Cloud Computing Makes GVT More Attractive
Vivendi's Brazilian subsidiary GVT , is due to launch cloud computing services for its corporate client base in 2014, according to the company' marketing director Ricardo Sanfelice. GVT's cloud business model will deploy infrastructure-as-a-service (IaaS) and software-as-a-service (SaaS) but few other details were provided. As the largest alternative operator in Brazil, BMI believes GVT has the infrastructure and capacity to meet growing demand for cloud computing and will make the company more attractive to potential buyers.
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In March 2013, Vivendi suspended the sale of GVT, after receiving a number of bids that fell short of its expectations. DirecTV and a group of financial funds led by KKR & Co and Gavea Investimentos came closest to an acquisition ( see February 25, 'DirecTV Enamoured With Brazilian Expansion'), but offers were lower than Vivendi's asking price of EUR7bn. The company had been keen to sell off its telecoms holdings in order to service its net debt and refocus the business around its media content but will hold onto GVT in the short term. Vivendi reported in Q113 that its media division increased EBITDA by 3.5% y-o-y in constant currency, whereas its telecoms division decreased by 13.7% over the same period. We therefore expect that Vivendi still wishes to divest its telecoms units, including GVT and a launch of cloud services will enhance the company's portfolio, making it a more attractive acquisition and increasing shareholder value.
The move to offer cloud computing will be supported by the company's fibre-to-the-home services and has been increasing the capacity of its broadband packages. GVT has been offering a 25Mbps broadband service since January 2013, and reported that 47% of its customers opted for speeds equal or higher than 15Mbps, up from 40% y-o-y. Additionally, GVT has three data centres in Brazil, located in São Paulo, Rio de Janeiro and Curitíba.
Competition in the cloud computing segment for corporate customers will come from Telefónica/Vivo and Oi, which have already launched services. GVT may find it difficult to challenge these players given their early rollout and larger size. However, we expect to see demand for cloud computing increase significantly over the next few years, and we forecast that it will account for around 15% of the IT market in 2017. Growth in the cloud division could stabilise Vivendi's falling revenues, and encourage better offers from potential investors.