Vivendi Net Falls Amid Stratgic Shift

By Sam Schechner

Vivendi SA (VIV.FR) profit dropped in the third quarter, dragged down by a continuing, albeit slowing, decline at a French phone business it hopes to split off next year.

The Paris-based conglomerate posted second-quarter net income of 376 million euros ($506 million), or 28 cents per share, compared to EUR493 million, or 38 cents per share, a year earlier.

Adjusted earnings before interest and taxes, which exclude assets sold as part of its makeover, fell 23% to EUR730 million from EUR948 million a year earlier. That was in line with some analysts' expectations.

The company confirmed its year-end guidance for all units.

Vivendi is midway through a tumultuous strategic shift, selling or spinning off businesses to pay down debt and focus on a handful of media assets, including TV company Canal Plus and California-based Universal Music Group.

Earlier this month, the company struck a binding deal to sell African phone operator Maroc Telecom for about EUR4.2 billion. In October, it sold most of its controlling stake in videogame maker Activision Blizzard for $8.2 billion. It also agreed to pay EUR1.0 billion to buy the 20% stake it didn't own in Canal Plus's French arm--a unit central to its identity as a media company.

Early next year Vivendi hopes to split off French phone operator SFR, its largest unit by profit and revenue.

Reeling from a price war in France, SFR has had to cut retail prices to keep customers. Adjusted earnings before interest, taxes, depreciation and amortization - a key figure for the capital-intensive business - fell 13% to EUR731 million, the company said. The decline was slower than the 18% recorded for the first nine months.

Overall, revenue for the quarter edged up 0.2% to EUR5.35 billion, when adjusted to remove the two assets it has sold.

Sales at the company's main media businesses grew 12% to EUR2.42 billion from EUR2.16 billion a year earlier. Universal saw revenue grow 28% as it ingested the recorded music assets of EMI acquired last fall. Excluding that change, sales were up 6.7% in the quarter.

Vivendi's long transformation--started in early 2012--has strained management. Its last permanent CEO left more than a year ago after a strategy dispute with Chairman Jean-René Fourtou.

Chief Financial Officer Philippe Capron, who has helped shepherd the shift, plans to leave by the end of the year to join waste and water utility Veolia Environnement SA.

-Write to Sam Schechner at [e-mail]

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