Vivendi Shares Fall on Profit Drop as Iliad Boosts Revenue

Vivendi SA shares fell in Paris after first-quarter profit missed analysts’ estimates as a wireless price war started by Iliad SA entered its second year.

Iliad, which introduced monthly packages for as little as 2 euros ($2.60) last year, said today first-quarter mobile revenue tripled to 294.5 million euros ($380 million). SFR, France’s second-largest mobile-phone company and Paris-based Vivendi’s biggest unit, yesterday reported an 11 percent decline in revenue, to 2.6 billion euros.

“This has been a tough quarter,” Vivendi Chief Financial Officer Philippe Capron said during a conference call. “Really we feel a worsening economic environment across the board in basically all our activities, but especially in France.”

Wireless tariffs in France, still among the highest in Europe, have accelerated a decline since Iliad became the country’s fourth network operator. Market leader France Telecom SA, which sells services under the Orange brand, last month reported an 8.1 percent slide in first-quarter revenue.

Average monthly bills in the country fell to $36.25 during the final quarter of 2012 from $43.37 a year earlier, according to researcher Informa Plc. Still, the most recent figure exceeded an average of $30.37 for the U.K. and Germany’s $18.67.

Vivendi shares dropped as much as 3 percent to 15.50 euros before closing 1.7 percent lower in Paris. The stock has declined 7.3 percent this year.

Waiting Mode

Earnings before interest and taxes fell 21 percent to 1.18 billion euros, the company said yesterday. That compared with the 1.26 billion-euro average estimate among analysts compiled by Bloomberg.

More than a year after Chairman Jean-Rene Fourtou promised shareholders a “no-taboo” strategy review to reorganize its telecommunications-to-media structure, investors are still waiting for concrete proof of a revamp. Vivendi earlier this year halted a planned sale of its Brazilian broadband unit GVT. It is evaluating two bids for its 53 percent stake in Maroc Telecom SA.

Vivendi also owns Universal Music Group, video-game publisher Activision Blizzard Inc. and French pay-television company Canal Plus.

Vivendi is fighting a lawsuit filed in February by Lagardere SCA, which has a 20 percent stake in Canal Plus’s France unit, seeking 1.6 billion euros in restitution for the subsidiary. It’s retaliated with a slander and abusive lawsuit claim, seeking 1.2 million euros, Challenges magazine said. A Vivendi spokeswoman confirmed the report and declined to comment further on the case. A Lagardere spokeswoman didn’t immediately respond to an e-mail seeking comment.

‘Hard Look’

Adjusted net income fell 19 percent to 672 million euros, topping the 632 million-euro average estimate by analysts. Sales slipped 1 percent to 7.05 billion euros, trailing estimates.

At SFR, earnings before interest, taxes and amortization slumped 42 percent to 328 million euros. Activision jumped 12 percent to 442 million euros. Canal Plus slumped 23 percent, Universal Music dropped 19 percent, while earnings at Maroc Telecom were little changed.

All Vivendi units are “taking a hard look at their costs,” Capron said. On Activision, the board “continues to review a variety of different options looking at ways to optimize the balance sheet,” he said.

Maroc Telecom

Emirates Telecommunications Corp. and QSC Qatar Telecom last month submitted binding offers for Vivendi’s share of Maroc Telecom. While Vivendi wants as much as 5 billion euros for the holding in Maroc Telecom, according to one person briefed on the matter, a more realistic target would be in the range of 4 billion euros to 4.5 billion euros, two other people with knowledge of the sale have said. The stake has a market value of $5.9 billion.

Earlier this year, Vivendi scrapped its planned sale of GVT after it deemed offers from bidders that included U.S. pay-TV operator DirecTV and a private-equity consortium led by KKR & Co. to be too low. Vivendi had asked for 8 billion euros for the asset, a person familiar with the matter has said.

“We finally decided that the best way to serve our shareholders’ interests was to keep this asset and to continue to grow it and develop it,” Capron said yesterday.

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