Vivendi's Mobile Phone Unit Drags Down First-Quarter Profit

By Sam Schechner

PARIS--A sharp decline in French mobile-phone revenue dragged down profit by nearly a quarter at Vivendi SA (VIV.FR), underscoring the conglomerate's plans to slowly get rid of telecom assets and focus on its media businesses.

However, the Paris-based company didn't give any new details on its strategic shift, while it considers two binding offers for its African phone operator Maroc Telecom (IAM.CL) and a long-term plan to either spin off or publicly offer the French mobile unit, known as SFR.

Overall, the company posted first-quarter net income of 534 million euros ($693 million), down 24% on the year. The company's adjusted earnings before interest and taxes, a figure watched by analysts, came in at EUR1.34 billion, down 17% from EUR1.62 billion a year earlier, in large part because of SFR.

But rising revenue at the company's media businesses--Universal Music Group, Activision Blizzard and French TV company Canal Plus--helped offset the declines. Revenue for the quarter slipped just 1% to EUR7.05 billion.

Vivendi was forced to keep slashing prices at SFR during the quarter due to a brutal price war, which dates to the January 2012 launch of low-cost phone service from Iliad SA (ILD.FR). In the quarter, SFR's earnings before interest, taxes, depreciation and amortization fell by 25% on the year to EUR702 million.

The brightest spot in the quarter was the company's video-game division Activision Blizzard, which saw revenue rise 12.2% to EUR1.00 billion, and adjusted EBIT rise 12% to EUR442 million.

Vivendi said its performance in a difficult environment allowed it to confirm its prior 2013 guidance.

Write to Sam Schechner at [e-mail]

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