Pay TV, games drive Vivendi Q1

Profit jumps 32% despite 'slightly weaker' music sales

French media giant Vivendi saw a 32% jump in its first-quarter profit to €932 million ($1.27 billion) and a 22.8% increase in operating profit to €771 million ($1.05 billion), driven mainly by its pay TV and video games units, the company said Tuesday.

Revenue totaled €5 billion ($6.8 billion), an increase of 5.3% compared to the year-ago quarter, and adjusted earnings before interest and income taxes rose 21.7% to €1.3 billion ($1.8 billion).

Vivendi boasted "very good first quarter 2007 earnings," with the group particularly lauding the successful launch of its "World of Warcraft: The Burning Crusade" video game, fewer days of airing French football Ligue 1 and the first positive effects of the Canal Plus–TPS satellite TV merger.

A profit decline from the group's affiliate NBC Universal, which Vivendi attributed solely to the decline of the U.S. dollar, was offset by an increase in income at Neuf Cegetel.

Based on its results, Vivendi reiterated its financial goals for the full year.

Analysts generally lauded the results, with UBS analyst Ian Whittaker calling it a "blowout quarter." While "music was slightly weaker" than expected, "the positives from other divisions more than offset this," he said.

Universal Music Group's revenue of €1.03 billion ($1.4 billion) dropped 8.7% compared to the same period last year because of poor sales in the U.S., Japan and France. However, U.K. sales were off the charts.

UMG dominated the U.K. market in the first quarter with nine of the top 10 best-selling albums over the period, according to the Official Chart Company. Bestsellers included releases from Fall Out Boy, Nelly Furtado, Akon, Amy Winehouse and Mika.

Canal Plus Group reported revenue of €1.07 billion, up 18.7% compared to the first quarter of 2006. Revenue from pay-TV operations in France were up 24%, driven by the TPS acquisition, subscription portfolio growth and higher advertising revenue.

Vivendi Games' revenue of €291 million ($395.5 million) was 117.2% higher than the same period last year with January's "World of Warcraft: The Burning Crusade" expansion pack launch breaking records for PC game sales in its first month of release by selling 3.5 million copies in North America, Europe, Australia and New Zealand.

Blizzard Entertainment launched the game in Korea in February and in the regions of Taiwan, Hong Kong and Macau in April. Mainland China is next on the list.

On the telecom side, French mobile phone operator SFR's revenue decreased by 1.8% to €2.1 billion ($2.85 billion), though Maroc Telecom revenue jumped 13.9% to €550 million ($747.6 million).

In a conference call Tuesday, management signaled it was interested in a potential buyout of Vodafone's stake in French mobile phone group SFR.

"We have made it clear that we would be willing to discuss the acquisition of the shares of SFR presently held by Vodafone," finance director Philippe Capron said.

Georg Szalai in New York and Reuters contributed to this report.
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