* SFR drags on Q3 results
* Q3 sales 5.35 bln euro vs consensus 5.31 bln euro
* Q3 EBITA 730 mln euro vs consensus 707 mln euro
* Confirms annual goals for all units
* Role of GVT in future media co remains to be seen-CFO
* Search underway for new management for media co (Adds GVT, management issues, shares)
By Leila Abboud and Gwénaëlle Barzic
PARIS, Nov 14 (Reuters) - Vivendi said it was progressing with its plan to hive off its largest business, France's No. 2 telecom operator SFR, and had not seen red flags that could derail the project slated for middle of next year.
The music, pay-TV, and telecoms conglomerate also on Thursday confirmed its annual targets for its four business units after it posted operating profit down 23 percent to 730 million euros ($978.53 million), hurt by continued pressure on SFR brought on by an ongoing mobile price war in France.
"Work on the demerger is going at good pace," said Chief Financial Officer Phillipe Capron, who will leave the group in January. A successor has not yet been announced.
"Achieving an independent listing for SFR will be beneficial to our shareholders by removing the conglomerate discount and revealing true value and growth potential of our media businesses."
Vivendi is in the midst of a broad revamp to pay down debt, reduce exposure to telecom and focus on media. In July it announced sales of its controlling stake in video games maker Activision Blizzard and Maroc Telecom.
It also recently settled a dispute with minority partner Lagardere to buy its stake in pay-TV operator Canal Plus France for 1.02 billion euros. That move will boost earnings per share next year by 5 percent.
The transactions will allow Vivendi to cut its net debt to 7.2 billion euros when the transactions are done, compared with 13.4 billion at the end of 2012.
Cutting the debt is a key step for the group before it goes forward with the split of SFR from its other businesses, which are Universal Music Group, Canal Plus, and Brazilian telco GVT.
Overall, Vivendi's third-quarter sales rose 0.2 percent to 5.35 billion euros. Adjusted net income was 403 million euros.
Analysts had been expecting third-quarter sales of 5.31 billion euros, EBITA of 707 million euros and adjusted net income of 390 million euros, according to a Reuters poll of five analysts.
At SFR, revenue fell by 10.5 percent to 7.6 billion euros in the first nine months, while core operating profit slipped 19.5 percent to 2.74 billion euros.
Capron said SFR's results would bottom out next year in terms of operating profit before returning to growth in 2015.
As Vivendi works on the demerger, a search is also underway for new management to lead the soon-to-be-formed media company, Capron said.
Asked whether a sale of Brazilian telco GVT was possible given that it did not fit with the media ensemble, Capron said the decision was up to the new management.
"The management of the new media group will need a new equity story and a strategy, and they will have to decide how GVT fits into that," he said.
Regardless, Capron argued that Vivendi's media activities were undervalued - trading around 6 to 7 times 2014 EBITDA compared with global media peers at 10-12 times.
"Once the SFR elephant is out of the room, people will start to see that the other media assets are actually generating good growth especially on the bottom line."
Universal Music Group has grown its revenue by 17 percent to 3.4 billion euros and EBITA by 7.1 percent to 238 million on a reported basis in the first nine months.
Vivendi's other media business, Canal Plus, grew revenue in the period but EBITA dropped by 10.4 percent to 647 million euros because of higher content costs and the effect of new competitor Al Jazeera-owned beIN Sport.
Vivendi shares are up 7 percent this year to 18.23 euros per share, underperforming near 30 percent rises in the European media and European telecom indices. (Editing by Lionel Laurent and David Evans)