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Vivendi Warns Of Profit Pressure Until 2013; Shares Fall

3/1/2012 4:02 AM ET

Vivendi SA's (VIVEF.PK) shares dropped 8 percent in Paris Thursday morning after the French media and telecom group reported a loss for the fourth quarter. The majority owner of video game publisher Activision Blizzard Inc. (ATVI: Quote) also warned that strong competition in France and Morocco and recurrent tax charges threaten its 2012 and 2013 results.

The company projects profit growth to resume in 2014 driven by acquisitions made in 2010 and 2011 and its strengthening position in emerging countries.

Vivendi said its 100 percent-owned unit SFR - France's second largest mobile phone firm, will have to reconsider very carefully its commercial offers and its cost base following the excessively favorable conditions granted to the new mobile operator by the regulator, the state and the incumbent operator. SFR's revenues fell 4.8 percent in the fourth quarter adversely impacted by the new VAT rules and termination price cuts imposed by the regulators. In 2011, Vivendi's net income climbed 22 percent despite revenue edging down 0.2 percent. Chief Executive Officer Jean-Bernard Lévy said, "We generated the highest adjusted net income in Vivendi's history thanks to the strong growth of our activities in Brazil with GVT and the exceptional profitability generated by Activision Blizzard's video games. The 2011 results were achieved despite a very significant increase in tax charges."

In addition, the company said it plans to distribute 1 euro per share in cash as well as one bonus share per 30 shares held for the year 2011. Also, from 2012 onwards, Vivendi intends to distribute in cash around 45 to 55 percent of its adjusted net income.

In the final quarter of 2011, Vivendi's loss, on IFRS basis, attributable to the company's shareowners was 118 million euros or 0.09 euros per share, as against a profit of 559 million euros or 0.45 euros per share a year ago. The results were hurt by higher one-time charges mainly related to impairment losses as well as deferred tax asset.

Adjusted net income, which excluded one-time items, fell 10.5 percent to 433 million euros or 0.35 euros per share as revenues declined 2.8 percent to 7.78 billion euros. EBITA, a key earnings metric, also declined 5.6 percent for the company.

Universal Music Group, Vivendi's unit which is in a deal to buy the recorded-music unit of Britain's EMI Group Global for 1.2 billion pounds, generated 11 percent lower revenues in the quarter, with falling demand for physical product, despite growth in digital music sales and increased income from new business activities.

Maroc Telecom Group, the telecommunications operator in the Kingdom of Morocco, also recorded lower revenues amid a 25 percent mobile price cut and a particularly unfavorable regulatory and competitive environment.

However, GVT unit, Brazil's alternative telecommunications operator, and French pay-TV segment Canal+ Group posted strong revenue growth in the quarter.

Vivendi's shares are currently trading at 14.90 euros, down 1.22 euros or 7.57 percent in Paris.

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by RTT Staff Writer

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