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11 November 2015 By Fiona Maharg-Bravo

Like the Beatles song, Vivendi investors are waiting for the French media group’s strategy to come together.

In an effort to shed its conglomerate status and focus on music, content and pay television, Vivendi has sold some 35 billion euros of assets since 2013, on estimates by Bernstein analysts. The outlook for remaining businesses, however, is uncertain. While growth from music streaming and subscription services grew 33 percent in the third quarter, it’s not enough to make up for the decline in digital downloads and physical sales. The launch of Apple’s new streaming service, which has a free trial, is partly to blame. Streaming may have great potential, but the inflexion point seems elusive. Earnings before interest, tax and amortisation fell 27 percent in the quarter against the same period a year ago.

Meanwhile, Vivendi’s Canal Plus has a strong position in French pay television and a growing business abroad. But revenue fell slightly in the quarter and it is losing pay-TV subscribers in France. Vivendi said bolstering both music and television will require heavy investments in the next two years along with strict management of costs. It’s unclear exactly what that entails or how much it will cost, or how committed it is to a share buyback program.

Then there is Vivendi’s latest acquisition spree, which seems to go against its new strategy of shedding telecom and gaming assets. It has built a 20 percent stake in Telecom Italia and says it wants to be a long-term shareholder. It’s not obvious why Vivendi needs to part-own a telecom company in order to distribute its content.

Gaming may be an attractive investment, but it looks odd having previously exited the business. It also isn’t clear to what extent Vivendi can influence these investments. Family owners of Ubisoft and Gameloft have hired bankers to advise them on a defense strategy to protect their independence, Reuters reports. Vivendi may have a grand plan, but it’s not obvious and the payback uncertain. Shares fell as much as 8 percent on Nov.11, perhaps reflecting what seems like a long and winding road to Vivendi’s reinvention.


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