Vivendi reports biggest corporate loss in French history, but remains upbeat

7 Mar 2003

French media conglomerate Vivendi Universal yesterday posted a net loss of EUR23.3 billion on its 2002 operations, a rise of more than 50% on 2001, eclipsing the EUR15 billion predicted by most of the analyst community. The loss ranks as the biggest in French corporate history and comes just a day after France Télécom posted record losses of EUR20.7 billion. Total revenues rose by 4% to EUR28.7 billion, but operating income was slightly down at EUR2 billion. However, operating cash flow rose 115% to EUR2.6 billion, and operating income for Vivendi’s six core business units – Cegetel-SFR, Universal Music Group, VUE, Canal+ Group, Maroc Telecom and Vivendi Universal Games – rose 18% over the year to EUR3.2 billion.

Vivendi cited a write-down charge of EUR18.4 billion as the main reason behind the record deficit, as well as a EUR2.9 billion loss on portfolio investments. The main contributors to the deficit were Vivendi Universal Environnment, the book value of which was reduced by EUR6.5 billion, pay-TV operator Canal+ (EUR5.4 billion) and Universal Music Group (EUR5.3 billion). It said excluding exceptional items and goodwill amortization, the recurring loss for the year was EUR94 million. At the end of 2002 Vivendi Universal had cash reserves of EUR5 billion and an unused back-up credit facility of EUR1 billion.

During 2002 Vivendi succeeded in reducing its debt burden from EUR37.1 billion to EUR12.3billion. Vivendi chairman Jean-Rene Fourtou told analysts that 2003 would be a year of transition and of financial and economic progress. He said debts would be reduced by a further EUR7 billion during the year. His priority is to trim the Group’s US assets, with Universal Studios, Universal Music and two cable TV channels likely to head the disposals list. Among the possible suitors for Universal are Viacom and MGM.

The one ray of light in Vivendi’s armoury is French telecoms operator Cegetel, in which Vivendi raised its shareholding from 44% to 70% at the end of February 2003 after purchasing the 26% held by UK telecoms operator BT. The move increased Vivendi’s stake in France’s number two mobile operator SFR from 35% to 56%. Cegetel’s revenues increased by 11% to EUR7.1 billion In 2002 whilst its operating income grew by 56% to EUR1.4 billion. Revenues from Cegetel’s fixed telephony services grew by 18% during the year, mainly due to the liberalisation of the local telephony market at the start of 2002. Cegetel became the first company to compete with France Télécom in the fixed line market when it launched a long-distance and international service under the brandname Le 7 in February 1998. It remains the second largest operator in the country with more than 3 million fixed line subscribers at the end of 2002, up from 2.9 million the year before.

During the year SFR’s customer base (including SRR, its subsidiary in Reunion, an overseas department of France) grew to 13.5 million, giving it a 35.5% share of the French mobile market, up from 34% at the end of 2001. Its average revenue per user (ARPU) from prepaid customers increased 13% to EUR22.2, whilst that from postpaid customers increased slightly to EUR58.3. Vivendi said it expected Cegetel and SFR’s revenues to increase by around 7% in 2003, and their combined operating income to grow by more than 25%.

CIT's Datafile of European Telecommunications