Vivendi FourthQuarter Profit Rises 16% on Maroc TV (Update2)
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Feb. 29 (Bloomberg) — Vivendi SA, owner of the world%26#39;s
largest music company, said fourth-quarter earnings rose 16
percent on subscriber gains at its Moroccan telephone company and
lower costs at the Canal Plus pay-television unit.
Profit excluding one-time gains and some costs, which
Vivendi calls adjusted net income, rose to 585 million euros
($888 million) from 505 million euros a year earlier, the Paris-
based company said in a statement today. Earnings at mobile-phone
unit SFR and Universal Music Group, Vivendi%26#39;s biggest businesses,
fell more than analysts had estimated.
Maroc Telecom, Canal Plus and Vivendi%26#39;s video games unit
spurred revenue in 2007. Last year, Chief Executive Officer Jean-
Bernard Levy completed or announced takeovers in Vivendi%26#39;s pay-
TV, telephone and music-publishing businesses to bolster
recurring sales such as subscriptions.
“A large part of their sales is from recurring business,
which is reassuring in a depressed market,%26#39;%26#39; Bruno Hareng, an
analyst at Oddo Securities, said in a phone interview before the
report. “In 2008, we%26#39;ll see an improvement of profitability in
Canal Plus and again a big earnings increase in games.%26#39;%26#39;
Vivendi shares slipped 26 cents, or 1 percent, to 26.39
euros at 9:35 a.m. in Paris. Before today, Vivendi had fallen 15
percent in Paris this year, while the Bloomberg Europe Media
Index had lost 13 percent.
The company said it anticipates growth in its subscriber
portfolios in 2008, and a profit increase similar to last year%26#39;s
based on its current businesses. Full-year adjusted net income
rose 8.3 percent to 2.83 billion euros, in line with Vivendi%26#39;s
forecast for 2007 profit of more than 2.8 billion euros.
Monthly Fees
Vivendi began a service selling songs and video games online
for a monthly fee this month, a response to the music industry%26#39;s
biggest drop in sales in eight years and part of the company%26#39;s
strategy to seek a steady stream of revenue. Universal Music%26#39;s
artists include singer Amy Winehouse and rapper Jay-Z.
Adjusted net income, the number tracked by most analysts
that cover Vivendi, excludes non-recurring gains as well as
amortization of intangible assets. Profit at that level was seen
rising 6.6 percent to 539 million euros, the median estimate of
14 analysts surveyed by Bloomberg News. Fourth-quarter net income
slipped 15 percent to 521 million euros.
The company plans to raise its dividend to 1.30 euros a
share from 1.20 euros a year earlier. Total shareholder
distribution will amount to about 1.5 billion euros, payable on
May 14, Vivendi said.
More Takeovers
Levy stepped up the pace of takeovers last year, buying BMG
Music Publishing Group in July after the Television Par Satellite
acquisition. In December, he announced the purchase of phone
company Neuf Cegetel and a controlling stake in video-game maker
Activision Inc.
In January, Vivendi said fourth-quarter sales rose 8.5
percent. That was after Vivendi reported its first profit drop in
seven quarters in the third quarter, hurt by falling music sales
at Universal Music Group and the dollar%26#39;s drop against the euro.
Maroc Telecom, in which Vivendi owns 53 percent, is buying
phone companies in Africa, where the wireless market has been the
world%26#39;s fastest-growing for the past five years, according to the
International Telecommunications Union. Maroc Telecom on Feb. 21
reported full-year net income rose 19 percent.
Fourth-quarter operating profit from Maroc Telecom rose 8.6
percent to 240 million euros.
In the games business, the World of Warcraft online role-
playing game has more than 10 million players. Earnings in the
fourth quarter slipped 28 percent to 21 million euros, hurt by
costs for staff retention as well as expenses to develop
StarCraft II and an expansion pack for World of Warcraft.
Pay-TV Merger
Canal Plus combined with smaller competitor Television Par
Satellite in January last year to create a single French pay-TV
company. The television unit%26#39;s fourth-quarter loss narrowed to
109 million euros from 263 million euros a year earlier, the
biggest single contributor to Vivendi%26#39;s profit increase.
The pay-TV operator has been unprofitable in the fourth
quarter for at least six years because of costs to acquire
subscribers during the Christmas holiday period.
Profit at SFR, France%26#39;s second-largest mobile-phone company,
has been hurt by tariff cuts imposed by regulators. Earnings fell
7.6 percent to 451 million euros in the fourth quarter, versus a
forecast for a 2.5 percent decline, based on the median of 15
analysts%26#39; estimates. Revenue rose 8.7 percent to 2.37 billion
euros after the purchase of Tele2 AB%26#39;s French business.
SFR is the company%26#39;s largest business by sales and profit
contribution.
Universal Music has suffered from declining CD sales and the
dollar%26#39;s slide. Profit in the quarter slipped 7.1 percent to 289
million euros, more than the 4.5 percent drop that analysts
estimated.
The recorded music market shrank 10 percent to about $17.6
billion in 2007, the eighth straight drop and the biggest since
sales peaked in 1999, according to the International Federation
of the Phonographic Industry. “Tens of billions%26#39;%26#39; of illegal
music files were swapped worldwide in 2007, with 20 unlawful
downloads for every legal one, the London-based group said.
Music Challenge
Vivendi plans to become less reliant on CD sales. It started
an Internet service called zaOza this month that offers unlimited
downloads of games, videos and music for mobile phones and
computers for a monthly subscription fee of about 5 euros.
The company agreed in December with Nokia Oyj to offer a
year of unlimited downloads with each handset. Universal Music
also agreed to make its songs available for free on social-
networking site Imeem in exchange for advertising revenue.
Of the 29 analysts tracked by Bloomberg who rate Vivendi, 25
recommend buying the stock, three to hold it and one to sell.
To contact the reporter on this story:
Rudy Ruitenberg in Paris at
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