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Vivendi Stumbles on Asset Sales; Shares Drop

Vivendi's Chief Administrative Officer Philippe Capron

Entertainment-to-telecoms conglomerate Vivendi said on Tuesday it could give no full-year group outlook until it had more clarity on key asset sales, prompting its shares to slip and analysts to caution the company needed to deliver on deals.

Vivendi is looking to sell assets including its 53-percent stake in Maroc Telecom and Brazilian telecoms and TV subsidiary GVT as part of an overhaul to cut debt and reduce its exposure to the capital-intensive telecoms business.

Les Echos newspaper reported on Tuesday that Vivendi had failed to obtain offers near its preferred price of 7 billion euros for GVT and was delaying the sale.

"If disposals disappoint, investor focus will switch back to weak earnings momentum and the limited credit rating headroom," UBS analysts wrote in a note.

Vivendi beat its full-year earnings target, helped by video game sales and a smaller-than-expected profit drop at its French mobile unit SFR, which has been hammered by a price war launched by low-cost mobile player Iliad.

SFR saw full-year earnings before interest, tax, depreciation and amortization (EBITDA) fall 10.6 percent before one-offs to 3.3 billion euros, better than the group's target for a drop of close to 12 percent.

Finance chief Philippe Capron said Vivendi was not in a hurry to push through asset sales. Vivendi's financial position meant it was not forced to make a "fire sale", he told analysts on Tuesday.

"We are not under pressure in our disposals processes," Capron said in a conference call with journalists. "If the prices are not good, we will take our time."

Vivendi shares fell 3 percent in early trading then narrowed the loss slightly to be off 2.1 percent at 15.605 euros by 0913 GMT, in line with the broader market.

The stock rose 3.2 percent on Monday on expectations of asset sales after Brazilian newspaper Folha de S.Paulo reported on Sunday that a deal to sell GVT, which provides fixed-line telecommunications, high-speed broadband services and pay television in about 120 Brazilian cities, was just weeks away.

Shares in Vivendi, whose businesses range from video games, music and pay-TV to telecoms, have lost about two-fifths of their value in the last five years. The company is penalized by a conglomerate discount, meaning investors undervalue its intrinsic value because of the range of subsidiaries - Vivendi has said it wants to shake this off to improve its valuation.

"The results look ok but, with Vivendi, we see the main catalyst as the sale of its telecom assets," a Paris-based trader said.

Mobile Customer Base "Stable"

Vivendi posted full-year adjusted net income of 2.86 billion euros ($3.78 billion) before one-offs, ahead of its target of 2.7 billion. Revenue rose 0.6 percent to 28.99 billion, compared with the average estimate in a Thomson Reuters I/B/E/S analyst poll of 28.51 billion.

The company said its postpaid mobile customer base was stable at the end of last year compared with 2011, and Capron said he did not expect further price decreases.

Vivendi stuck to its forecast for full-year EBITDA to fall further to close to 2.9 billion euros at SFR this year, with capital expenditure of about 1.6 billion.

"Some may see this as evidence of stabilization in the French (mobile) market, but after the recent round of price cuts, we remain cautious on the outlook for French mobile," the UBS analysts added.

The company's Activision Blizzard video games maker posted increases of 9.8 percent in revenue to 3.77 billion euros and 13.6 percent in EBITA to 1.15 billion last year as it launched new games such as Black Ops II.

The division is not expected to match last year's performance in 2013, however, due to a "challenged global economy" and a smaller number of game releases, Vivendi said, adding that the EBITA target was still above $1 billion.