Vivendi Cuts Its Losses

9/28/2003 8:00 PM Eastern

Vivendi Universal S.A. narrowed its losses in the first half of the year, fueled by strong results from its U.S. entertainment assets — slated to be sold to General Electric Co.'s NBC television unit next year — and its telecom properties.

In the first half of the year, revenue at Vivendi Universal was down 59% to 12.36 billion euros ($14.2 billion) from 29.99 billion euros ($34.45 billion), mainly because of a number of asset sales made to reduce debt. Operating income rose 20% to 1.677 billion euros ($1.93 billion), fueled mainly by the performance of its Cegetel and Maroc Telecom telephone assets.

Net loss for the period was 313 million euros ($359.5 million), a dramatic decrease from the 11.5 billion euro ($13.2 billion) loss reported by the French media giant last year.

Vivendi also made a major dent in its debt, reducing its leverage from 19 billion euros ($21.8 billion) as of July 2002 to 13.7 billion euros ($15.74 billion) in the current period, primarily through asset sales. Vivendi said it expects debt to fall to 5 billion euros ($5.74 billion) by the end of 2004.

Vivendi Universal Entertainment — which includes cable channels USA Network, Sci Fi Channel, Trio and NewsWorld International, the Universal movie studio and Universal television production, reported a 6% decrease in revenue to $3.1 billion and a similar decline in operating income to $537 million, but that was mainly due to a weakening U.S. dollar. At constant currencies, revenue at VUE rose 16% and operating income was up 15%, the company said in a statement.

"The management teams in VUE have nevertheless kept their end up, because their first-half 2003 performance has been very good and we hope that it will remain good for the rest of this year," said Vivendi chief operating officer Jean-Bernard Levy on a conference call with analysts to discuss the financial results last week.

The NBC deal, in which Vivendi Universal will keep a 20% interest, is expected to close in the second quarter of next year. The combined company, to be called NBC Universal, will include the NBC Television Network, NBC's cable channels Bravo, CNBC, MSNBC and Spanish broadcasting network Telemundo. The transaction values VUE at about $14 billion, according to analysts.

As part of the deal, Vivendi will receive $3.68 billion in cash and GE will assume $1.6 billion in VUE debt. The remainder of the $14 billion valuation is Vivendi's 20% stake in the NBC Universal entity.

Vivendi said on the conference call that it hopes to have a definitive deal with NBC signed in the next two weeks. Closing is expected after about six months of regulatory approvals, the company said.

Vivendi Universal chairman Jean-René Fourtou said the NBC deal has three strong points: it reduces Vivendi's debt, creates a new company with higher net income and forges a strategic partnership that will allow Vivendi to exploit its other media assets, including its French television and movie studio Canal Plus.

Fourtou said that a strategy committee is being set up concerning the NBC deal that will look into ways VUE and Vivendi's remaining media assets — including Universal Music Group — can partner with NBC.

"The role of that strategy committee will be to develop the ideas that we wish to implement in cooperation with NBC, extracting synergies from music, Canal Plus, and its film rights," Fourtou said.

VUE Numbers Improve
1 H '03 1 H '02
Source: Vivendi Universal financial report
Revenue$3.1 billion$3.3 billion
Operating Income$537 million$366 million

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