UPDATE: Vivendi Earnings Rise On Strong Games Sales, Brazil
May 12 2011 - 2:37PM
Dow Jones News
French media-to-telecoms conglomerate Vivendi SA (VIV.FR)
Thursday said first-quarter earnings rose as strong sales of
video-games and growth at Brazilian telecoms unit GVT offset
weakness at French carrier SFR.
Vivendi said it still expects adjusted profit to grow slightly
this year, counting mainly on strong growth at GVT. The Paris-based
group also said that it expects adjusted profit to be higher than
EUR3 billion this year and its dividend to increase after it takes
full control of SFR, a deal which is due to close by the end of the
second quarter.
Vivendi last month agreed to buy out Vodafone Group PLC's (VOD)
44% stake in SFR for EUR7.95 billion, giving the French company
full control of its biggest cash generator. However, SFR faces
increased competition in the French telecoms market, where
operators are preparing for the arrival of fourth mobile operator
Iliad SA's (ILD.FR) Free Mobile next year while they were hit by an
increase in value added tax at the start of the year.
SFR, France's second-largest mobile phone operator behind France
Telecom SA (FTE), said its churn rate, which measures the number of
customers leaving the company, rose to 17.5% in the first quarter
from 14% in the same period last year due to the disruption caused
by the VAT tax hike, after which customers could legally switch
contracts for a period of four months. This forced the carriers to
invest more heavily to keep existing subscribers and acquire new
ones. SFR spent EUR37 million more in the quarter than normal on
client acquisition, Vivendi said.
Still, Chief Financial Officer Philippe Capron said the
disruption caused by the tax hike in January and February returned
to normal in March.
Vivendi said net profit surged in the first three months of the
year to EUR1.73 billion from EUR589 million last year, boosted by a
EUR1.26 billion settlement from the end of a legal battle in
Poland. The Polish settlement offset a capital loss linked to the
sale of Vivendi's remaining stake in NBC Universal.
Revenue rose 3.8% to EUR7.18 billion in the quarter, above
analysts' forecasts for revenue of EUR7.03 billion, helped by
strong sales at video-games unit Activision Blizzard Inc. (ATVI)
and at GVT.
Adjusted earnings before interest and taxes, a closely watched
figure that excludes charges relating to acquisitions and mergers,
also rose 7.2% to EUR1.71 billion in the first quarter, as gains at
Activision and GVT offset an 11% drop in adjusted EBIT at SFR and a
32.4% drop at Universal Music Group. The figure also topped
analysts' expectations.
Activision, the maker of the hit 'Call of Duty' and 'World of
Warcraft' game franchises, earlier this week reported a 23% rise in
net profit as it benefited from a shift in sales to more
profitable, Internet-based sources of revenue.
Recently acquired telecom operator GVT continues to benefit from
strong growth in Brazil, and first-quarter adjusted EBIT more than
doubled at the unit.
Vivendi shares Thursday closed at EUR19.11.
-By Ruth Bender, Dow Jones Newswires; +33 1 4017 1754;
ruth.bender@dowjones.com