Bloomberg News

Vivendi Jumps After Profit Tops Estimates on Music, SFR

May 15, 2012

A cyclist passes the headquarters of Vivendi SA in Paris.  Photographer: Fabrice Dimier/Bloomberg

A cyclist passes the headquarters of Vivendi SA in Paris. Photographer: Fabrice Dimier/Bloomberg

Vivendi SA (VIV) reported first-quarter profit that beat analysts’ estimates on growth at the music division and as earnings held up at French wireless unit SFR amid intensifying competition.

Vivendi jumped as much as 6.6 percent to 13.25 euros and was up 4.6 percent at 9:15 a.m. in Paris. Net income excluding one-time gains or losses and some costs was 823 million euros ($1.1 billion), compared with the 765 million-euro average of analyst estimates compiled by Bloomberg. Sales slipped 0.9 percent to 7.1 billion euros, also exceeding predictions, helped by Universal Music Group and the GVT Brazilian division.

SFR, which accounted for 41 percent of Paris-based Vivendi’s sales and 35 percent of profit in the period, has cut prices to stop customers from defecting to discounter Iliad SA. (ILD) With SFR’s new Chief Executive Officer Michel Combes due to start on Aug. 1, the carrier is working on cutting network, computer and call-center costs, Pierre Trotot, SFR’s senior executive vice president, said on a conference call yesterday.

“With the first-quarter numbers not bringing any further nasty surprises and management’s comments on cost cutting, there may be some light at the end of a very long tunnel,” Ian Whittaker, an analyst at Liberum Capital in London, wrote in a note. He has a buy rating on the shares.

Iliad Gains

Iliad, the broadband provider founded by entrepreneur Xavier Niel, won 2.6 million subscribers within the first 80 days of its mobile-service launch, in a burst that is unprecedented in the past decade in Europe.

The company, which operates under the Free brand, became France’s fourth mobile-network operator on January 10, with packages starting at 2 euros.

Iliad shares jumped 6.1 percent to 104.60 euros in Paris.

“The first quarter hardly felt the impact of the fourth entrant,” SFR’s Trotot said yesterday. “You will see the drop in our Ebita as soon as the second quarter.”

Vivendi continues to project a decline of as much as 570 million euros in earnings before interest, taxes, depreciation and amortization at SFR in 2012, from 3.8 billion euros last year. First-quarter earnings before interest, taxes and amortization at SFR slipped 0.9 percent to 561 million euros.

SFR plans to reduce operating expenses by as much as 450 million euros this year through firings, cuts in marketing spending and renegotiating contracts with call centers, two people with knowledge of the matter said last week.

Bieber, Swift

Vivendi reiterated its forecast adjusted net income of “above” 2.5 billion euros this year, or a decline of as much as 15 percent from 2011. It said in March it expects an earnings slump that will last through 2013, largely because of SFR, about a year after CEO Jean-Bernard Levy spent 7.95 billion euros to take full control of the unit from Vodafone Group Plc. (VOD)

Universal Music Group reported Ebita growth of 48 percent to 68 million euros. Chief Financial Officer Philippe Capron said on the call that one should “not over-emphasize” the unit, even though it has important scheduled album releases including Justin Bieber, Jennifer Lopez and Taylor Swift.

To contact the reporter on this story: Marie Mawad in Paris at mmawad1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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