PARIS (Reuters) - France's Vivendi experienced continued pressure at its SFR telecom unit in the second quarter and posted declining financial results on Thursday shorn of two business units sold in the quarter.
Video games maker Activision Blizzard and Maroc Telecom, which were sold as part of the group's revamp to pay down debt and focus on media, are now listed as income from discontinued operations to conform with accounting rules.
Vivendi's second-quarter sales fell 0.5 percent to 5.43 billion euros ($7.24 billion), while earnings before interest, tax and amortisation (EBITA) fell nearly 20 percent to 762 million largely because of competition at SFR.
Analysts at Exane BNP Paribas had been expecting sales of 5.42 billion euros and EBITA of 720 million.
While the two deals leave Vivendi smaller and less profitable, they are expected to allow the group to pay down its debt, return money to shareholders and possibly pave the way for a spin-off of SFR.
Chief Financial Officer Philippe Capron said the board had not yet decided how to use the proceeds from the divestments, but investors are anticipating a special dividend or share buyback.
SFR, which like rivals has been hit by tough competition from low-cost player Iliad, saw sales fall by 11.3 percent to 2.51 billion euros despite increasing the number of customers on mobile contracts.
The mobile price war that began in January 2012 has not abated, and SFR's cost-cutting efforts have only partly offset the damage to profits. SFR's earnings before interest, tax, depreciation and amortisation (EBITDA) fell 16.3 percent to 768 million euros.
Capron said on a conference call that the SFR results were "disappointing" but promised that the benefits of cost cutting would come through next year to spark a turnaround.
He declined to say when Vivendi would decide to pursue a plan to do an initial public offering of SFR.
Vivendi shares traded in Frankfurt were 4.3 percent lower at 0639 GMT.
Vivendi confirmed its full-year outlook for Universal Music Group, while slightly scaling back its operating profit target for SFR by 100 million euros to 2.8 billion because of a tax change in France.
It also scaled back its sales growth target for Brazilian telecom unit GVT from above 20 percent to in the mid-10 percent range.
Including the businesses that Vivendi is selling, second-quarter group net profit attributable to Vivendi shareholders rose 7.5 percent to 501 million euros, helped by strong video games sales.
Editing by James Regan