Vivendi Management Discusses Q4 2012 Results - Earnings Call Transcript

Feb.26.13 | About: VIVENDI SA (VIVDY)

Vivendi (OTC:VIVDY) 2012 Earnings Call February 26, 2013 3:00 AM ET

Executives

Jean-Michel Bonamy - Executive Vice President of Investor Relations

Jean-François Dubos - Chairman of the Management Board and Chief Executive Officer

Philippe Gaston Henri Capron - Chief Financial Officer and Member of Management Board

Pierre Trotot - Senior Executive Vice President of Finance and Administration

Analysts

Conor O'Shea - Kepler Capital Markets, Research Division

Jérôme Bodin - Natixis S.A., Research Division

Filippo Pietro Lo Franco - JP Morgan Chase & Co, Research Division

Julien Roch - Barclays Capital, Research Division

Matthew Walker - Nomura Securities Co. Ltd., Research Division

Ian Whittaker - Liberum Capital Limited, Research Division

Omar Sheikh - Crédit Suisse AG, Research Division

Charles Bedouelle - Exane BNP Paribas, Research Division

Polo Tang - UBS Investment Bank, Research Division

Thomas A. Singlehurst - Citigroup Inc, Research Division

Richard Jones - Goldman Sachs Group Inc., Research Division

Patrick Kirby - Deutsche Bank AG, Research Division

Operator

Good day, and welcome to the Vivendi's [indiscernible] I would now like to turn the call over to Mr. Bonamy. Please go ahead.

Jean-Michel Bonamy

Good morning, ladies and gentlemen. Thank you for joining us today for Vivendi's 2012 earnings [indiscernible] François Dubos, Chairman of the Management Board and Chief Executive Officer; and Philippe Capron, member of the Management Board and Chief Financial Officer. This presentation will be in English with a simultaneous translation. This call is webcast on vivendi.com where the slides are available for download. We invite you to read the important legal disclaimer at the end of the presentation on Page 54.

The full year 2012 financial report and consolidated financial statements will be available on our website as of today after the market close. In order to access the replay of this call for 15 days, also on our website, and as usual this presentation will be followed by Q&A session. And now I have the pleasure to introduce our CEO, Jean-François Dubos.

Jean-François Dubos

Good morning, ladies and gentlemen. A pleasure to be presenting with you -- to you the Vivendi annual results along with Philippe Capron, our Chief Financial Officer and member of the Management Board. Good morning, Philippe.

Despite the challenging economic environment, [indiscernible] subsidiaries reached their outlook in 2012. This with new market conditions and the intense competition from subsidiaries also reorganized their operations and put in place cost reduction program. Activision Blizzard, the business [indiscernible] all year, thanks to a series of successful launches. SFR [indiscernible] of its business model, including the implementation of a voluntary departure plan in order to maximize its value and stabilize its consumer base.

SFR was the first operator to offer 4G mobile network generation to both [indiscernible] customers and companies. Our telecom [ph] recorded strong growth in its international activity. GVT's development was once again confirmed with its network expansion and new pay-TV offer. Its major strategic transactions in content [indiscernible] included in 2012 [ph]. Acquisition of EMI Recorded Music reinforce [indiscernible] group's position and worldwide leader in music [indiscernible] strengthened its position in free-to-air TV in France and in Poland. It's consolidated its presence in pay-TV wide offering in the free-to-air market. These transactions are in line with Vivendi's desire to strengthen its position in media and content. Vivendi has all of the assets needed to assert itself as a European bond global leader. Our ongoing strategic review was defined precisely and as and when appropriate, the right path to increase the overall group's value and to best serve shareholder interest.

Looking at the first slide, we are pleased to demonstrate that Vivendi delivered on its commitments in 2012. In terms of operating performance, all businesses achieved results in line or above initial guidance.

Adjusted net income was slightly above upgraded guidance. Net debt was well below guidance. Concerning acquisitions, the successful disposal of our EMI assets required by Brussels and the strategic acquisitions by Canal+ in Poland had been closest [ph] for satisfaction. Last but not least, the process regarding the strategic review is ongoing.

This slide is self-explanatory and gives you the key numbers for 2012. I will let you read them for yourself. Revenues 28, 29 EBITA, adjusted net income, CFFO, net debt.

As a result of these figures, the management -- the Management Board will propose a EUR 1 dividend per share to our shareholders payable in cash on May 17.

We were very active in 2012, including acquisitions announced in 2011. As a result of the EMI deal, we are -- we have reinforced our worldwide leadership, specifically in the 3 main markets: U.S.A., Japan, Germany. We are present in 77 countries now. We are developing our presence on digital platforms, which are, by nature, transnational and the disposal of EMI assets is a success, with 1/3 of EMI revenue sold for almost up the initial price of the acquisition.

With Canal+, we have successfully relaunched the 2 free-to-air channels, D8 and D17. Meanwhile, in Poland, we have created the #2 pay-TV operator and gained the foothold in the free-to-air market, too.

Litigations. We are very committed to protecting shareholders' interest at Vivendi. You already know our position on Liberty Media lawsuits, and the securities class action, all debate since 2012 -- 2002. You can read this slide for yourself, and Philippe will come back to this later, if necessary.

In short, Vivendi strongly believes that there are many grounds for appeal and continues to pursue all available path of action to overturn the verdict and reduce the damages award.

To come back to the element of our strategic review, I confirm that we want to strengthen our presence on media and content while unlocking value for SFR. We are convinced that having a strong presence in content in a strategic asset in the digital world. We at Vivendi have the opportunity to build a worldwide European-born media champion. Thanks to our leading positions in games, music and audiovisual. We have great brands and a unique expertise. The objectives of the strategy are enhance growth with a focus on shareholder return and a higher valuation of the total group. Our aim here is that with the refocusing organization and lower costs, there will be no justification for the conglomerate discount. We have a strong commitment to unlock value for SFR. We will continue to invest in SFR. To boost growth, we intend to remain in and develop our premium customer base, while increasing segmentation between low costs and premium offers and leading the market on 4G. We are realigning operations to manage costs down, creating savings of EUR 500 million. In parallel, we are studying certain strategic alliances in networks and industrial partnership.

To conclude, ladies and gentlemen, Vivendi is focused on the following key priorities of 2013: cash flow generation in a challenging environment, adaptation of our telecom business -- our telecom businesses to this environment, integration acquisition and delivering synergies. Strengthening in media and content is our focus for 2013, while continuing to unlock value for SFR, and finally, creating value for Vivendi's shareholders. Thank you, and now I will hand over to Philippe.

Philippe Gaston Henri Capron

Thank you, Jean-François. Good morning, everyone. It's a pleasure to be among you here to present our annual results.

As well expected, 2012 proved a very challenging year because of the economy, especially in this country, but also because of the specific challenges facing SFR, given the market developments, which occurred last year. In light of this, I'm proud to report that our businesses all delivered very satisfactory performances and it's fair to say ahead of expectations.

Adjusted net income at EUR 2.55 billion is EUR 400 million below the previous year. But if you take out the changes in perimeter, so fine at SFR, which relates to many years ago and the restructuring plans, which were implemented at Maroc Telecom and some of its African subsidiaries, as well as booked for SFR even though the plan itself will unfold over this year, then you are -- you have an adjusted net income of EUR 2.86 billion, which is not so far from last year's performance. So overall, in the face of everything which happened, I would daresay this has been a good year. Why? Well, it's fair to say that it's been driven in large part to the excellent performance of Activision Blizzard, driven by the strengths of their franchises. I will get back to this. But also SFR delivered better-than-expected results, with an EBITDA down 10.6%, whether we had guided the market initially at somewhere in between minus 12% and minus 15%. Strong commercial cost control and cost control in general has been the main driver to this performance by SFR. Maroc Telecom has also been an excellent performer. We had guided the market to expect after, it's fair to say, a dismal 2011, another couple of difficult years before we re-stabilized Maroc Telecom. But actually it has restabilized already in 2012 and we have every indication that this will continue in 2013. So we are extremely happy with the way the company has reacted to yet another challenging competitive environment.

EBITDA margin at GVT has reached a new record and grows continue unabated in spite of the change in VAT, which occurred late last year. Additionally, all Vivendi businesses generated strong cash flow, so that our net debt at year end, after spectrum and after EMI acquisition, is well below the guidance -- the initial guidance of minus -- of less than EUR 14 billion.

I won't dwell on those figures. They have been already shown to you by Jean-François. Not much to say, really, and I'll get back to each of them.

Recent highlights for our media businesses. As I've said, we had a record EBITA, more than EUR 1.1 billion at Activision Blizzard. This is in spite of further increase of the deferred EBITA figures. So we've not actually -- we've not used up those resources. We've further built them. So in the face of a year, which, of course, is going to be more difficult because of the consoled cycle and less launches. It's reassuring to know that we have an enlarged mattress, so to speak, of accumulated earnings, which we put forward -- which we push forward. Another satisfaction last year has been the fact that Skylanders is really proving to be a third leg to the business. I mean we're often criticized for the fact that we have Activision Blizzard only 2 legs: Call of Duty and World of Warcraft. Which is good in a world where most everybody else has no legs at all but it's only 2. And we are happy to see that Skylanders is really growing into a third leg of the business, with about $1 billion of sales last year and yet another game, which is going to be launched this year. Diablo III also from Blizzard has been a great success.

Net cash at Activision Blizzard has reached $4.4 billion at year end. That's net cash, no debt. And of course, the board is currently -- as has been announced by Activision, the board is currently looking into the possible uses of that cash.

UMG has successfully closed the EMI acquisition and sold the Brussels mandated remedies at excellent conditions. We'll get back to that. And meanwhile, the core business at UMG, prior to the acquisition, was slightly up, as digital sales and new modernization models continue to develop and to offset the decline of physical, which is less and less relevant, especially in North America as time passes.

Canal has been building its future last year by completing its major strategic movements into free-to-air in France on one hand and pay-TV in Poland, while already enjoying good growth overseas. Canal overseas is another growth engine for Canal. And this offsets a more difficult environment in France because of competition, because of taxes and because of the economy, but so far Canal is proving up to this challenge.

The proceeds from EMI asset sales have reached about GBP 530 million. That is close to 1/2 of the initial price tag we paid for the whole of EMI. So basically we will have sold about 1/3 of the revenue for close to 1/2 of the value. So with hindsight, it's going to look like a very sweet deal, because when we factor in the restructuring cost, which have been incurred or which are ahead of us and the synergies, which are going to be extracted over the next couple of years, we will have paid for this acquisition less some 5x EBITA. So by any standards, this acquisition will prove extremely beneficial, leaving aside the strategic benefits of being the undisputed leader in this industry.

Recent highlights for our telecom businesses. Relative to the environment, as I mentioned, they all posted a very strong performance last year. Maroc Telecom, as I mentioned, re-stabilized 1 year ahead of plan, thanks to very strong growth in the African subsidiaries. The EBITA margin is up more than 1 point, reaching 56%. And if you take time to think about it, knowing that the market is declining a little bit in Morocco, this is offset by growth in the African subsidiaries, but this growth should be dilutive, given the fact that the EBITDA margins are below the Moroccan level and the other African countries. But EBITA margin increase has been such in the African subsidiaries that this has offset some mix effect and actually, we're growing the EBITDA margin. The EBIT margin at 39.6% is also well above guidance and CFFO is up even after paying for the redundancy plan, which we booked in Q2. And overall, if you took out the restructuring plan, you would see that EBIT actually has been flat or slightly growing in Morocco last year, which is an amazing performance in the face of a very steep price decline in the country itself, in Morocco itself.

GVT has continued on a strong growth path in spite of the VAT change impact, as I said, and in spite of weaker currency. So that results are more impressive in reals [ph] and they are in [ph] Euros but still we're extremely pleased with the way the company is developing. I'll get back to that.

SFR, as I mentioned, is ahead of guidance, was only at 10.6% EBITDA decline versus 12% to 15%. Commercial momentum has been reestablished, including in fixed and we are, clearly, leaders in 4G deployment.

A few more words on SFR. We now think we are fully adapted, fully adjusted, to the new competitive environment. We feel we offer the best value proposition for each segment. Of course, we emphasize our presence on the high end of the market. We feel that premium offers will continue to account for 60% to 70% of our customers and the huge majority of our sales. We'll definitely try to preserve and launch [ph] our premium on pricing, leveraging 4G access and other innovations. I want to reassure our competitors because sometimes they worry for us. We are not going to cut prices down across the board. We are doing this in a very selective, tactically efficient way. We are not going to give away 4G with our low-end subscriptions, and we've never been leaders in price reduction. We're not going to start now. The best indication of this will be the guidance I showed you in a while. I mean we are still guiding the markets on EUR 2.9 billion of EBITDA next year, which, I guess, is a best reassurance we can give you guys.

And at the same time, of course, our new streamlined tariffs will help drive a further round of cost reductions through complexity reduction.

If you look at the breakdown of our EBITA contributions last year, I mentioned the record performance of Activision Blizzard at EUR 1.15 billion. Music has been up -- slightly up, at EUR 525 million. This is before any net contribution of EMI, the 2 months of contribution of EMI has been offset by restructuring charges and, therefore, this is really the core business, which has been slightly growing, which we're very happy with, of course. SFR is down to EUR 1.6 billion, but this includes some non-restructuring items, including the fine I mentioned and, of course, EUR 187 million of restructuring charges and mostly the redundancy plan, which has been announced and which has been negotiated.

Maroc Telecom is down, but, as I mentioned, this is due to the restructuring charges. We had 1,400 people go out of Maroc Telecom itself, and this, of course, will help drive cost down in the next years. Leaving this phenomenon aside, we would have been almost flat last year.

GVT is growing by 23% on the face of it but this is in Euro, in reals [ph], the real growth is 33.7%, and this calculation is becoming a bit more awkward as time goes by, of course, but if we had not have to suffer an increase in ICMS, so local VAT, our actual EBITA increase would have been 58%.

Canal is slightly down. That is due to the cost of relaunch of D8 and D17. If we took those charges aside, we would actually be slightly up at about plus 2%.

So overall, a strong performance across the board, as I mentioned.

Adjusted net income is down 13.6%. This is, of course, driven by a lower EBITA. We also have less income from investments, because last year, we still had a last dividend from NBCU at the very beginning of the year, which did not occur in 2012.

Interest charge has increased somewhat due to the larger average debt over the year. This impact has been actually lessened by the very favorable financing conditions, which have lowered the average interest on our gross debt.

The tax is going down but not as much as you would expect, looking at the pretax earnings. This is due to heavier taxes in both France and, to a lesser extent, Morocco, which have taken the effective tax rate from 26% in 2011 to 28% in 2012. And then, of course, the noncontrolling interest come down in spite of a very good performance of Activision Blizzard due to the fact that we now control SFR fully.

The IFRS net income group share itself is much lower at only EUR 164 million, but that is because of 2 significant noncash items. One is the provisioning of the Liberty Media litigation and the other one is an impairment of the goodwill on our 80% stake in Canal+ France, which is mostly driven by the increase in VAT. As you know, in 2014, VAT will go from 7% to 10%, which means roughly EUR 80 million for Canal -- of additional tax burden for Canal. And in the present environment, there's not much which can be done to pass this on to the customer. Therefore, this means an EUR 80 million impact per year starting next year. And if you do the math, it's a very large part of the EUR 665 million impairment charge, which we are taking this year on Canal+ France.

I'm sorry. Cash generation, however, has remained extremely strong. In 2011, we had generated EUR 8 billion of cash. This year, we come close to this performance. In 2012, we generated EUR 7.9 billion. So as you see, the decline in earnings has not been parallel to the decline in cash generation. We've taken care of that. Of course, the cash flow from operations after CapEx, is significantly down, but this is due to the fact that we had an exceptional CapEx charge last year because of the spectrum acquisition. We paid at the very beginning of the year 1 point -- EUR 1,065,000,000 for 4G spectrum and, of course, this is reflected by the CFFO. If you excluded the spectrum acquisition, CapEx would be EUR 3.4 billion, and the increase is mostly driven by GVT, due both to the network rollout on telecoms but also increasingly leads to the pay-TV launch, which generate CapEx. That's related to the set-top boxes we install in people's homes.

Our net debt is below guidance at EUR 13.4 billion at the end of 2012. It would actually be less than EUR 13 billion if we were already taking into account the -- of the EMI remedies, mostly Parlophone and Sanctuary, which have been sold at good conditions, as I mentioned. The other interesting thing to note is that without spectrum or without EMI, the EMI acquisitions, we would have actually had decreased in our debt. So in this front, the situation is fully under control and it doesn't mean we have any margin from maneuver from where we are, but it also explains why we are not in any hurry to sell assets at any prices. Especially our present level of debt is proving very easy to finance or refinance in today's market environment. In particular, we are enjoying a large and cheap commercial paper program. We're actually, I mean -- we're actually enjoying now more than EUR 4 billion of support from the commercial paper market at conditions which are unheard of, I mean, historically low, less than 20 basis points. And we are also refinancing on the bond or bank market at conditions, which are relatively attractive from an historical perspective.

For 2013, we are releasing guidances by business. We are not releasing an overall guidance for Vivendi. We feel that because of the strategic review, both our group level earnings and/or dividend policies need to be reassessed and need to be recalculated according to what the perimeter is going to look like. And therefore, we are not giving an overall guidance. But we're giving a guidance for each of our businesses.

Activision should generate an EBITA above $1 billion. That is significantly less than this year. This year has been exceptionally strong like the year before. We have less releases in 2013 and also the console cycle is traditionally creating an environment, which is less conducive to software sales.

Universal should post a significant increase in EBITA with a positive contribution from EMI Record Music. This, of course, after restructuring charges.

EBITDA at SFR, as I mentioned, should be close to EUR 2.9 billion, with CapEx around EUR 1.6 billion.

Maroc Telecom should maintain its EBITDA margin around the present very high figure of 56%, and show a slight growth in EBITDA minus CapEx. I forgot to mention it but, I mean, both SFR and Maroc Telecom have had amazing cash generation this year -- I mean, EUR 1.8 billion before spectrum acquisition for SFR and a growing CFFO for Maroc Telecom as well.

GVT should continue to post a significant growth in the low 20s at constant currency. EBITDA margin should still be above 40% in spite of the pay-TV business, which is growing, which is, therefore, creating some dilution on the margin level. And EBITDA minus CapEx, which was breakeven for telecoms alone this year should be breakeven for the business as a whole in 2013.

Last but not the least, Canal should have an EBITA around EUR 670 million before the restructuring related to pay TV in Poland. That is up EUR 50 million if you look at the pro forma of last year if Canal had had Poland and the free-to-air channels for the whole year, it would have generated about EUR 620 million this year.

In conclusion, our key priorities for 2013 is, of course, to continue to focus on cash flow generation. And that is all the more important because of the challenges due to the economy, to the macro. We will continue to adapt our telecoms businesses to this environment. We'll integrate, of course, the acquisitions, which were closed late in 2012, in order to deliver the expected synergies. And we will implement the board's new vision, which is to strengthen media and content while making sure we maximize the value of our telecom assets, especially SFR. We'll focus on shareholder value creation. I mean we clearly look forward to cash returns to our investors, which may include dividends but also buybacks, as mentioned by Jean-François. And we'll remain strictly committed to our present BBB or Baa2 credit rating. And as mentioned by Jean-François, also, $1 dividend per share will be paid on May 17 to the -- to our shareholders provided the General Assembly votes -- approves it, of course. Thank you, and, I guess, now we're ready, Jean-François and myself, to take questions.

Question-and-Answer Session

Operator

[Operator Instructions]

Conor O'Shea - Kepler Capital Markets, Research Division

Conor O'Shea, Kepler Capital Markets. Three questions, if I may. Two questions on SFR. And you mentioned the drop in prices is quite selective in January but seen at least from the outside quite across the board. Can you give us an indication of what's your assumptions are in terms of how long it would take from subscriber base to be on the 2013 prices? That's the first question. Secondly, how do you maintain your EBITA target? I guess, EUR 2.9 billion was what was assumed before the price decreases. That doesn't seem to have been an acceleration of cost savings. How do you explain that? And then just the last question on Canal+. You mentioned the increase -- the impact of the increase of VAT in 2014. Recently, we have the impression that you've been investing more in programming costs with the FORMULA 1 rights and FAPL rights renewed presumably at a higher costs. Can you give us an indication what kind of evolution on programming cost we might expect maybe next year?

Philippe Gaston Henri Capron

You're sitting exactly behind the 2 experts who are able to answer your questions. No, no, no. [French]

Jean-François Dubos

About the tariff drop. When you are concerned with our tariff drop, you should look at our competitors' tariff decreases as well and in very detail. And you will see that, as Philippe mentioned, we are not leaders in cutting prices. We are fast followers but followers only. When you -- it may appear that we are less expensive, but it's for much less than the others, especially Orange. And what we did in our -- generate tariff decrease was just to align to competitors' tariff, including promotions, which tend to be everlasting promotions today [ph]. So be careful. This was the first thing. The second thing was what is the impact on the EBITA of 2013. Last year, we announced that over 2012, '13, '14, mobile service revenues should decrease by 25%. That was an estimate. We declined -- we decreased 11% this year. We shall decrease 12%, 12.5% in 2013. When I say this year, it was 2012. This is, more or less, in line with what we had said last year. So we are not visioner but for the time being, it's -- we are in line. The better-than-expected EBITA decrease that we experienced in 2012 is due to the fact that we are controlling costs and not that bad but also the fact that we were slightly late in repricing the base versus our competitors. Actually, we started actively repricing in September, and we are accelerating this year. But we are on track with what we announced so far, like in [ph] Europe. Just to mention that you didn't ask the question but I will answer. The EUR 2.9 billion EBITDA guidance for 2013 is quite challenging. It assumes no further price war or very limited, very, very limited one, no change in French tax environment. We have a lot of taxes, deep tax rate [ph]. We expect to have good news [French]. We assume it will not change, but it's not yet decided. And also it's subject to global French economic environment being stable, which is not sure. So this guidance has more potential downside than upside. You may understand.

Philippe Gaston Henri Capron

Gregoire [ph].

Unknown Executive

For Canal+ [ph], as you noticed it, we are not in great [ph] strategy for the premium content. We not only secured our content but also enriched our premium content through, firstly, the English Premier League that we secured for France, but not only for France for all our territories, also in Africa, Vietnam and Poland, and we also enriched our offer with FORMULA 1 and also with the output in [indiscernible] in September 2012. Of course, I can -- I can't give you the exact impact for confidential reasons of this new -- this renegotiation, but what I can say is that, the -- of course, our target for '13 includes the increase for mainly the premium sports rights. Regarding the VAT impact, well -- the VAT impact will represent around EUR 80 million in '14, and we think that it will be difficult to increase our price, and we think that we could partly offset this hike but not totally because of the economic environment and also the competition of brining sports who introduced a new price reference at EUR 11 and the Canal+ offer is around EUR 39.

Unknown Analyst

[indiscernible], Cheuvreux [ph]. A couple of questions from my side, please. The first one is to follow up on Canal+ [ph]. I remember you used to give the detail on the share of our [ph] customers, there will be no [ph] reprice; is it possible to have this figure again? And I understand you are accelerating the repricing for the old contract; but what would the impact of this change in 2013? It's going to accelerated pricing? And second question is related to the lawsuit against Lagardère concerning the access of cash of Canal+ France. Could you please update us on this one? And also technically there is any fiscal friction in case Canal+ France as to pay the cash dividend to its shareholders [indiscernible] and Lagardère [ph]?

Philippe Gaston Henri Capron

On the reprice as explained by Pierre, we've already repriced about half of our base. And this will continue, the new tariffs announced last year for many, many -- or at the beginning of this year for many customers will not change a lot. And what we expect is less a very significant further ARPU decline and a very significant decline in churn for those old customers who are in a very old contract who were -- some of them were asleep on them, but many, when they woke up, were immediately churning away from us. So we expect for this proactive method to reduce churn. And the first tactical indications we have is that this is working. On the lawsuit of Lagardère, I mean, we are not going to make large comments. I mean the situation is well-known. Let's just say that we feel very confident that the treasury convention, the cash pulling we apply to all the group subsidiaries is valid from a legal point of view. Our auditors are certain that this was a normal conditions, that convention between related parties and, therefore, we feel legally very strong. But even if we lost, I mean, it would just mean that group Canal has to send back its treasury to Canal+ France who would then have to invest it in other risk-free instruments, yielding presumably less than the yield they are presently enjoying. And there would be no change for -- we would have to borrow more on our bank lines, which would not be good for some of the bankers here in the room, but is largely relevant for us. And at the end of the day, I'm not exactly sure to see what Lagardère would have won from it. I mean the real -- the real thing they're after is dividends, but that's not what they're asking and that's not what they're getting.

Jérôme Bodin - Natixis S.A., Research Division

Jérôme Bodin from Natixis. Two very small one from me. The first one on Activision Blizzard. I see that your stakes is at the 61.5% end of '12, so I just want to check that point, so it was 63% in Q3. So did you dispose some shares in Q4? My second question is on Canal+. You were mentioning costs for the FORMULA 1 rights. If we could have your view on revenues and what is it to the new contract?

Philippe Gaston Henri Capron

Okay, I'll answer Activision first. No, we've not disposed of any share. I mean, as far as I know, our share has been -- our share of the company has been completely stable over Q4. It was 61%; it's still 61%. It's the previous year; that's also almost 15 months ago, which we had disposed some shares in November. But since then, we've had no sales and, therefore, no change. On the other hand, the company has stopped buying back its own shares after Q2 and, therefore, we've not been diluted [ph] the way we used to the previous years. On Canal, Gregoire [ph]?

Unknown Executive

Yes. On Canal+, of course we think that the FORMULA 1 will help us in recruitment and also in churn. And mainly in the tough competition with bringing sports, but I can't give you exact figures of the impact we target with this way.

Philippe Gaston Henri Capron

We might switch to questions from -- on the telephone. Filippo Lo Franco?

Filippo Pietro Lo Franco - JP Morgan Chase & Co, Research Division

So I have 3 questions, please. The first one is concerning Activision Blizzard. I mean, just to come back on the previous question, you said that you have 61%. I wanted to know if you consider this as a share that you can keep even if there is, for instance, Activision Blizzard a potential share buyback. And actually how do you think about this? The second is you usually provide in the past an Activision Blizzard EBITA guidance for you in Europe and IFRS. What would this be, or should I just confer to the EUR 1 billion in Europe? The thing that I'm missing is the potential IFRS impact. And then should you sell any asset, as we all hope you're going to do, would you consider buying back some of your shares to avoid dilution?

Philippe Gaston Henri Capron

Okay. First on Activision Blizzard, I mean we're at -- again we're at 61%. There is no project right now to change that situation. We'll see if opportunities arise and, as I mentioned, the board is presently considering how best to use the cash balance on the balance sheet in the interest of all shareholders. Therefore, there's not much more I can say at this stage. We'll see how we react to the proposals. Concerning the guidance, it is IFRS. It is in dollars just because I don't know Jean-Michel is feeling cute and wants to give a guidance in dollars, so that -- the good news is that our guidance increases every day, nowadays, given the strength of the American currency, but that's a comparable figure to the EUR 11.50 million, which we have posted. And regarding sales, yes, as indicated by Jean-François, if there are disposals, we do consider buyback -- buybacks as a possible way to pass some of the proceeds on to the shareholders, if only to limit or cancel out the dilution, which inevitably would follow any major asset disposal.

Filippo Pietro Lo Franco - JP Morgan Chase & Co, Research Division

Okay, fantastic. I just want to make sure that I understood well. Okay, fantastic.

Philippe Gaston Henri Capron

Julien Roch, Julien?

Julien Roch - Barclays Capital, Research Division

First question is on EMI. Would it be possible to have the 2012 pro forma revenue and EBITA, taking into account the acquisition and disposals, as well as the restructuring charge for '13? That's my first question. The second one is on net debt. I understand that the perimeter might change but would it be possible to have a guidance for '13, if the perimeter was not changing on net debt? And then the last question is the amount of the Canal+ restructuring in '13 for your guidance of EUR 670 million x restructuring. Those are my 3 questions.

Philippe Gaston Henri Capron

Okay. So for EMI, I forget the exact figure but we must have had something like EUR 30 million contribution in 2012, which was completely offset by the restructuring charges, which we started in those countries where you can do it quickly. And was the situation was clear because there was no remedies. For 2013, EMI should contribute something like EUR 100 million to UMG, but a large proportion of this, something like EUR 80 million, will be invested in further restructuring in the other countries. So that the net gain for UMG will be limited. It is only in 2014 that we'll have the full impact plus synergies and with no more restructuring charges. In terms of net debt, we're not giving any guidance. We feel that there are too many unknowns regarding the perimeters, so we've deliberately chosen not to give guidance. And the restructuring in Poland should be about EUR 50 million of restructuring cost. Keeping in mind the fact that we are expecting north of EUR 60 million, possibly more, we hope more, million Euros of the synergies on the pay-TV operations, which are being consolidated in Poland. So the payback on that investment will be very quick. We take a question from the room.

Unknown Analyst

[indiscernible] Just a question on the SFR, if you can give some position about your industrial partnership that you mentioned on one of your slides. I was wondering if you could be a close cooperation with the [indiscernible]? And also if you can have an update on your fiber strategy, and how much you plan to invest this year? And how much would go with the Maroc Telecom [ph] investment scheme?

Philippe Gaston Henri Capron

We do envisage industrial partnerships. We do not envisage -- and that can take a variety of forms, and we do not envisage a strategic partnership at this stage, i.e., revolving around capital. On fiber, I think Pierre is better suited to answer.

Pierre Trotot

In 2012, we invested the EUR 130 million and we shall invest EUR 170 million in 2013. Out of these co-investments that we are doing with telecom [indiscernible] will be limited to EUR 20 million, EUR 25 million because it's only the start.

Jean-Michel Bonamy

Matthew Walker from Nomura. Matthew?

Matthew Walker - Nomura Securities Co. Ltd., Research Division

I was just wondering if you could give us a few updated thoughts on GVT, and what your attitude towards the process going on down there is? The second question goes back to Canal+, so you've got EUR 670 million minus EUR 50 million for 2013 of the restructuring charges in Poland. Then I guess what you said was you've got some synergies of EUR 60 million or so kicking in 2014. Is that -- is it correct to assume that, that is going to be basically offset by the EUR 80 million of VAT impact in 2014? So effectively in 2014, you will end up back with a sort of EUR 600 million to EUR 620 million kind of figure for EBIT in Canal+?

Philippe Gaston Henri Capron

You're forgetting the free-to-air channels, but I will let Gregoire [ph] answer you more fully.

Unknown Executive

Yes, as Philippe mentioned it, we target EUR 60 million impact of synergies in Poland but by year end '15, '14, so we will benefit from the synergy in '14 but only partially. The second thing is that, of course, the maintenance cost [ph] will suffer from the VAT impact. The VAT hike will represent about EUR 80 million, and we mainly -- we will only offset the impact in maintenance [ph] and [indiscernible], with the new-to-us [ph] driver and mainly the free-to-air channel and the -- of developments outside France.

Philippe Gaston Henri Capron

On GVT, I mean we've not officially confirmed that there is a process, but since some of the bidders have publicly announced that they were making bids, it would be a bit foolhardy for me to deny it. So clearly, in light of what we said about strengthening in media and focusing on media, yes, we had an exploratory -- we have an exploratory process on GVT, whether -- and this is still going on by the way. It's not gone cold as some papers have indicated. Whether it will go through will really depend on whether we feel that the value being proposed to us is representative of the quality of the asset. I mean, this is -- it's fair to say that the main growth engine of Vivendi, it is a superb asset. There is still a lot of growth ahead for quite a few years because we've not covered the full country. We're just rolling out -- starting to roll out in São Paulo city proper. And therefore, I mean we are not in any hurry to rush any asset -- to sell any asset, but least of all, GVT, given the growth potential. So yes, if we have a very good price within this process, we will definitely recommend selling to our board who will make the ultimate decision. But if the price is not right, we won't and we'll wait and we'll sell something else or we'll wait. We don't feel that it is in your interest, and the shareholders' interest to fire [ph] sales or assets when actually financially we are definitely not forced to. So we take a question by Ian Whittaker. Ian?

Ian Whittaker - Liberum Capital Limited, Research Division

Just 3 questions. The first one is just leading on from your answer on GVT. You said you've just started to build out in the city of São Paulo. I think on the last conference call, you had said that you had delayed that. So I'm just wondering if that was right, and if it is, is there was any reason why you changed your strategy there. And the other 2 questions, first of all, just relates to the -- of your view on the priorities of cash, any cash that is raised from any disposals that you do. Do you have a pecking order in preference for what you would use that cash for, whether share buybacks, further acquisitions, organic revenue growth and so forth? And then the third question, just have to do with Activision. You mentioned this $4.4 billion of net cash at year end. From a -- certainly from an S&P standpoint, you don't get any -- or it doesn't seem that you get any benefit of that from a -- for your net debt-to-EBITDA leverage. So given you’re a 61% shareholder, I just wondered whether you -- sort of you have any preference for how Activision management uses that cash, whether you would prefer them to use it to increase the dividend or to do more acquisitions that would be earnings-accretive?

Philippe Gaston Henri Capron

Okay. On São Paulo, we got the authorization to roll out only last year. So before that, we had rolled out our network in other cities in the metropolitan area but not in the city of São Paulo proper. Now that we have the authorization, it's just a question of trade-offs and whether it's more interesting to roll out in some parts of the cities, which we finally concluded it would, or in other smaller cities in São Paulo state or in other states. So it's just a question of determining the right order to do things. It's true that CapEx per line is typically higher in dense cities like São Paulo or Rio, where we have now the network -- I mean not fully rolled out but significantly developed. But at the same time, there are some significant benefits given the higher income brackets of a large part of the population. So it's just a tactical trade-off. Regarding the use of cash, I mean, we'll cross that bridge when we get there. We are focusing on trying to get a great value for those assets, which we might consider disposing of. What we do with the cash will be in the interest of shareholders, keeping in mind the interest of bondholders, which means there will be some deleveraging whatever else we do. Concerning Activision Blizzard, yes, indeed, we have different attitudes from the different rating agencies regarding how much of that cash is taking into account in their assessment of Vivendi's value, of Vivendi's creditworthiness. And we do have a preference from the use of the cash, but I'm just not telling you.

Jean-Michel Bonamy

We continue with Omar Sheikh from Crédit Suisse.

Omar Sheikh - Crédit Suisse AG, Research Division

I've got 3 questions left, I guess. Just going back to Activision, again, Philippe, I wonder if you could, just in the context of everything you said on your ambition to strengthen media and content, whether you could sort of give us a definitive statement of intension in relation to your stake? Could you just kind of say whether or not you'd be willing to reduce that stake in the future? That's the first question. Secondly, on SFR, could you just give us the timing of the cost savings of the EUR 500 million in total fixed cost savings by 2014? How much did you book in '12? And how much should we expect to be booked in '13 and '14? And then finally, could you just give us -- just clarify on disposals, how they might be treated for tax purposes? Could you just tell us whether or not if you were in a hypothetical situation that you would sell either the stake at Maroc or GVT whether that will be subject to capital gains tax?

Philippe Gaston Henri Capron

Okay. On Activision Blizzard, I can only reaffirm that we have no statement of intention. I mean it's a pretty -- we're in an interesting optional situation. We can go up; we can go down. We can stay where we are. And so it's an interesting case study, but I'm not telling you which we way we lean. On disposals, I mean, we will try to structure all of them in a tax-efficient way. It doesn't mean we will necessarily fully escape capital gains taxes, but it is our assumption that, in most cases, capital gains taxes would be only fractional in any of the transactions you might contemplate. On cost reduction of SFR, I'll let Pierre answer.

Pierre Trotot

So you remember that the baseline was in 2011, EUR 8 billion of costs out of which EUR 6 billion were related either to revenues that is mostly acquisition [ph]costs or the other EUR 3 billion were related to customer base acquisition costs, retention cost, et cetera. The total of the EUR 8 billion has been reduced by EUR 575 million in 2012. That is a little bit more than 7%. What we call -- what is the remaining part, the EUR 2 billion of what we call "our fixed cost," that is network cost, the IT cost, structure cost, et cetera, these EUR 2 billion we achieved a 5% reduction. That is EUR 110 million, to be specific. We intend to have the same amount of reduction of this fixed cost; that is, again, EUR 110 million in 2013, which the total, which represents EUR 220 million, will be realized at the end of 2013. We shall be on track with the full year effect in 2015 after EUR 500 million that we announced. It is to be noted that this year, in 2013, the employee redundancy plan will only count for 1 quarter. It is the last quarter of 2013, because we are still negotiating with the trade unions, with the new trade unions, and the new workers' counsel, which has been elected in last November. So this explain for -- this accounts for the delay in the employee redundancy plans. But otherwise, we are on track.

Jean-Michel Bonamy

We move on to Charles Bedouelle from Exane. So much to say.

Charles Bedouelle - Exane BNP Paribas, Research Division

So I wanted to focus on GVT numbers. You had a very, very strong EBITA margin in Q4 at GVT, and you also had a somewhat slower growth in terms of new lines and new home passed, so I just wanted to understand how the 2 were linked and also to understand do you expect the very strong margin gains you've achieved in Q4 to be maintained partially, entirely, in the coming years, or there is a little bit of a one-off effect with maybe a slightly lower commercial activity relative to previous quarters?

Philippe Gaston Henri Capron

You're absolutely right. There is that, but there is an even more important point which you need to have in mind. Q4 is the first VAT-free or ICMS-free comparison base, because the increase in ICMS occurred on October 1, 2011, and therefore, it was a drag for Q4 2011 and the next 3 quarters. And therefore, the last quarter of last year was the first quarter in which we -- the underlying performance of the company was realized. In terms of lines in service, however, it's fair to say we had a slow Q4. And we normally had a better activity, but essentially, between the last 2 weeks of December, not much happened. It was smaller -- slower than usual. We were a little bit worried, but looking at the performance in January, we feel that we are back on track and sales of new lines are there. This being said, it's more an uphill struggle to grow GVT nowadays because our competitors very often have reacted and as they cannot react by improving their service, especially the technical service, they react by cutting, slashing prices. And very often in some cities, now we are actually more expensive than the traditional players, which is a paradox for an alternative service provider. But that's the fact of life. We are trying not to cut our prices, which is fully justified because we give much better value, especially better service quality and more bandwidth than our competitors do. But it's true that the price comparison makes it more difficult for us to grow share, which we'll still do, rest assured.

Charles Bedouelle - Exane BNP Paribas, Research Division

Okay. And just a very thorough [ph] question on that very point and that will be my only question. I note that the home passed were usually obviously much higher than the line in services, but this gap has been reducing to almost 0 in Q4. So should we understand that you need a big boost in CapEx very short term to be able to grow, again, like you did there in the past? I mean, how should I interpret this number basically?

Philippe Gaston Henri Capron

Well, we make -- we are making a conscious effort to better monetize the previous home passed and the previous street cabinets and convert them into more lines. So we have a specifically targeted effort to achieve this. But I mean, we are not constraining CapEx in terms of deployment. I mean, we invested north of EUR 1 billion of CapEx at GVT last year, and it was growing slightly -- it was growing on the telecom side, as well as on the pay-TV side. But in spite of this, I mean, we are -- I mean, we will continue to -- we'll maintain CapEx where it is. We will start to be CapEx minus -- we will start to be cash-positive on the telecom side this year and overall, as I said, will be cash neutral. We move on to Polo Tang.

Polo Tang - UBS Investment Bank, Research Division

It's Polo Tang from UBS. I just have 2 questions. The first question is really just about leverage. Where do you see your optimum level of leverage on that pension and lease adjusted basis? I mean so I estimate that roughly your around about 3x on a proportionate basis, but ideally, where do you want to take this down to, for example, would be something like to 2.5x? And my second question is really just about Maroc Telecom. Can you maybe give us an update in terms of where you are on that process?

Philippe Gaston Henri Capron

Okay. Well in terms of leverage, we do not have any preset target. Our target is to be well within our BBB rating. So we have a constant dialogue with the rating agencies to make sure we achieve this. We don't want to be under leverage. It wouldn't make any sense. We don't aim to be BBB+ or AA, AA- or A-. We don't feel this would be in the interest of our shareholders, so that's what we'll do. And if there is excess cash, as we said, beyond the necessary deleveraging, if we sell an asset, we'll think of our shareholders, first and foremost. In terms of Maroc Telecom, I cannot give you a precise update. There is also an exploratory process going on in Morocco. It's no big secret given the fact that many of the potential bidders have made their intentions known. Same thing, we'll...

Jean-François Dubos

But no official offer.

Philippe Gaston Henri Capron

Yes, we do not have -- we did not receive any binding offer at this stage, and we'll see whether the process leads to a good price for an asset, which, again, has had amazingly strong performances last year. I mean, I think, the management team of Maroc Telecom is really to be credited for an exceptional performance in the face of a very significant price decline; over 2 years prices have been cut by half. Thomas Singlehurst from Citi. Thomas?

Thomas A. Singlehurst - Citigroup Inc, Research Division

Thomas here from Citigroup. I have one question to be released now. It is on GVT, and it has to do with the medium-term guidance, because where it stands today, I think you're guiding to BRL 7 billion in 2014, BRL 10 billion in 2016, but just to hit the first target the BRL 7 billion, if I got my numbers right -- but I'm assuming you need to consistently hit high 20s growth, and I'm just wondering whether there's any slippage in that medium-term guidance based on the 2013 number -- forecast. Keep it up.

Philippe Gaston Henri Capron

I would have to look. We've not launched our annual 3-year planning exercise, but I don't think there is a slippage compared to what we announced, which was rather cautious actually to start with. So I don't think there is significant slippage, but Jean-Michel will get back to you with more precise figures, if we made them public. We continue with Richard Jones from Goldman Sachs.

Richard Jones - Goldman Sachs Group Inc., Research Division

Two questions, if that's okay. First is, and apologies if you answered this already. When you say one of the strategic aims is to strengthen media and content, I'm just wondering what you really mean by that. Does that just mean that you expect the businesses, the media businesses that you are now ready to grow strongly? Or you expect to increase your stakes in them? Or are you expect to move in to other media businesses as well? And then secondly, if you could give us your thoughts on what synergies there are between those 3 media businesses?

Philippe Gaston Henri Capron

I think everything is possible. The 3 avenues of growth, which we indicated could be pursued simultaneously. We are not emphasizing the synergies, which exists across our existing media businesses, but it's fair to say that for many large media groups, you can also speak of conglomerates with not necessarily a large amount of synergies except in terms of the financial management, in terms of the human management, with more sharing of executives across our business practices across them. So we're not dogmatic about any of this. We'll -- we have to, in a way, invent a new group. This will necessarily take time because we're not doing it under any pressure, except self-inflicted, the will to actually develop a new group out of the present perimeter of Vivendi.

Richard Jones - Goldman Sachs Group Inc., Research Division

Can I just ask a follow-up on that on why the strategic aim is...

Philippe Gaston Henri Capron

Patrick from Deutsche Bank.

Patrick Kirby - Deutsche Bank AG, Research Division

I have 2 questions left, please. Firstly, just on the cash dividend policy. I appreciate you've said you don't want to give any firm guidance on this because of what might happen on perimeter changes and so on. But if the perimeter didn't change in 2013, could you confirm that you would stick to the 45% to 55% payout ratio, and that the EUR 1 cash dividend is a minimum payment? And then secondly, just on the tax rate this year, your guidance is an increase of up to 200 basis points in that. Can you remind us what the components of that increase are going to be?

Philippe Gaston Henri Capron

I love science fiction. I read a lot of it. That -- I mean, yours is a very -- your first question is very hypothetical, I mean. If nothing changes, then, and the perimeter is the same, then we'll assess the situation, but I cannot -- I mean, and we'll see what Jean-François and myself choose to present the board and whether the board accept it or not, but it's too far-fetched. Again, we're not committing to any policy. It doesn't mean we are going to start hoarding cash. It's actually, exactly the other way around. I think we made it clear that we want to have some cash returns to the shareholders as soon as we can and in a more advantageous way as we can. But beyond that, again, we're not committing to any policy even if the perimeter had not changed 1 year from now. Concerning the tax rate, I mean, it's not it's [indiscernible] cuts. There is no large explanation for this year's or last -- or next year's increase, but it's just a series of measures taken by the government on the deductibility of interest, the 3% taxes on dividends. I mean we are distributing EUR 1.3 billion this year. That means EUR 40 million of taxes. In Morocco, in the same way, the withholding tax has increased. So it's a series of small, unsavory measures, while at the same time, the [French] competitive is relatively irrelevant for us because neither Canal nor SFR are large employers in France. So no large reasons but a series of small ones and I'm sure you can go through them with Jean-Michel and his team.

So on this note, unless you want to -- on this note, I think we can conclude this presentation. Thank you for your attendance and your questions.

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