Vizzavi, the ambitious internet portal joint venture between Vodafone and Vivendi, is poised to make widespread job cuts as part of a concerted effort to control costs.
The move follows persistent rumours that Vizzavi is failing to live up to its shareholders initial expectations and that senior executives at Vivendi are starting to question the French company's long-term commitment to the project.
Vizzavi was set up early last year to provide users with access to services including email, address books, search engines, music and news, regardless of whether they were using a mobile phone or laptop computer.
It aimed to become Europe's leading provider of information and services for users of wireless devices.
Insiders say, however, that it has struggled to overcome technology problems and missed its self-imposed target of 2m registered subscribers by the end of last June.
The slower than expected take-up of mobile internet devices has compounded the company's problems.
Vizzavi is a 50-50 joint venture between Vivendi and Vodafone, employs around 800 people and was once valued by analysts at €5bn.
The company was born out of Vivendi's support for Vodafone during the UK group's hostile takeover of Mannesmann in 1999.
The two shareholders earmarked £1bn to invest in the project in the hope that it would be achieving monthly break-even on an ebitda basis by the end of 2003.
However, analysts believe that Vivendi is now starting to reassess its commitment to the project.
"There is no doubt that Vivendi is not the company it was when it did the deal with Vodafone," said one analyst who declined to be named.
"Since then it has bought Seagram and is questioning its whole wireless involvement."
Another analyst commented: "The cuts are indicative of where the mobile sector has and - at the same time - has not got to. Vizzavi's business model has always been very complex."
Some investment bankers suggest that the highly-acquisitive Vivendi could abandon Vizzavi and bid for a portal like Yahoo, which has an established user base and brand name.
Vizzavi lost Vodafone and Vivendi about £63m each last year. This year it is expected to make total losses of over £200m.
Vodafone has been highly acquisitive over the past two years but is now entering a phase of consolidation as it looks to increase revenues from its 95m customers in 29 countries. The company has no plans to enter new markets in the short-term.
Vizzavi is chaired by Vivendi boss Jean-Marie Messier, who has described it as "the first portal of the second internet age". Vodafone chief executive Sir Chris Gent is due to take over from him in the middle of next year.
The company is run on a day-to-day basis by chief executive Evan Newmark.
Headquartered in London, Vizzavi has subsidiaries in France, Germany and Italy. After a flurry of early releases, the company has not made a significant news announcement since May.
Vivendi referred calls for comment to Vizzavi which the company then did not return. Vodafone declined to make any comment.
