Vivendi raises 2010 goals, maintains dividend

H1 results, boosted by Brazilian telecoms unit, video games

PARIS -- Europe's largest telecom and entertainment group Vivendi raised its annual profit targets after posting first-half forecast-beating results, boosted by its new Brazilian telecoms unit and video games.

Vivendi, which owns Universal Music Group and pay TV operator Canal+, also said it would maintain its 2010 dividend at the same level as last year, €1.40 per share.

"Vivendi is back to growth in the first half of 2010 and improves its full year outlook," chief executive Jean-Bernard Levy said.

Vivendi shares opened up 2.85% on Wednesday.

Vivendi raised its 2010 guidance to an "increase" in earnings before interest, taxes and amortization (EBITA), compared to a previous forecast of "slight growth." It also gave guidance on its adjusted net income for the first time, forecasting it would rise from €2.59 billion in 2009.

First-half operating profit rose 11.9% to €3.24 billion ($4.1 billion), compared with a mean estimate of €3.01 billion in a Reuters poll. Revenue rose 6.1% to €13.98 billion, compared with a mean estimate of €13.83 billion in the poll.

French telecom operator SFR, 56% owned by Vivendi and the rest by Vodafone, posted strong results as it trounced competitors France Telecom and Iliad in terms of new client recruitments.

Operating profit at SRF, which accounts for more than half of Vivendi's revenues and was up 6.6% to €2.11 billion, ahead of analysts' expectations.

Vivendi's newest acquisition, Brazilian fixed-line telecom operator GVT bought in November 2009, also posted strong growth.

"GVT is, for this year and the future, a strong growth driver and we have increased its investment program," Levy said.

Levy added that Vivendi was raising its annual targets for GVT, SFR's fixed and broadband business, and video games maker Activision.

Maroc Telecom and gaming unit Activision, which publishes blockbuster "World of Warcraft", have already published second-quarter results and confirmed guidance for the year.

A Paris-based analyst said the results, increased guidance, and dividend could help lift Vivendi shares, which have underperformed media and telecom peers and slid about 12.5% this year.

The underperformance can be linked to investor concerns over acquisitions, intensifying competition in French telecoms, and a U.S. class-action shareholders' lawsuit that charges the company misled investors, which have all depressed shares to seven-year lows relative to the European market.

"Today's release gives confidence and visibility on the company's businesses and confirms the fundamentals," said a Paris-based analyst. "It should be appreciated by the market."

Vivendi's holding company structure under which it does not wholly own its major divisions such as SFR has also historically led investors to apply a 25% to 40% conglomerate discount.

Levy addressed these concerns in a call with reporters, pointing out what he called a "major" recent U.S. Supreme Court decision that would likely reduce the damages Vivendi was at risk of paying. The decision, which excludes non-U.S. shareholders from class actions, will lead Vivendi to reduce the €550 million provision it made in February, said Levy.

"The decision means that the risk of the case has largely diminished for us and we will reduce the provision in our accounts for 2009 as a result," he said, declining to say by how much or when the change would be made.

Levy also reiterated his interest in buying out Vodafone's shares in SFR as a way to reduce the conglomerate discount on the shares and simplify its structure.

"It has always been a strategic objective of ours to hold 100% of our French telecoms business," he said, adding that it could use the proceeds from the sale of its NBC Universal stake set to come in later this year. "No negotiations are underway on this subject."
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