Q1 2006 Vivendi Universal Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

DANIEL SCOLAN, EVP IR, VIVENDI UNIVERSAL: [Translated]. Could you please all be seated? Good afternoon, ladies and gentlemen. Mr. Jean-Bernard Levy, Chairman of the Management Board of Vivendi, and Mr. Jacques Espinasse, Member of the Management Board and Chief Financial Officer of our Group, are going to be presenting to you the first quarter earnings for 2006, as well as the outlook 2006/2011 for Vivendi.

Therefore it will be done a bit differently today. The presentation will be made in French today, with simultaneous interpretation into English. If you are in the room you can use channel one for French and channel two for English.

Furthermore, for those listening to us, this is going through a webcast on Vivendi.com/ir. It's also -- slides are also available on the Internet. You will be able to listen to this presentation again online for the next two weeks.

After the presentation, there will be a Q&A session. Answers to the questions will be made in the questioner's language, English or French.

I would like to give the floor to our Chairman.

JEAN-BERNARD LEVY, CHAIRMAN AND CEO, VIVENDI UNIVERSAL: [Translated]. Thank you, Daniel. Good afternoon to you all. Good afternoon to those of you in the room and those of you listening to us through the webcast or the conference call.

In a few moments, I'll be giving the floor to Jacques Espinasse and have him talk to you about our quarterly earnings which are good, which will enable us to increase our outlook for 2006 earnings, as announced a few months ago.

After the presentation made by Jacques, I'll be talking to you briefly about our strategy and the actual figures involved in that strategy. On April 20, at the shareholders' meeting, we gave a good description -- a long-term description of what Vivendi is now building. Since then we have worked with our business units. And today we can actually give you the figures to talk to you about what Vivendi may well look like by 2011. We will broadly outline what we are actually building right now.

I'll also talk to you about the nascent proposal received from a shareholder in the past few days, it was just a few hours before a supervisory board meeting, which approves these strategy plans which we submitted to them. And the management board and the supervisory board unanimously rejected that idea, that suggestion, that request to cooperate with an alternative strategy targeting dismantlement. But I'll talk to you about that more specifically later.

And then, after that, Jacques and I will be happy to field any questions you might have. Before the [commenting], I'd like to give the floor to Jacques Espinasse, who will be presenting you with our quarterly earnings.

JACQUES ESPINASSE, CFO, VIVENDI UNIVERSAL: [Translated]. Good afternoon to you all. I'd like to begin by thanking our English language interpreters. Usually these quarterly meetings are conducted in the English language. Today this will be done in French, though in future we will lapse back into English. But today, the circumstances are somewhat exceptional -- exceptional communications. And it's a pleasure to have Jean-Bernard with us, who's not always in attendance at these quarterly meetings.

But before beginning to comment on operating results for Q1, I'd like to remind you of something that's already written in the reference documents, talk to you about the reasons for changes in scope towards the beginning of the year. There were some changes that took place in scope. And, as is our custom, we will be talking about changes in the Group.

First of all, towards the beginning of the year, minority stake in Matsushita was bought, both in music and NBC Universal. That was a beautifully run negotiation by Robert De Metz, who's here in the front row. There was a significant discount to the tune of 30%. That enabled us to restructure, simplify all of our interests, particularly in North America.

Next, we mentioned to you in the reference document that we would be buying, in addition to the stake we already had, to reach 19.9% of Amp'd capital, which is Verizon MVNO. It's an MVNO specialized in event coverage, the reformat that's for cell phones. And investment, all in all, direct and indirect investment, amounts to around $50m.

In the first quarter we also - and this is a major feature for quarter one - we applied -- we were not successful, but we applied to acquire 35% of Tunisia Telecom's capital, which demonstrates that our investment process is firmly controlled, highly disciplined, and effective. We felt the price wasn't right to create value for our shareholders.

In the first quarter we thought the somewhat confusing situation in Poland would be settled. It hasn't been settled yet. We'll see what the future holds.

Next in the first quarter, very recently actually, we received the approval from the majority of ADR holders in the United States so that we'd be able, by August 28, to be able to de-list at the major stage in the New York Stock Exchange. Thanks to the delisting, in the long run we should be able to deregister in the United States, so no longer be subject to that. This is important because about two-thirds of the ADR holders gave the go ahead so that we could do this and de-list from the New York Stock Exchange.

So the first slide, which is on page two of the document, growth in revenues by 6.5%. Earnings from operations grew by 10.9%. As we indicated in the press release, if I just go through these quickly, adjusted net income grew as well. I'll come back to these in greater detail later.

Something isn't mentioned on the page, since we attach less importance to this. Nevertheless, this is something which we need to mention. The Group share of the net income after any non-recurring events is E707m, as opposed to E501m last year, which is a growth of 41.1%.

Now, I'd like to move onto the following page to talk about earnings from operations. Now, what we can say here is that we've had strong operating performance in Q1 which strengthens us, looking forward. You know this now. You've known this for about six weeks now.

In decreasing order of growth rates, you know our business activities, the best was Vivendi Games' growth here in Q1, at 18.6%. Next comes Maroc Telecom, 14.2%. Universal Music Group, 8.2% [sic - see documentation]. Canal+, fourth position, 7.7%. SFR, 2.9% growth rate. It's true the regulators really got involved in SFR. In spite of all this, growth rates against some analysts' expectations are in the neighborhood of 2.9% for SFR.

If you compare this with SFR's direct competitors and their growth rates, we can say that SFR's performance is satisfactory in Q1. If memory serves, other telecoms were plus 0.6 generally, or Bouygues Telecom, plus 0.6. Orange, about 1.6 up. So if we're trying to compare apples and apples, we still have to try to adjust things, and this was one of the strengths of SFR.

SFR owns about 700 stores. So you've got their wholesale revenues as well as their retail revenues. In marketing their products, if we adjust this for the 2.9%, it would become 2.3%. This is -- 9.3%, sorry, which is substantially better than the competitors -- than SFR's competitors.

Now, when it comes to earnings from operations, as such, I'd like to make a comment. Growth here is 10.9% in EFO after profit reached approximately E1b.

Some of you will have observed, and we did indicate, that Universal Music Group, there was a write back of their provisions. For the write back, actually, it's a reversal of charges. Under IFRS we had to put these under earnings from operations. This is due to the deposit that had been put down for a lawsuit. The lawsuit had been lost. People were trying to quarrel with us. But we'd then subsequently recovered the deposit, about E50m. This has an impact, a non-recurring one-off impact in Q1.

Also something for quarter one, there are some non-recurring elements. I won't go through all of them here but these do have an impact on operations. For instance, at Canal+, Canal+ stated [relative to that], Canal+ performance is entirely satisfactory.

In the first quarter, something somewhat unusual though, which you may not have noted. 2006 is the year of the soccer World Cup taking place in Germany, as we all know. This has made for a real upheaval in the League One calendar. In Q1 to date, there were two more League One days than in Q1 last year. One day for Canal+ costs a tidy sum of E16m. Multiply that, that is about E32m, the difference is E32m -- quantitative difference E32m.

A second reason for the variance which has a negative impact on Canal+ - new packages, new negotiations that took place with the national soccer league for three years. This has led to quite a step up. We went from E600m. That takes effect as from July of 2005.

This is why we can see in quarter one, and in Q2, I would also mention, the step up from the previous rate to the current rate, which is a big step up. And this is an explanation. We are not disappointed at all but this does explain why there is less operational performance for Canal+. The slight delay we have observed superficially will be reabsorbed by the end of the year because Canal+ has [agreement] to earnings from operations entirely in line with last year's figures.

Now, page four. On page four, as every …