Music, pay TV turn on Vivendi Q3

UMG, Canal Plus drive gains; BMG decision on way

Media and telecommunications company Vivendi SA reported a third-quarter profit Thursday that more than doubled and surpassed analysts' forecasts.

Net income was €1.56 billion ($2 billion), compared with €646 million a year ago. The latest profit included a one-time gain of €834 million on the sale of a stake in a noncore business.

Excluding one-time gains and amortization of intangible assets, the company's bottom line rose 28% to €731 million.

Vivendi, owner of Universal Music Group, the world's largest record company, also reported earnings before interest, tax and amortization of €1.3 billion ($1.7 billion), up 21% year-over-year.

As the conglomerate recently reported, revenue edged up 0.3% to €4.89 billion ($6.2 billion), below expectations.

UMG's EBITA of €138 million ($176.8 million) marked a year-over-year increase of 11.3% as higher margins and the settlement of the Napster litigation outweighed a slight revenue decline. The unit's one-off payment from Napster amounted to €36 million.

In a meeting to discuss the results, Vivendi executives signaled a willingness to sell assets to win regulatory approval of its recent agreement to acquire Bertelsmann AG's BMG music publishing unit for €1.63 million. "If a regulator obliges us to sell some assets, we bear the risk," chief financial officer Jacques Espinasse said during the meeting. "The risk may also be an opportunity."

He added that he expected a European Commission ruling on the deal Dec. 8.

Core profit at Vivendi's pay TV unit Canal Plus was up €51 million ($65.3 million) to €148 million ($189.6 million) compared with the same period last year, primarily because of strong programming additions and increased revenue per subscriber.

The Vivendi Games unit's 118.2% increase in EBITA to €24 million ($30.7 million) was driven by revenue growth from its profitable "World of Warcraft" online game, offset in part by startup investments for its Sierra Online and Vivendi Games Mobile units.

Vivendi, run by CEO Jean-Bernard Levy, this month confirmed a failed friendly takeover approach by private-equity firm Kohlberg Kravis Roberts & Co.

On Thursday, it reaffirmed its 2006 net adjusted profit target of at least €2.6 billion ($3.3 billion), with a dividend distribution rate of a minimum of 50% of profit.

UBS analyst Ian Whittaker called the quarterly financial report "a good set of numbers" and said "main areas of outperformance were Canal Plus and music."

Georg Szalai in New York contributed to this report.
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