 15 billion euros ($20.6 billion) and would see Vivendi keep a stake of roughly 30 percent stake in the newly merged company, one of the sources said. A second source cautioned that it remained to be negotiated what proportion of the new company the two sides would own after the tie-up.

Les Echos newspaper first reported on the talks on Sunday, saying the parties aimed to reach a firm deal in a few weeks. Numericable is 40 percent owned by Altice, the holding company of founder Patrick Drahi.

A Vivendi spokesman declined to comment beyond saying that no memorandum of understanding had been signed at this stage. Altice and SFR declined to comment.

The deal would be carried out via about 8 billion euros of debt and would lead to synergies of 6 billion, Les Echos added.

Shares in Numericable were 3.7 percent higher at 30.59 euros at 0922 GMT. Vivendi shares were up 0.3 percent.

Analysts have estimated such a pairing could be worth 6 billion euros in net present value. SFR could reduce line rentals from rival Orange and use Numericable's lines into homes instead, It could also reduce the cost of high speed broadband fibre rollout.

"There should be significant synergies from such an operation, namely with the migration of SFR fixed broadband customers to Numericable's cable network," Espirito Santo wrote in a note.

Drahi, Numericable's largest shareholder, has made no secret of his interest in a tie-up with SFR. The two sides held unsuccessful discussions in late 2012 but Vivendi was not inclined.

Since then Drahi carried out initial public offerings of both Numericable and Altice to bolster his financial firepower and borrowing ability and to take another run at buying SFR.

Vivendi's former cash cow, SFR has been hammered by a price war started when rival Iliad undercut it with its low-cost "Free Mobile" offer, forcing it to spend money to try and keep clients.

Cable operator Numericable, which listed on the stock market in November in France's biggest initial public offering since 2009, had previously been seen as a potential takeover target for SFR and rival Bouygues Telecom.

Altice also owns French and Belgian cable companies and mobile operations in Israel, and itself listed on the stock exchange at the end of last month.

Altice, built via a decade of acquisitions, is surfing a wave of investor interest in the European cable sector as a growing number of consumers turn to these companies for television and broadband at faster speeds and lower prices than from telecoms rivals. ($1 = 0.7275 euros)

(Writing by James Regan and Natalie Huet; Editing by Eric Walsh and Andrew Callus)

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