Vivendi will enter three weeks of exclusive talks with cable group Numericable in an effort to finalise a deal to sell its telecom unit SFR for 11.75 billion euros ($16.4 billion) in cash, plus a stake in the resulting business, reports Reuters.
The decision is a blow to conglomerate Bouygues, which had also bid for SFR.
"The board considers the Numericable offer to be the most pertinent for the group's shareholders and employees, and carries lower execution risk," Vivendi said on Friday.
Amid intense political lobbying - France's industry minister openly sided with Bouygues and criticised Numericable in a morning radio interview - Vivendi's board made the choice that was likely to help it exit a cut-throat telecoms market as quickly as possible.
The Bouygues bid was seen by Vivendi insiders as riskier because it would require a longer regulatory review and also time to carry out an initial public offering of the new company, sources said earlier.
Shares in Numericable were up 13 percent at 30.20 euros by 1331 GMT, while Bouygues' shares were down 8 percent at 28.82 euros. Vivendi was down 0.3 percent 19.80 euros.
For Numericable, which owns a cable network that covers two thirds of French households and sells television and broadband, winning SFR would vault it into the big league of French business.
It would also be a victory for billionaire entrepreneur Patrick Drahi, who founded the cable group two decades ago, against a later bid from Bouygues, in the face of the family-controlled firm's intense political lobbying.
French Industry Minister Arnaud Montebourg had backed Bouygues' bid because it would reduce the number of players in the French mobile market to three from four and calm what he called "destructive competition" that has sent prices down 20 percent in the past two years.
Read more of this report from Reuters.