Vivendi profit hit by fierce French mobile battle

PARIS Tue May 14, 2013 1:16pm EDT

PARIS (Reuters) - Entertainment-to-telecoms conglomerate Vivendi (VIV.PA) posted a 17 percent drop in first-quarter operating profit on Tuesday as its SFR French mobile division was hit by fierce competition.

The company said business in the quarter, against the backdrop of a "very challenging economic environment" was in line with its outlook and confirmed its full-year guidance for all its divisions.

Vivendi has still not given goals for the group, however, as it waits for more clarity on key asset sales, including that of Maroc Telecom (IAM.CS), which it does not expect to close before the autumn after receiving two bids.

Chief Financial Officer Philippe Capron would not be drawn on the progress of the Maroc Telecom sale.

He added: "I do not anticipate sizeable, large use of cash towards acquisitions in the immediate future."

Vivendi is still reviewing options for Activision Blizzard (ATVI.O), he said. It has previously been unable to find a buyer for the video games unit. It also confirmed its decision to continue developing Brazilian telecoms operator GVT after suspending an attempt to sell it in March.

Capron added that the group's 80 percent stake in pay-TV channel Canal+ was "core" and it was not interested in selling it to Lagardere (LAGA.PA), which owns the other 20 percent and is suing Vivendi in an ongoing spat over the business.

Vivendi said first-quarter earnings before interest, tax and amortization (EBITA) fell to 1.34 billion euros ($1.74 billion), a 16 percent drop at constant exchange rates. The biggest decline was at SFR, where operating profit plunged 42 percent.

Group revenue fell 1 percent to 7.05 billion euros, in line with analyst estimates, according to Thomson Reuters I/B/E/S.

SFR, which is France's second-biggest mobile operator after France Telecom FTE.PA, has been hurt by a price war in the French market sparked by the arrival of low-cost mobile operator Iliad (ILD.PA) a year ago.

SFR is still expecting a 12 percent drop in its earnings before interest, tax, depreciation and amortization (EBITDA) this year to 2.9 billion euros, but it hopes investment in super-fast mobile network, known as 4G, will help it claw back pricing power and retain customers starting next year.

SFR posted a 25 percent drop in EBITDA in the quarter.

"We are confident," said SFR finance head Etienne Du Vignaux. "If you look at cost reductions, we have taken actions that will have their effects only in the second, third and fourth quarter." ($1 = 0.7705 euros)

(Editing by Jane Baird and Helen Massy-Beresford)