contents · in accordance with its strategic objectives, on june 16, 2011, vivendi bought...

Letter to our shareholders

CONTENTS

September 2011

Ladies and Gentlemen, Dear Shareholders,

Vivendi’s first half 2011 earnings have exceeded expectations.

Adjusted net earnings rose by 20.2%, due in particular to the SFR

operation. In June, the Group finalized the acquisition of 44% of

the capital of the telecoms operator, giving it a 100% holding in

the operator. The Group now has control of all its assets, and has

simplified its organizational structure. Vivendi has thus met a crucial strategic objective

in very satisfactory financial conditions.

In September, Canal+ Group, our wholly owned subsidiary and the leading pay TV in

France, announced a partnership with the Bolloré Group to acquire the Direct 8 and

Direct Star channels, which should enable it to reach new heights in free-to-air TV.

We are continuing to construct our future and to develop in the fields of networks, plat-

forms and content. In telecoms, mobile clients are always seeking more bandwidth in

order to connect to the Internet any time they want. This is what’s at stake in the ten-

dering in France for the allocation of 4G network frequencies and more generally with

respect to the huge SFR investment.

Another hot topic is the decision by the French Parliament in early September to amend

or cancel certain tax provisions. The Consolidated Global Profit Tax System in particular

was ended. Our Group is analyzing all aspects of this recently adopted decision.

I thank you for your confidence, and I hope you enjoy reading this newsletter.

Jean-Bernard LévyPresident of the Vivendi Management Board

Results• Vivendi’s net adjusted income have enjoyed verygood growth in the first six months Pages 2-3• Vivendi takes sole controlof SFRPage 3

Strategy in action• Canal+ Group signs a partnership with Bolloré Group to acquire the Direct 8 and Direct Star channelsPage 4

Three questions to…• Sylvie Forbin on the 11 proposals made to theEuropean Commission in July Page 5

Sustainable development• Sustainable development is boosting the performance of multinational corporationsPage 6

Features• Three associations broughttogether by Create Joy,Vivendi’s solidarity program• Shareholders’ questionsPage 7

The shareholders’ diary• Meetings for individual shareholders• Contact usPage 8

Shareholders’ ClubDon’t hesitate to join up with the Group’s Shareholders’ Club. All you need to do is hold a registered or bearer share to belong and to take part in any

of the many events on offer (meetings on various topics in Paris and the provinces, premiers of films, visits to the Olympia, etc.).

For more information or to receive a membership form, just call 0 805 050 050(toll-free call from a fixed line) or go to www.vivendi.com,

choose Shareholder under User profile, then the Shareholders Club menu and then the Shareholders Club.

LAA Vivendi N°7 GB 09-11 JM:LAA-2009 3/10/11 11:58

2


Vivendi’s adjusted net income was up 20.2% for first half 2011, at more than €1.8 billion. The rise in EBITA, driven by the good performance of Activision Blizzard and GVT, was a major factor in the increase in adjusted net income. Vivendi thus confirms its outlook for 2011: adjusted net income of more than €3 billion, allowing for an increase in the dividend per share.

ACTIVISION BLIZZARDRevenues fromthe world’s lead-ing video gamemaker came to€1.857 billion, up9%, and theEBITA came to€833 million, up

34.4%. These performances reflect anincrease in digital sales as well as the suc-cess of Call of Duty: Black Ops and Worldof Warcraft: Cataclysm.

The rest of the year looks good, with thehighly anticipated launches of Call ofDuty: Modern Warfare 3™, the newonline service Call of Duty Elite, andSkylanders Spyro’s Adventure™. OnAugust 3, pre-purchases of ModernWarfare 3 had significantly exceededthose recorded by Black Ops last year atthis time.

Results

Vivendi’s net adjusted income enjoyed very good growthin the first six months

Revenues

€14.253 bnup to 1.9%or by 2.4%

at constant exchange rates

EBITA (1)

€3.363 bnup to 3.7%or by 4.6%

at constant exchange rates

Adjusted net income (1)

€1.834 bnup by 20.2%

(1) For a definition of EBITA and adjusted net income, go to www.vivendi.com.

SFRRevenue forthe Frencht e l e c o m soperator fellby 2% to€6.120 bil-lion, due tosharper competition, the rise in VAT andthe lower tariffs imposed by the regulators.EBITA fell by 6.4%, leaving aside the €42million in positive non-recurring itemsrecorded in first half 2010.During the first half-year, the operatorentered three major partnerships. SFR and

Virgin Mobile announced an agreementto use SFR networks, along with the firstunbundled mobile operator contract(full-MVNO) in France. La Poste Mobile,which is 49% owned by SFR, haslaunched its business in more than

1,000 post offices. Finally, SFR will soonhave dedicated space in Fnac stores.

2011 FIRST HALF EARNINGS

UNIVERSAL MUSIC GROUPThe world’s leader in music generated revenues of €1.863 billion, down 1.9% dueto a fall in demand for CDs.Excluding restructuring costs, EBITA fell by 6.5% at constant exchange rates. TheAmerican recovery helped lift EBITA dur-ing the second quarter by 6.5% at con-stant exchange rates, excluding therestructuring costs.The second half-year willsee the release of newalbums including from Lil Wayne, RobertoAlagna, Rihanna,Justin Bieber,Andrea Bocelli,LouiseAttaque,GreeeN,andmore.

2011 annual outlook

confirmed

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3

CANAL+ GROUPCanal+ Group had revenues of €2.392 billion, up 2.8%. In particular, Canal+France sales rose by 1.7%, thanks to anincrease in subscriptions, in revenue persubscriber and in advertising revenues.

There was net growth of 96,000 sub-scribers in the average portfolio ofCanal+ France. Revenues from otherbusiness also rose, in particular for StudioCanal, which enjoyed successwith a number of films in the cinemahalls and on video release.EBITA for Canal+ Group came to €495million, up 1.9%. ■

MAROC TELECOM GROUPRevenues for the telephone operator fell1.5% to €1.361 billion, due to the verycompetitive market in Morocco. The per-formance of the African subsidiaries wasnot able to offset thisdownturn. EBITA fell 10.9%to €531 million.The commercial expansionof the Maroc TelecomGroup has, however, notslowed down: the portfolioof customers grew to morethan 27.5 million, up 16.5%from the end of June 2010.This expansion was due to Morocco’s continuinggrowth (+6.4%) and to thestrong showing by the sub-sidiaries, whose total mobile customerbase grew by about 49%.

GVT GVT’s growth has not accelerated: revenues for the Brazilian fixed operatorrose by 53.6% to €682 million, and EBITAsoared by 90.8% to €187 million. GVT’sEBITDA margin rose to 41.8%, or even42.2% if the costs related to the upcominglaunch of its pay TV business are exclud-ed. GVT’s geographic expansion and the attractiveness of its offerings are thereason for this remarkable growth. As of

June 30, GVT covered102 cities, and 53% of its sales were forspeeds of above 15 MB(against 6% in the first half of 2010). TheBrazilian CustomersRelationship Institutenamed GVT the no. 1telecoms operator inthe ranking of compa-nies with the best cus-tomer relations.GVT has been continu-

ing to invest in first half 2011, in theamount of €336 million, up 70.3%.

cash flow. At the commercial level, SFRand Vodafone extended their coopera-tion for the next three years. Thereshould also be new opportunities forthe industrial growth of SFR. Finally,Vivendi is especially confident in SFR’slong-term prospects, driven by theexplosive increase in data consump-tion on the Internet and on mobilephones. ■

Vivendi takes sole control of SFRIn accordance with its strategic objectives, on June 16, 2011, Vivendi bought Vodafone’s 44% holding in SFR (agreement announced on 3 April 2011), giving it complete control of the operator.

of more than €3 billion this year, com-pared with €2.698 billion in 2010,which will give rise to an increase inthe dividend per share.

BBB rating maintainedThis operation was completed withoutaffecting the BBB debt rating, thus giv-ing Vivendi greater financial flexibility,now controlling 100% of the operator’s

The 44% holding in SFR was valuedat €7.950 billion (€7.750 billion and€200 million representing the cash flowgenerated between January 1, 2011and July 1, 2011).This transaction will have a positiveimpact of 15-18% on Vivendi’s adjustednet income for 2011, and more than€600 million per year in 2012 and 2013.Thus anticipates adjusted net earnings

Diane Kruger and Liam Neeson in Unknown

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©GVT


4


Strategy in action

Canal+ Group signs a partnership with Bolloré Group to acquire the Direct 8 and Direct Star channelsCanal+ Group is strengthening its presence in free-to-air television through a partnership with the BolloréGroup. The agreement, structured in two stages, will not negatively affect Vivendi’s financial ratios.A capital increase reserved for the Bolloré Group is planned, but a public offering should not be necessary.

discounted at the weighted average costof capital, the total price is closer to €425million. This partnership represents a veryattractive growth opportunity for Canal+Group. It will expand its positions in anincreasingly competitive environment,especially with the arrival of new globalplayers (Apple, Netflix, Google, etc.) in thetelevision sector, and will strengthen itsinvestment capacity.The transaction, the first stage of whichwas financed by a reserved capitalincrease, respects Vivendi’s investmentcriteria and financial debt ratios. ■

Canal+ Group, a wholly owned sub-sidiary of Vivendi, has just announced astrategic partnership with the Bolloré Groupconcerning its free channels, Direct 8 andDirect Star. These assets have been valued at €465 million.

The new Canal+ series, Borgia

The partnership will be implemented in twostages. At the closing of the transaction(after consultation of the competitionauthorities and the CSA), Canal+ Group(and not Canal+ France) will hold 60% of the assets. A total of 16.2 million Vivendi

shares will beissued at a priceof €17.3 (repre-senting a total of €279 million) to be transferred to Bolloré Group. The latter will thus hold 1.3% of Vivendi, mak-ing it the group’sfourth largest stable partnerand strengthen-ing the partner-ship concludedwith Canal+Group. At a three-year time horizon,the two entitiesmay exercise putand call optionson the remaining40% stake, for afixed price of€186 million. This40% stake willthus be paid forin three years atthe current price:

Cyfra+75%

Cyfraa+755%

Vietnam49%

Vietnaam499%

i>Télé100%i>Téélé1000%

Canal+ Régie100%

Canal+ Réggie1000%

Canal+ France 80%

Multi Thématiques 100%

ti Thématiques Mult% 100%

Société d’Edition de Canal+49%

été d EditionSociéanal+de Ca

49%

Canal+ Distribution 100%

al+ Cana Distribution % 100%

Canal+ Overseas 100%

al+ OverseasCana% 100%

StudioCanal100%

StudioCannnal100%%%

Canal+ Group before the partnership

with Bolloré Group

rance 80% Canal+ FC

Canal+ Group 100%


THREE QUESTIONS TO ...

5

Covering Europe with very high speed networksis one of the main challenges of the 2020digital agenda for Europe.Neelie Kroes, Vice-President of the EuropeanCommission and DigitalAgenda Commissioner, hasmobilized the entire sector(more than 40 companiesinvolved) around thisambitious goal. TheCommission took anunprecedented initiativeby asking three companiesCEOs (Jean-Bernard Lévyfor Vivendi; RenéObermann for DeutscheTelekom; Ben Verwaayenfor Alcatel-Lucent) to identify concrete proposalsto give a boost to the roll-out of the next-generationnetworks in Europe.

This effort, which was launched on March 3, led to 11 proposals on July 13.What are the main messages?The 11 proposals submitted to Ms. Kroes capture the highlights of the discussions that

took place for over 4 months in 3 working groups: new business models (Vivendi),

standards and network interoperability (Deutsche Telekom) and investment schemes in

next-generation networks (Alcatel-Lucent).

Regarding business models, two main proposals were made: the possibility for telecom

operators to develop value-added services aimed at content providers (such as, for

example, online video services), and secondly, the possibility of developing a wider range

of Internet access subscription offers to consumers.

On the issue of standards and interoperability, the industry has plead for the creation of

common European standards to ensure interoperability between the end user devises

and content, as well as fluidity of uses.

On the subject of financing investments in next-generation networks, the main proposal

concerned the implementation at the European level of co-investment schemes between

operators in situations where market forces do not provide the coverage by themselves.

What is at stake for Vivendi?As a leading provider of networking, content and platforms, Vivendi faces a dual

challenge: to preserve its investment capacity and innovation, while ensuring that its

subscribers have high-quality service and content. With its expertise in both networks

and content, Vivendi has been able to play an active role as a mediator in building a

dialogue between the various digital players so as to lay the foundation for a new

approach. Faced with the rise of global Internet players that, as everyone knows, enjoy

a status that allows them largely to escape from regulation, it is essential to promote

a European vision that will serve employment, growth and culture and will benefit

consumers.

What precisely are the implications for consumers?All telecom operators have shared the same conclusion: there will not be enough

revenue from subscriptions to cover the considerable investments required by the

transition to high-speed broadband by 2020. In addition, service and content providers

have needs that are growing in scale and specificity, and which require the development

of a new-generation infrastructure.

This is why one of the key proposals concerns the creation of a new type of partnership

between over-the-top providers and ISPs, an ecosystem that is very favorable to the

development of creative offerings. One of the most recent examples of this is the launch

of a joint subscription offer between SFR and Spotify, with the support of record

companies, which provides access to SFR mobile customers, on optimal tariff conditions,

to over 15 million music titles. This offer reflects Vivendi’s strong commitment to develop

attractive and innovative subscription packages.

Sylvie Forbin, Vice-President, Public and European affairs

6


Sustainable developmentand the G-20 On September 14, 2011, Paris Europlaceorganized the first discussion workshopson the topic “Sustainable Development,CSR, SRI - Levers of value creation, Contributions to the orientations of theG-20* and the B-20*”.Vivendi was invited to participate in thisevent, which aimed to develop a state-ment of corporate commitments on cor-porate social responsibility (CSR) andSocially Responsible Investment (SRI)which will be presented at meetings ofthe B-20/G-20 on November 3-4, 2011 inCannes. *The G-20 consists of countries that represent 85% of the global economy and 2/3of the world’s population. The B-20 bringstogether representatives of the business asso-ciations of these 20 countries.

Innovation and sustainable developmentThe ESSEC Business School invitedVivendi to explain how the companyidentified innovative challenges as earlyas 2003 in its understanding of socialresponsibility at a symposium on “Inno-vation, Efficiency, Responsibility”.By bringing together public and privatestakeholders, the organizers have giventhe various participants an opportunityto compare their approaches to reconcil-ing the “culture of innovation” and the“culture of accountability”. The sympo-sium reflects the objectives of the Insti-tute for Service Innovation and Strategy

(ISIS) at ESSEC. The aim is to stimulatecreativity and innovation in services andindustry with the objective of generatingresponsible growth and sustainablecompetitiveness among organizations

Vivendi: A partner of ERDF 2011The 10th annual European Forum forSustainable Development and Responsi-ble Enterprise (ERDF) will be held in Parison October 12, 2011. Representatives ofprofessional organizations and interna-tional institutions, along with analystsand experts, the Forum’s goal is to

Sustainable development

Sustainable development is boosting the performance of multinational corporationsThe demand to be responsible to society is at the heart of governance and is a basic driving force in the new growth expected.

encourage discussion of three main top-ics: non-financial reporting as a manage-ment tool for better corporate gover-nance, corporate social responsibility(CSR) as a driver of business perform-ance, and the evolution of businessmodels as a result of sustainable devel-opment strategies. Vivendi will participate in a panel discus-sion on the theme: “Coordinating CSRstrategy in the context of internationalcompetition: What is the best course ofaction in the face of regulatory pressureand pressure from financial markets andcitizens?” ■

Vivendi gets solid marks from non-financial ratings agenciesIn 2011, Vivendi was ranked No. 1 in the European media industry by the non-financial ratings agency Vigeo and was tied for first place worldwide on theFinancial Times Stock Exchange’s FTSE4Good ESG Ratings. In addition,Vivendi is listed on the Dow JonesSustainability World Enlarged Index,as well as on the ASPI Eurozone Index,the Ethibel Excellence SustainabilityIndex and the ECPI Ethical Index.These references are regularly dis-cussed with the company’s variousstakeholders. The social partners haveparticularly welcomed these solidresults, which are the fruit of lively,ongoing dialogue with all the compa-ny’s subsidiaries.


7

SHAREHOLDERS’ QUESTIONS

On June 8, Create Joy broughttogether the associationsApprentis d’Auteuil, Orchestre à l’Ecole and La Chance auxConcours. Their young beneficiaries took part in variousworkshops on music, video, journalism, etc. Olivia Ruiz wasthe mistress of ceremonies.

This was a new initiative of Create Joy,Vivendi’s solidarity program founded in2008! This program funds associations thatoffer young people ages 12-25 activitiesrelated to Vivendi’s core skills: videogames, music, telecommunications, Inter-net, television and film. Create Joy sup-ports about 30 projects in France, the UK,the United States, Brazil, Morocco, Maliand Burkina Faso, the main countrieswhere the Group operates. On June 8,2011, Create Joy brought together the

associations Apprentis d’Auteuil, Orchestreà l’Ecole and La Chance aux Concours.Workshops on the different programs runby the associations, including music, video,editing, sound recording and an introduc-tion to journalism, were organized by theteenagers to explore and share their know-how. More specifically, the young people

from the Orchestre àl’Ecole showed the othershow to play an instru-ment, while those fromthe Chance aux Concoursprovided training in film-ing techniques, soundrecording and editing,and those from theChance aux Concoursprovided an introductionto journalism. The MC forthe event, Olivia Ruiz,spent the afternoon withthe young people, taking

an interest in their skills, explaining herown life history, discussing, giving advice,and more. At the end of the day she sang,to the accompaniment of an orchestracomposed of all the youth.Other initiatives like this are planned in France and abroad to build on this success. ■

Features

Three associations brought together by Create Joy,Vivendi’s solidarity program

Why not propose a dividend with a supplement for shares held for two years, for example?

Vivendi is not in favor of an increase in the dividend based on how long the shares have been held, because in its view,

this would rupture with a fundamental principle of the stock market, i.e., the equal treatment of shareholders.

Standard & Poor’s has downgraded the rating of the US debt. Many rumours about the downgrade are circulatingamong countries and major corporations. What is Vivendi’s situation?

Standard & Poor’s and Fitch give Vivendi a debt rating of BBB and Moody’s assigns it a rating of Baa2, which in fact is equiv-

alent to the BBB of the other two agencies. These ratings were confirmed during the takeover of the 44% SFR holding

for €7.950 billion (operation completed on June, 16). The financing was done through bank loans and a bond issue without

any increase in the capital. At the end of the year, Vivendi’s net debt should stand at €13.5 billion.

Olivia Ruiz surrounded by young people on 8 June


8

SHAREHOLDER’S DIARY

Important disclaimer: Forward Looking Statements. This document contains forward-looking statements with respect to the financial condition, results of operations, business, strategy, plans and outlook of Vivendi,including expectations regarding the payment of dividends as well as the impact of certain transactions. Although Vivendi believes that such forward-looking statements are based on reasonable assumptions, such state-ments are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, includ-ing but not limited to the risks described in the documents Vivendi filed with the Autorité des Marchés Financiers (French securities regulator) and which are also available in English on Vivendi’s website (www.vivendi.com).Investors and security holders may obtain a free copy of documents filed by Vivendi with the Autorité des Marchés Financiers at www.amf-france.org, or directly from Vivendi. These forward-looking statements are madeas of the date of this press release and Vivendi disclaims any intention or obligation to provide, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.Unsponsored ADRs. Vivendi does not sponsor an American Depositary Receipt (ADR) facility in respect of its shares. Any ADR facility currently in existence is “unsponsored” and has no ties whatsoever to Vivendi.Vivendi disclaims any liability in respect of such facility.

Contact us

For further information on Vivendi, please contact our Shareholder Information Department by post:

Vivendi, Shareholder Information Department, 42 avenue de Friedland, 75008 Paris.

By e-mail: [email protected]

Or by telephone: +33 (0)1 71 71 34 99 if you are calling from outside France.

The department will respond Monday to Friday from 9:00 am to 6:00 pm (hours extended in the event of important news).

You are a recipient of this “Letter to our Shareholders”. Under the terms of the French Data Protection Act of 6 January 1978, you may exercise your right to accessor correct or contest personal data by sending us an e-mail at [email protected], or by writing us at VIVENDI Shareholders Information Department – 42 avenue de Friedland – 75008 PARIS – France. Should you wish to unsubscribe and cease receiving these newsletters, please contact us at the same address.

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Meetings for individual shareholders

September 22 in Rouen. ”Ecole de la Bourse” meeting on “How to understand a financial article”.

September 23 in Paris. Meeting of the Shareholders’ Committee.

September 29 in Montpellier. Financial information meeting.

October 6 in Paris. ”Jeudi, c’est Vivendi” conference about StudioCanal.

October 11 and 20 in Paris. Visit to the Olympia.

October 15 in Paris. Live rebroadcast of the opera Anna Bolena from New York’s Grand Metropolitan Opera.

October 19 in Le Havre. ”Ecole de la Bourse” meeting on “How to understand a financial article”.

November 18 in Paris. Financial information meeting with Philippe Capron, Member of the Board and Chief Financial Officer.

November 18 and 19 in Paris. ”Actionaria Fair” at the Palais des Congrès.

November 28 in Strasbourg. Financial information meeting with Jean-Bernard Lévy, Chairman of the Management Board.

November 29 in Reims. Financial information meeting.

December 8 in Biarritz. Financial information meeting.

December 15 in Paris. ”Jeudi, c’est Vivendi” conference about cultural diversity.

A new blog from Jean-Bernard LévyOn Saturday, September 3, the Chairman of Vivendi’s Management Board, Jean-Bernard Lévy, launched a new blog

(http://www.jeanbernardlevy.com). Jean-Bernard Lévy regularly offers his reflections on current events and the challengesfacing the company. You will find lively discussion of strategy, the ups and downs of the share price and much more.

A number of comments have already been posted, in particular by individual shareholders. We invite you to read Mr. Lévy’s blog and and share your thoughts and comments!


contents · in accordance with its strategic objectives, on june 16, 2011, vivendi bought...

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