UPDATE: Vivendi 2Q Net Profit +12%: Confirms '08 Outlook

PARIS -(Dow Jones)- Entertainment and telecoms company Vivendi, Monday reported a 12% rise in second-quarter net profit and outlined synergy targets for its recently bulked up French telecom operations.

Vivendi's SFR, the second largest French mobile operator by revenue, aims to reap between EUR250 million and EUR300 million a year in cash synergies in 2011 from the acquisition of fixed-line and broadband operator Neuf Cegetel.

By buying Neuf, SFR gave itself more clout to better compete with incumbent France Telecom and hastened the consolidation of the French telecom sector, which is now grouped around five main players.

"As everybody knows, the telecom business is a scale business," SFR Chief Executive Frank Esser told a conference call with analysts. SFR plans to have five million French households connected to its next-generation fiber-optic network by 2013, he said.

Vivendi's net profit for the three months ended June 30 increased to EUR667 million from EUR594 million a year earlier, boosted by a EUR83 million gain from the early redemption of exchangeable bonds in Sogecable, the broadcasting unit of Spanish media group Promotora de Informaciones.

Adjusted profit, which strips out most non-recurring gains and charges, edged up 0.3% to EUR757 million from EUR755 million a year earlier, matching the average forecast of eight analysts polled by Dow Jones Newswires.

Vivendi confirmed 2008 guidance of adjusted profit growth similar to the 8.3% increase in 2007. The guidance excludes the impact of the acquisitions of Neuf and video game company Activision Inc.

"We see a very good resistance to this slightly tense economic situation," Chief Executive Jean-Bernard Levy told a conference call with reporters.

Adjusted earnings before interest and tax, or EBIT, the figure analysts follow to gauge Vivendi's operating performance, rose 3.2% to EUR1.36 billion from EUR1.32 billion, slightly below an analyst forecast of EUR1.37 billion.

"It's not bad," said Landsbanki Kepler analyst Conor O'Shea, noting that pay-TV broadcaster Canal Plus' results look good while those of telecom operator SFR appear "a bit light."

"Earlier in the year, there was the hope that the interims would see a guidance upgrade," said O'Shea, who has a buy rating on Vivendi shares. "But the sharp economic slowdown and delayed release of the World of Warcraft expansion pack...probably put paid to that."

At 1256 GMT, Vivendi shares were down 0.8%, or EUR0.22, to EUR26.22, underperforming a 0.4% decline in France's benchmark CAC-40 index.

Vivendi also owns Universal Music Group, the world's biggest record label by sales, and has majority stakes in Maroc Telecom, pay-TV broadcaster Canal Plus.

Meanwhile, CEO Levy said that Vivendi had abandoned plans to carry out a rights issue to help finance the acquisitions of Neuf Cegetel and Activision.

Still, charges linked to transaction, restructuring and transition costs from the two deals will drag down Vivendi's 2008 reported adjusted profit, Levy said, with elaborating. However, the company will pay out its dividend from an adjusted profit figure that excludes the impact of the two large-scale operations.

Implementation costs for the Neuf Cegetel and SFR transactions, meanwhile, will be EUR150 million, to be booked in 2008, the company said.

Vivendi's share price has declined about 16% since the start of the year, outstripping the DJ Stoxx 600 telecom and media indexes, as its subscriber-based revenue streams have given it a defensive profile and fears of a possible capital increase have receded.

In July, Vivendi reported a 15% increase in second-quarter revenue to EUR5.99 billion, boosted by the Neuf acquisition.

By Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738; jethro.mullen@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 1st September 2008