French media giant Vivendi reports profit slump

French telecoms and entertainment group Vivendi reported a big profit fall on Wednesday and said it was lowering its target for 2011 after France raised taxes to tackle its budget deficit. In a statement on its third-quarter results, Vivendi said it was targeting net profits this year of 2.85 billion euros ($3.38 billion), down from a previous target of more than 3.0 billion euros. Vivendi said it estimated the new French tax rules would cost it about 350 million euros this year. In the third quarter, the group said net profits fell 35 percent on a 12-month comparison to 241 million euros and sales fell 1.6 percent to 6.77 billion euros. Vivendi shares were showing a gain of 4.65 percent to 16.20 euros on Paris's benchmark CAC 40 index in mid-morning trading, since the results were better than some traders had expected. The sales drop was due mainly to difficulties at Vivendi's French telecom operator SFR, where revenues fell 3.6 percent to 3.01 billion euros, and at Moroccan subsidiary Maroc Telecom, where revenues dropped 6.2 percent to 698 million euros. The group nonetheless confirmed an increase of dividend per share for 2011. It also increased its forecast for 2011 adjusted net profits by 200 million euros, at constant tax levels, thanks to "the operational performance and favourable impact of the group's new organisation," financial director Philippe Capron told a conference call. Last week, Vivendi announced it will buy British music label EMI from US bank Citigroup for 1.4 billion euros to expand its Universal Music Group (UMG). UMG's revenues fell 4.7 percent in the third quarter to 979 million euros as an 11.3-percent increase in digital music sales and higher license income "only partly offset a lower demand for physical products," the group said. Vivendi also announced it had sold 35 million shares in its video game affiliate Activision Blizzard, lowering its stake in the company from 63 to 60 percent. The move came as Activision Blizzard saw third quarter revenues fall 7.6 percent to 533 million euros. But Vivendi said it was raising its outlook for Activision Blizzard's EBITA earnings to 850 million euros for 2011 following the strong launch of its "Call of Duty: Modern Warfare 3" title, which recorded sales of more than $400 million in North America and Britain in its first 24 hours of release. Vivendi's Brazilian telecom subsidiary GVT bucked the trend of falling revenues, seeing a 37.2 percent increase to 395 million euros. The group's French pay-TV unit Canal+ Group also saw revenues rise 3.0 percent to 1.17 billion euros.