Vivendi SA (VIV) tumbled as much as 9.4 percent after forecasting a profit slump through 2013 as SFR, the French wireless unit it bought out for 7.95 billion euros ($10.6 billion) last year, faces increased competition.
Vivendi, owner of the world’s largest music and video-game companies, bought Vodafone Group Plc (VOD)’s 44 percent stake in SFR last June to get full control of the business. SFR is looking to cut costs to cope with falling prices and revenue after new competitor Iliad SA (ILD) started a service in January.
“We have two growth engines: videos games and GVT, but we’ve also got a lot of competition and price drop in France in telecoms and television,” Chief Executive Officer Jean-Bernard Levy said on a conference call today. “Those are burdens which will weigh on Vivendi for two years.”
Vivendi fell 7.7 percent to 14.88 euros at 1:19 p.m. in Paris, where the company is based. The stock was the biggest loser on France’s benchmark CAC 40 Index. Iliad rose as much as 1.6 percent. France Telecom slipped as much as 1.5 percent.
Net income excluding one-time items will fall by as much as 15 percent to more than 2.5 billion euros in 2012, Levy said.
SFR’s earnings before interest, taxes, depreciation and amortization will drop 12 percent to 15 percent in 2012, from 3.8 billion euros last year, Vivendi said today. SFR’s cash flow from operations will decline 15 percent to about 1.7 billion euros.
SFR lost 208,000 subscribers, a little over 1 percent of its wireless customer base, in the first two months of 2012. Competitor France Telecom SA (FTE) said it had lost a similar number of clients as of mid-February.
SFR will adapt its structure, capital expenditure and operational costs, Levy said.
“The excessively favorable conditions granted to the new mobile operator by the regulator, the state and the incumbent operator lead SFR to reconsider very carefully its commercial offers and its cost base,” Vivendi said in a statement. “These efforts to adapt will place increased pressure on Vivendi’s results in 2012 and 2013.”
The French company said it plans to change its dividend policy and intends to distribute 1 euro per share in cash for 2011 as well as 1 free share for every 30 shares held. From 2012, Vivendi will pay out 45 percent to 55 percent of its adjusted net profit, compared with a previous policy of more than 50 percent.
Levy, who has been orienting Vivendi more toward the music and TV businesses, said the company has no current plans for acquisitions, and would wait until all recently announced deals are completed.
Universal Music Group, Vivendi’s music unit, agreed to buy EMI Group (EMIS)’s recorded music operations in November for 1.2 billion pounds ($1.9 billion). The European Commission has set an initial deadline of March 23 to rule on the deal, which is also being scrutinized by the U.S. Federal Trade Commission.
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