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Universal Music Group continued to suffer in the first quarter amid a global slump in music sales. The unit reported an operating loss of euro28 million from a profit of euro27 million in the year earlier.

VU NARROWS LOSSES

French Media Giant’s Operating Profits Jump in First Quarter; UMG Continues to Suffer

Vivendi Universal reported Tuesday that its loss narrowed for the first quarter and its operating profit rose, spurred by its telecommunications and pay TV units.

Vivendi's net loss for the first three months of 2003 was euro319 million ($377 million), compared to a loss of euro17.01 billion in the same period last year. Last year's loss reflected a change in accounting rules.

Vivendi Chairman Jean-Rene Fourtou is trying to sell assets to trim the company's massive debts, accumulated during a spending spree by former Chairman Jean-Marie Messier.

The company’s first-quarter operating profit was euro844 million ($998 million), beating analysts' expectations of euro622 million, according to wire reports. A year earlier, the company posted operating profit of euro781 million on an actual basis and euro607 million on a pro forma basis.

VU attributed the improvement to strong performance at phone units Maroc Telecom and Cegetel, France's No. 2 telecommunications provider.

Vivendi said it expects to post strong growth in operating profit this year, and a "sharp improvement" in its operating cash flow, which was euro928 million in the first quarter.

Despite the weakness of the U.S. dollar against the euro, Vivendi said it is maintaining its full-year operating-profit forecasts.

Vivendi's Universal Music Group continued to suffer in the first quarter amid a global slump in music sales. The unit reported an operating loss of euro28 million from a profit of euro27 million in the year earlier.

The global music market continued to show weakness in the first quarter with an estimated decline of 12%. In this context, UMG continued to grow its marketshare, with strong sales of the debut release by 50 Cent and strong carryover sales from 2002 releases by T.A.T.U and the 8 Mile soundtrack featuring Eminem.

In the U.S., the music market album unit sales declined 9.9% against the prior year, while UMG increased current album market share 3.5% to 30.9%. Overall, despite these share gains, the revenue of UMG declined by 9% on a constant currency basis (decline is 19% taking into account exchange rate fluctuations).

UMG said its major album releases including albums by Enrique Iglesias, Limp Bizkit, Sting and U2, are scheduled for the second half of the year.

Telecommunications units Cegetel and Maroc Telecom reported sharp increases in operating profit. Cegetel's operating profit rose 30% to euro465 million from euro359 million, while Maroc Telecom reported an operating profit of euro138 million, up 27% from euro109 million in the first three months of 2002.

Television arm Canal Plus Group posted an operating profit of euro158 million in the first quarter of this year, compared with a loss of euro68 million in the same period last year. The operating profit at Vivendi's U.S. entertainment operations, Vivendi Universal Entertainment, rose 44% to euro213 million from euro148 million.

Vivendi said its net debt at the end of May was about euro14 billion, compared with euro15.3 billion at the end of March, and €12.3 billion as of Dec. 31, 2002.

Vivendi is trying to sell its U.S. television and film businesses. Those include UMG, as well as the Universal film studio and theme parks and the USA and Sci-Fi cable networks.

Vivendi said it expects to return to profit excluding one-time items and goodwill amortization for all of 2003.

In 2002, Vivendi lost euro23.2 billion, the largest loss in French corporate history.

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