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Edited Transcript of VIV.PA earnings conference call or presentation 11-May-17 4:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Vivendi SA Earnings Call

Paris May 26, 2017 (Thomson StreetEvents) -- Edited Transcript of Vivendi SA earnings conference call or presentation Thursday, May 11, 2017 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Arnaud Roy de Puyfontaine

Vivendi SA - CEO and Chairman of Management Board

* Herve Philippe

Vivendi SA - Group CFO and Member of Management Board

* Laurent Mairot

Vivendi SA - EVP of IR and Corporate Development

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Conference Call Participants

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* Adrien De La Haye Saint Hilaire

Morgan Stanley, Research Division - VP

* Charles Bedouelle

Exane BNP Paribas, Research Division - Research Analyst

* Conor O'Shea

Kepler Cheuvreux, Research Division - Head of Media Sector

* Ian Richard Whittaker

Liberum Capital Limited, Research Division - Analyst

* Julien Roch

Barclays PLC, Research Division - MD and European Media Analyst

* Laurie Davison

Deutsche Bank AG, Research Division - Research Analyst

* Lisa Yang

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Marcus Diebel

JP Morgan Chase & Co, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Vivendi First Quarter 2017 Revenues and Earnings Presentation Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Laurent Mairot, Executive Vice President, Investor Relations and Corporate Development. Please go ahead, sir.

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Laurent Mairot, Vivendi SA - EVP of IR and Corporate Development [2]

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Good evening, ladies and gentlemen. Welcome and thank you for joining us for Vivendi's first quarter 2017 earnings. Your host for today's call are Arnaud de Puyfontaine, Chairman of the Management Board and Chief Executive Officer; and Herve Philippe, Member of the Management Board and Chief Financial Officer. This presentation will be in English. This call is webcast on Vivendi.com, where presentation slides are available for download. I encourage you to read the important legal disclaimer found at the end of this presentation on Page 27.

The first quarter 2017 financial report will be available on our website after the end of the call. On our website, you will also find a replay of this call that will remain available for 15 days. As usual, we will leave time for a Q&A session at the end of the presentation. This presentation, as well as the Q&A session, will be dedicated to the first quarter result only. We will not discuss or take any question relating to the proposed transaction that has just been announced.

A separate call dedicated to the transaction will take place at 6:45 p.m., just after the Q1 2017 earning calls.

Note that this second call is closed to callers from restricted jurisdiction, including the United States, Canada, Japan, Italy and Australia.

And now I have the pleasure of introducing the Chairman of our Management Board and CEO, Arnaud de Puyfontaine.

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Arnaud Roy de Puyfontaine, Vivendi SA - CEO and Chairman of Management Board [3]

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Thank you, Laurent. Welcome, everyone. Thank you for joining us today. Herve Philippe will go through our earnings in detail in a few moments. Let me just emphasize that Vivendi is on track to meet its full year outlook.

As I said last time we talked, 2017 is a year of growth for the group. Revenues should increase by more than 5% and EBITA by around 25%. The first quarter 2017 was marked by Universal Music Group's strong performance and by the first signs of recovery in France for Canal+.

In music, Universal Music Group has recorded its sixth consecutive quarter of revenue growth, largely fueled by a 49% increase in subscriptions and streaming. We are at the forefront of the streaming transition, thanks to partnerships with more than 400 digital platforms. It is worth mentioning that Universal Music Group is the first major music company to reach a global licensing deal with Spotify. This agreement signed last month provides greater flexibility for new releases and cooperations on innovative marketing campaigns across the world's largest streaming service.

In television, the Canal+ transformation planning front is well underway. In November 2016, Canal+ Group completely overhauled its pay-TV packages by providing more customization, more choice and more freedom to its subscribers. This is starting to bear fruit. Last March, for the first time in many quarters, the number of new pay-TV subscriptions offsets the number of cancellations. The impact of the transformation plan on EBITA is expected to be tangible from the second half of 2017.

We are building a sustainable business model for Canal+, which involves paying the right price for what our subscribers want. We will not pay silly money for rights. We have been serving customers for 30 years, and we will continue to do so in the years to come.

In sports, we enjoyed first choice rights in France with the French football championship and the top 14 in rugby. Most recently, we signed the new agreement for the broadcasting rights of Formula 1 for 3 additional seasons.

In mobile games, Gameloft had its all-time second-best quarter. It released 2 new games in March, Gangstar New Orleans and N.O.V. A. Legacy, which respectively registered more than 7 million and 12 million downloads. These good results demonstrate that Gameloft's integrations within Vivendi is fully successful.

In addition to these 3 pillars, a new Dailymotion with a completely revamped user interface and premium experience will be launched in June. It will mark an important step in its transformation.

Last, but not least, the slate proposed by Vivendi for Telecom Italia's Board obtained the majority of votes at the company's shareholders' meeting held last week. The new Board composed of 15 members, including 10 independents, will be a valuable asset in the development of Telecom Italia's strategy. Once again, Vivendi reaffirms its long-term commitment to Telecom Italia and its desire to create significant value for customers, employees and shareholders.

As mentioned during Vivendi's shareholders' meeting in April, we are focused on long-term value creation. Our Chairman, Vincent Bollore, the entire Supervisory Board and the Management Board, all share the same vision, which is making Vivendi a world-class player in content creation and distribution. The group has laid the foundations to achieve this ambition and is now ready to embark on a new phase of growth. The proposed transaction, which has just been announced, is a new step in Vivendi's strategic project. We will have the opportunity to discuss it after this call.

Thank you for listening. And I will now hand over to Herve Philippe.

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [4]

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Thank you very much, Arnaud, and good evening to all of you. It's really a pleasure for me to present to you our results for the first quarter of the year, which are in line with our previously issued guidance for full year.

Before going through the results, I'd like to remind you of the changes in the scope of consolidation on the main currencies of the group. In terms of scope of consolidation, Telecom Italia has been accounted for as an equity affiliate starting December 15, 2015, with a lag of 1 quarter. In Q1 2017, we accounted for 3 months of Telecom Italia results against only 15 days in Q1 2016. In addition, Gameloft and Paddington have been consolidated since the end of June 2016.

With regard to the currency changes. The most noticeable change was the increasingly negative impact of the GB pound, down 11.5% on average, compared to the first quarter 2016. While the U.S. dollar and the Japanese yen increased against the euro by 3.1% and 5.4%, respectively. Note that the impacts of these currency changes are mostly just [conversion related] mainly at the level of revenues.

On Slide 4, we highlight a few changes in the way we present the profit and loss account. In order to better align the presentation of the P&L with the one prepared by Bollore Group, which will fully consolidate Vivendi as from April 26, 2017, we have made few changes in the presentation of the consolidated P&L as from January 1, 2017. The changes, which are logical for Vivendi being an integrated group, are as follows.

First, we reclassified the income from equity affiliate within EBIT; and second, we reclassified the impacts related to the financial investment operations from the line, other income and charges within EBIT to the line, other financial income and charges below EBIT. For more details, you can refer to the Note 1.2 of the first quarter financial statements.

On Slide 5, you have the usual summary of the key financial metrics. As we mentioned in February, the group is now poised for growth. In Q1 2017, revenues grew 3.4% year-on-year, reaching EUR 2,663,000,000. UMG's strong performance, up 12.7%, more than offset the decline at Canal+.

The growth in profitability at UMG was very solid, but as expected, it was not enough to offset the decline in profits at Canal+. Therefore, EBITA was down 34% organically, but was completely in line with the full year guidance of 25% equities in EBITA.

In IFRS, EBIT reached EUR 185 million, down 52% compared to the first quarter 2016, which included the onetime impact of EUR 240 million related to the reversal of reserve resulting from the settlement of the Liberty Media litigation.

At EUR 155 million, adjusted net income was up 57.2%. Regarding the net cash position, it stood at EUR 473 million at the end of March 2017 against EUR 1.1 billion at the end of December 2016.

Let's turn now to the operational performances on the different businesses. On Slide 6, as you can see, Universal Music is performing extremely well. Overall, UMG's revenues were up 12.7%. Q1 2017 was the sixth consecutive quarter of growth for recorded music at Universal Music. As a consequence of the solid release schedule, as well as continued growth in streaming and subscription services, recorded music revenues were up 12.2% organically despite the decline of physical sales and downloads.

In Q1 2017, UMG's best sellers were The Weeknd, Drake and the soundtracks from the La La Land and Fifty Shades Darker. The positive momentum of streaming also had a positive impact on publishing revenues, which grew by 14%.

Merchandising and other revenues, which are quite small, also performed very well with growth of 13.3%. Income from operation was up 33% organically, mainly benefiting from the revenue growth, and EBITA grew 65.7%. As a reminder, restructuring charges amounted for -- to EUR 20 million in Q1 2016 compared to only EUR 4 million in the first quarter of this year.

On Slide 7, as you can see on the right-hand side of the slide, streaming and subscription revenues were up 49% year-over-year while physical sales were down only 5.6% because of the nature of our Q1 releases, original soundtracks. The most impressive in the quarter is probably the proportion of the streaming and subscription revenues, which in Q1 represented 3/4 of digital revenues and almost 50% of Universal Music recorded music revenues while it represented only 1/3 in Q1 2016. This indicator confirms that streaming and subscription is now by far the main distribution format for Universal Music.

Moving to Canal+ Group on Slide 8. Q1 2017 continued to be impacted by the deep-rooted past impacts as well as tough comparable basis, mainly in pay-TV in mainland France. All the initiatives taken in 2016 will translate into results in the coming quarters with the objective of returning to growth in the second half of 2017 and achieving an EBITA of approximately EUR 350 million.

During the first quarter 2017, revenues decreased by 3.5% organically with a persistent significant decline of pay-TV in mainland France, partially offset by the continued good performance of the international operations, mainly in Africa.

Indeed, revenues of international pay-TV increased by 8.3% with 28.6% growth in Africa. This illustrates the success of our strategy of providing the best content and the best offers. At the end of March, the number of subscribers in Africa stood at 2.6 million, slightly lower than at the end of December. As we saw over the last years, we experienced a seasonality erosion of the subscriber base in the first quarter following the strong promotion during the holiday season. However, the trend remains very positive with a year-over-year increase of almost 650,000 subscribers.

Pay-TV revenues in mainland France suffered a decrease, which was fully expected and can be explained by the lower average number of subscribers compared to Q1 2016 and the decrease in advertising revenues as a result of the reduction of the free access windows on the Canal+ channels, but benefited from revenue generated by the distribution agreements signed in 2016 with Free and Orange.

As regards the evolution of the subscriber base, even though the base was still in decline in [Q1] 2017, however, we are seeing first positive trends. Over the month of March, the number of subscribers remained flat in mainland France for the first time in a long time.

With regard to the performance of the new offers. We are satisfied with the first results. ARPU of the new subscribers is increasing. And since the launch of the offers, 70% of new subscribers have taken at least one option package. This churn is still high, but should start to decrease by the end of the year as a consequence of the fact that 95% of the subscribers to the new offers commit themselves for 24 months.

The OTT version of the new Canal+ offers was also launched on Apple TV and is meeting a good success. While we may need some more time to fully assess the successfulness of the new packages, these good signs are encouraging. Revenues of the free-to-air channels were down 5.1% due to lower audiences at CNews, previously i)Tele despite good performances at C8.

Studiocanal had good box office successes in the first quarter 2017 with Alibi.com in France, which sold 3 million tickets, and the distribution of La La Land in Germany. However, revenues declined by 8.5% due to lower DVD and VOD sales and sales to TV channels compared to last year. These 2 trends are linked to the low performance of the end of 2016.

Regarding the profitability, despite the cost optimization plan, income from operation was down 70% as a result of the decrease of pay-TV mainland France as well as higher programming costs compared to last year. Higher cost mainly relate to sports rights with the increase of the cost of the French football since last August, following the start of the new agreement and also to programming costs related to Cinema Series and Canal+ channels, as well as higher spendings at C8 with the objective of increasing its audience.

As previously mentioned, we expect Canal+ Group's financial performance to recover significantly. For 2017, EBITA is expected to reach approximately EUR 350 million, a strong improvement over the EUR 240 million achieved in 2016.

Over the year, we will see opposite dynamics between the first half and the second half. As previously explained, the first part will continue to be heavily impacted by a tough comparable basis against the same period last year on revenues and on costs. We should see very different trends in second half.

First, we anticipate a much lower impact on subscription revenue with a smaller year-over-year difference in the average number of subscribers as the new offer gains traction.

Second, on a comparable basis, we will no longer have the negative impact of lower advertising revenues and higher sports rights costs. The programming cost on the free-to-air channels should also be more on a like-for-like basis. Studiocanal is expected to benefit from a stronger lineup during the second half.

Now turning to Slide 10 and to Gameloft. Gameloft is performing very well. With EUR 68 million in revenues, Q1 2017 was its second best quarter ever and revenues grew by 9%, excluding a one-off item accounted for last year. This performance is due to the strong performance of the catalog as well as advertising revenues, which reached 12% of Q1 2017 revenues.

During the first quarter, Gameloft benefited from the strong performance of its game Disney Magic Kingdoms in the U.S. In Q1 2017, income from operations reached EUR 4 million.

As for the other businesses on Slide 11, you can see Vivendi Village good performance in terms of revenues, which grew by 3.6% while New Initiatives revenue is still declining due to Dailymotion whose repositioning is set for June. All the initiatives launched in these other businesses, like the opening of the networks of entertainment venues in Africa and Studio+ as well as this transformation of Dailymotion are still in the investment stage, and thus result in losses at the income from operation level. We look very closely to the expenses in these initiatives, which are under strict control month after month.

Going to Slide 12 and to the presentation of the consolidated P&L. As we have seen earlier, the strong performance of Universal Music was not enough to offset the still declining EBITA of Canal+ Group. Therefore, EBITA was down by 29.9% in Q1. But the decrease in EBITA is nearly compensated by the positive contribution of Telecom Italia in Q1 2017 compared to a negative impact in Q1 2016. However, because of the EUR 240 million reversal of reserves related to the Liberty Media litigation in Q1 2016, EBIT is down EUR 200 million.

Q1 2016 was also positively impacted by the sale of the remaining stake in Activision Blizzard for EUR 576 million before taxes, which together with the Liberty Media settlements largely explain why earnings attributable to Vivendi SA shareowners is down 88% at EUR 101 million. However, adjusted net income grew 57.2% year-over-year, standing at EUR 155 million and benefited from the improved contribution of Telecom Italia results as well as lower income tax charges.

Moving to the consolidated balance sheet on Page 13. In fact, the situation at the end of March is quite similar to that at the end of December 2016 with no major changes. The most noticeable impacts were other financial investments, which increased mainly as a result of the reevaluation of our participation and the decrease in net cash, which stood at EUR 473 million at the end of March 2017.

A good transition to the net cash position on Slide 14. Over the first quarter of 2017, the net cash decreased by EUR 0.6 billion, mainly due to, first, acquisition of approximately 12 million of Vivendi shares since the beginning of the year for EUR 0.2 billion. Secondly, a negative CFFO of EUR 0.2 billion. Operating cash flows were negatively impacted by significant advances paid to artists by Universal Music and by the lower profitability at Canal+ as well as some onetime payment related to certain agreements.

Since the end of March, we can only highlight the payment of the dividend for EUR 0.5 billion at the beginning of May as well as the reimbursement from the French tax authorities of around EUR 340 million following a judgment by the administrative court relative to fiscal year 2012.

At end of March 2017, net cash stood at EUR 0.5 billion with EUR 4 billion of cash available bonds as well as undrawn credit line of EUR 1.5 billion as of May 9.

Thank you very much. And now we'll leave you some time for Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is coming from Adrien De Saint Hilaire from Morgan Stanley.

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Adrien De La Haye Saint Hilaire, Morgan Stanley, Research Division - VP [2]

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I've got 3 of them, please, 2 around Canal+. First of all, can you share some thoughts around the loss of the Champions League rights? I'm sure you've done some studies, perhaps telling you how many subscribers are at risk of perhaps leaving Canal+. And second sub question. Would you be interested if that was available for signing wholesale or distribution agreements with SFR, if ever that was made available? So that's on Canal+. And on UMG, the physical sales were only down 6% in Q1, which is much better run rate than what we've seen before. Was there any one-off, maybe any particular artist which had a, I don't know, a heavy skew towards physical that explained this? Or have we reached the bottom when it comes to physical?

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Arnaud Roy de Puyfontaine, Vivendi SA - CEO and Chairman of Management Board [3]

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(foreign language), Adrien. (foreign language) Arnaud de Puyfontaine speaking. I will take your first question as regards to the comments with the Champions League right. A few things. Number one, I'd like to emphasize the point that we're going to get the Champions League till 2018, number one. So we don't know what's going to be the environment at that time.

Second point, we're talking about 16 games on Canal+ as regard to the Champions League. And we think that as regarded to what maybe the outcome in 2018, this is not a move that is going to threaten the compelling proposition in terms of sport offering of both Canal+ and Canal+ Sport in our new package.

Third thing, I'd like to focus on an interesting situation, which is the situation of Sky in the U.K., which doesn't broadcast the Champions League's rights. It's got a business model which is doing pretty well.

And last but not least, I would just tell you that Canal+ has gone through many different strategic evolution over the past 20 years. And yes, we're faced with a player, which is really to put a price, which I would comment as being a price that we were not ready to pay. And for one reason, is that this is a price on which we don't see any sustainable business model. So the bigger risk for us would be a risk of putting a price that could jeopardize the job that has been done over the past 18 months.

And to do that only to keep a right, which at the end of the day, would make -- would not make any sense in the interest of the sustainability of the Canal+ pay-TV business model, on the one hand, and in the interest of the value creation and the sustainability of the pay-TV offer in France. So to cut a long story short, part of the competitive environment, no regret as regard to a situation which we -- don't think that it is a sensible price. And let's move on. Thank you.

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [4]

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(inaudible) Second question on SFR and wholesale agreement, we have no discussion with them in any kind, in any sort of discussion on wholesale agreements. And for the question regarding the physical sales decline at Universal Music, I'm not sure that we can consider that we are at a bottom at this level of minus 5%. The first quarter has been, I would say, positively impacted by some original soundtrack. So I will not bet on the future quarters in physical sales.

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Operator [5]

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Our next question is coming from Charles Bedouelle from Exane.

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Charles Bedouelle, Exane BNP Paribas, Research Division - Research Analyst [6]

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Just a quick follow-up on Adrien's question around music. I understand one quarter doesn't make the year. Can you tell us what you think is the share of positive surprise or abnormal element notably linked to soundtracks in your very, very stronger Q1? And also, regarding Adrien's question on the decline in the physical formats. If we haven't reached the bottom, what do you think is a more normal decline for this format or normal year for UMG? That would be my first question.

And the second question, I guess, is you alluded to the fact that in a year from now or more, when the Champs rights will move, you might be in a different competitive environment. And I just wanted to know if you could give us maybe what you think could be different in the competitive environment in a year from now for you or maybe from some telco players, that will be very helpful.

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Arnaud Roy de Puyfontaine, Vivendi SA - CEO and Chairman of Management Board [7]

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(foreign language), Charles. So thank you for your question. I will start by the last one, which is experience has led us to just to plan for what we can control and to do the very best under this criteria. But to be ready to expect different moves that are unexpected. And this is what we do. So in more than 12 months from now, we do think that there's going to be certainly some moves in the environment. We're very happy about the renewal of the Formula 1 results for 3 seasons. We're very happy about the TOP 14 rugby and so on and so forth. But what I say is we're going to get in 12 months the results of the recovery of Canal+ pay-TV. This is our ultimate goal.

If we have to go through a situation where again, some can make some moves that we don't consider to be sensible, we're not going to be driven by this. And again, what is very important for us is to be long term, to be successful and to avoid a certain kind of ego-driven type of move that could destroy the reality and the quality of the good job that has been done by the Canal+ Group team since now Summer 2015. So many things may happen from now till then. And watch the space, this is what we do mean by this comment.

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [8]

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Well, to answer the first question on the physical sales in Universal Music. While it's quite difficult to evaluate what will be the trend full year in the decline, but if you take the average decline 2016 it was something in the range of 15%. In fact, it will clearly depend also of the take-off of streaming and subscription in some countries where physical are still very, very high. As you remember probably in Japan or Germany, physical sales remain very, very high. So it will largely depend on the development of subscription and streaming in those countries in my view.

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Charles Bedouelle, Exane BNP Paribas, Research Division - Research Analyst [9]

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And maybe just a very quick follow-up maybe for you, Arnaud. Any comment on SFR's move and -- this one and the one before in terms of how the antitrust could think about the competitive environment for Canal, which may not be a monopoly anymore as they've thought in the past. So any comment on that?

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Arnaud Roy de Puyfontaine, Vivendi SA - CEO and Chairman of Management Board [10]

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A comment that I bet on the reality fact-checking of regulators just to create an environment which is going to be taking into account those kind of moves. So I'm not going to comment any further because we are in the process. But I think that if needed a kind of a wake-up call as regard to the environment and the acknowledgment that the rule of the game are changing and it has to be -- need to rethink about the way to think about the market, the environment, the competitive environment and the kind of the radical changes in the way to think about the industry should in fact create a kind of a reality check. But I'm expecting to see what's going to be the outcome of the process in which we are.

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Operator [11]

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Next question is coming from Julien Roch from Barclays.

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Julien Roch, Barclays PLC, Research Division - MD and European Media Analyst [12]

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Questions on Canal+. You are very helpfully giving us a target for operating profit or EBITA for this year of EUR 350 million. You clearly control a lot of things in that number, more on the cost side, but not necessarily the revenue. So if we could have an idea of the revenue level in terms of subscription you expect to get at that EUR 350 million, some pointers would be really helpful. That's my first question.

The second question is, Herve, at one point you said that the ARPU of the new offer was increasing. You mean, the ARPU of the new offer is higher now than mid-November, you're not -- you don't mean that the ARPU of the new offer is higher than the old offer? If you could clarify this. And could we get what the ARPU is of the new offer so we can have an idea whether that's ARPU accretive or ARPU dilutive?

And then the last question, again on Canal+, is if you could give us any comment on the price you paid for Formula 1, that would be amazing.

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [13]

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We've given a precise figure on the level of EBITA, which is approximately EUR 350 million in 2017 for all Canal+. This was clearly to show you that we'll have a very different phasing in the years in terms of result, mainly driven by the cost side of that. And the comparison basis is very tough in terms of cost in the different semesters of this year. For the subscription revenues, we can expect to have a smaller difference on the average number of subscribers, which are expected in second part of the year, thanks to the new offer. So we have more declines revenues in the first part compared to last year, that's the one which is expected in the second part of this year.

For the ARPU on the new offer, we have an increase of those ARPUs and the figures which are given are considered by the old ARPU and the old calculation, I would say. But it's clear that we have been positively -- not surprised but to have been positively seeing the level of ARPU with the new offers on the, especially, the level of the acquisition of packages by the new customer. The fact that we have the price, an intro price of EUR 20 could have been a threat on the ARPU. But in fact, we see that the vast majority of our customers pay one or more packages in addition to the entry price.

For the Formula 1, I will not give any idea of the price we have paid.

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Julien Roch, Barclays PLC, Research Division - MD and European Media Analyst [14]

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Okay. Just coming back to the -- are you...

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Arnaud Roy de Puyfontaine, Vivendi SA - CEO and Chairman of Management Board [15]

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Arnaud de Puyfontaine speaking, sorry. And I wouldn't give a number. But I would just say that it is a number that is making the proposition reasonable, sound and a good one in the context of where we are at Canal+.

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Julien Roch, Barclays PLC, Research Division - MD and European Media Analyst [16]

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Okay. And just to be clear, Herve, are you saying that the new offer, the average ARPU of the new offer is higher than the average ARPU of the other offers? Or that's not the case and it's lower?

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [17]

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It's higher. The ARPU of the new subscribers is higher than it was in the past.

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Operator [18]

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Our next question is coming from Ian Whittaker from Liberum.

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Ian Richard Whittaker, Liberum Capital Limited, Research Division - Analyst [19]

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Two questions, please. First of all, just going back on music and the extremely good results you had there. Also what that was accompanied by was a sharp increase in the EBITA for the first quarter. Would you provide us with an explanation of how we could think in terms of the revenue drop-through from the -- services such as streaming to profitability and also as well just in terms of what it would mean for the cash flow profile for music?

And then the second thing is just in terms of games. Obviously, you've got sort of some interesting games assets there as well. Are you quite happy with the size of your exposure to games at the moment? Or do you think there's a potential to bulk up that business by making further acquisitions?

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Arnaud Roy de Puyfontaine, Vivendi SA - CEO and Chairman of Management Board [20]

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Thank you for your question. Arnaud de Puyfontaine speaking. I will take the question on games. As you know, we took control of Gameloft on 1st of July last year. And as we referred to both in our annual results and confirmed in the trend we can see this at first quarter 2017, we are more than happy as regard to the performance of the Gameloft operation on its own right, but also in the capacity of the integration. Fantastic team, people very excited about the Vivendi project and very, very fit for purpose as regard to the strategic vision we're having from the Vivendi and the capacity of all our line of operations to work together. So we really ticked all the boxes.

Now as you know, we are the #1 shareholder on Ubisoft and that we have made some statement that our willingness is to develop a really much stronger presence in this game sector. We've got different options. We are currently working and we will action on the chosen options in due time. But be sure that our ambition in that market is absolutely confirmed and it's not a question of if, it's a question of when and what.

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Ian Richard Whittaker, Liberum Capital Limited, Research Division - Analyst [21]

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May I just ask a quick follow-up on that question? Just in terms of your view of games, sort of longer term. Would you -- at the moment, obviously, it's a smaller component than what music and Canal+ is. Would do imagine longer term that games would be as an important contributor to the profits as your music and Canal+ divisions?

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Arnaud Roy de Puyfontaine, Vivendi SA - CEO and Chairman of Management Board [22]

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I think that if you revert back to the AGM on the 25th of April, we made some statement as regard to, yes, that would be the ambition and the vision we're having for the future of Vivendi.

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Ian Richard Whittaker, Liberum Capital Limited, Research Division - Analyst [23]

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Okay. Then just on music.

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [24]

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On Universal Music we -- you asked the question on the cash flow profile for the year. In fact, we had, in the first quarter, very specific expenses for Universal Music and specifically advances which have been paid to some major artists, which have weighted on the cash flow for the first part -- for the first quarter. For the margin, we have also leverage coming from the very satisfactory level of revenue, so we have an increase of 2% of the profitability. We'll see what it will be for the full year. You see what was the trend on last year could be a good idea.

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Operator [25]

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Our next question is coming from Conor O'Shea from Kepler Cheuvreux.

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Conor O'Shea, Kepler Cheuvreux, Research Division - Head of Media Sector [26]

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A couple of questions, please. Firstly, Herve, just on Universal Music, Q1, can you confirm that in the revenue growth, there were no settlements over issues relating to rights that could be considered one-off in the 12.7% constant currency growth?

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [27]

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No, no, no, it's [not at this point in time]

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Conor O'Shea, Kepler Cheuvreux, Research Division - Head of Media Sector [28]

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Okay, perfect. And then just 2 quick questions on Canal+. I wonder if we can have an idea. You mentioned, Arnaud, that you don't expect any negative impact from the loss of the Champions League rights. Can you give us an indication how much cost savings you can make from 2018 by no longer having to pay for these rights even if they are -- they could be reinvested in some other rights?

And then the third question, just on the wholesale subscribers, it seemed to be flat versus the end of December. It seemed to contradict a little bit your comments on the take-up on the new offers for the premium channels, but also we might have expected for these, the wholesale subscribers of Canal satellite. Are you happy that there's no further increase compared with end December?

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [29]

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Well, for Canal+, obviously, the loss of the Champions League will provide us with some savings starting in 2018 as we have not given the price of it. In the past, we do not give the level of the savings. But it's, I would say, significant. For the wholesale subscribers, they have not the new offer for the wholesale subscribers. They have a package of channels, which are the Canal+ Panorama more or less channels. So we have roughly, effectively the same level of subscriber in wholesale at the end of March as at the end of December. And it will clearly depend of the launch of new offers by the -- our partners Free and Orange in the coming months.

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Operator [30]

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Our next question is coming from Lisa Yang from Goldman Sachs.

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Lisa Yang, Goldman Sachs Group Inc., Research Division - Equity Analyst [31]

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My first question is on UMG. So you recently said at the AGM that some bankers put a valuation of EUR 20 billion on it. Just wondering what are your thoughts in terms of the ways to better crystallize the value of that asset and whether you could think of spinning off at some point.

Second question is on Canal+. And I want to go back to the churn, which meant a very high level, about 17%. Just wondering whether there was any one-off there in Q4 and also in Q1 such as, for instance, cannibalization from the wholesale customers moving into retail, and whether we should see some normalization of that churn from the second quarter.

Thirdly, I was wondering whether you can provide any color on the subscriber trends in April. So you said stabilized in March, but are you seeing similar trends in April? And finally, I think there was an article in the French press recently saying you could potentially withdraw your Canal+ offer of some SFR platform. I'm just wondering if you are allowed to do that.

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Arnaud Roy de Puyfontaine, Vivendi SA - CEO and Chairman of Management Board [32]

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Thank you. So we'll from now on, take a very -- give short, short answer to the question due to the constraints of time. So Lisa, on the first point, we said that we have -- we think that the value on the music operation is much greater than what is currently taken into account in our share price. We said that we could, in due time, take different measures just to be able to crystallize this value. But no decision taken in any shape or form.

And last but not least, just to be able to show that the value of the music is much greater to what is currently recognized in our share price will be to keep on developing the kind of a fantastic momentum which we see in the business, due to the quality of the job done by the team led by Sir Lucian Grainge and the capacity within the Vivendi group to benefit also from all the kind of the common initiatives between our different line of businesses. So I expect more good news to come and we will do the very best to make that happen.

As regard to your last question, I will not comment on these rumors as regard to the French press and what you read in the French press. But be sure that we'll do what has to be done to maintain the momentum within Canal+ and to reinforce our positive outlook -- sorry, competitive position.

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [33]

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Just to answer quickly on your question on the churn for the second quarter. It's obviously an issue to advise at Canal+ and we are working hard to -- on this item. And we are -- but we're much more confident in the second part of this year to reduce the churn. For April, we will not have yet -- had the meetings with Canal+, so I cannot give you any color on the figures for April.

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Operator [34]

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Our next question us coming from Marcus Diebel from JPMorgan.

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Marcus Diebel, JP Morgan Chase & Co, Research Division - Research Analyst [35]

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It's Marcus. I will just limit to maybe one question in regards to time. Just again, on your Canal Group EBITA kind of outlook, there was a question before, but you haven't really been able to answer it properly. I will ask it in a different way. Is there any chance, and we had this discussion last month, the call, that you can at least tell us a little bit more about the impact of restructuring charges in that EBITA bridge at least to give us an indication how we should think what -- how big the impact is going from 240 to 350.

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [36]

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Well, we have given the figure at the level of EBITA. And we have no specific or no very important exceptional charges expected. But we have, each year, we have a certain amount. So I will not -- I'm not in a position to give further details on that at this stage of the year.

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Operator [37]

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Our next question is coming from Laurie Davison from Deutsche Bank.

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Laurie Davison, Deutsche Bank AG, Research Division - Research Analyst [38]

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It's Laurie here from Deutsche. Yes, I'll limit it to one question as well. Just on the EUR 350 million EBITA guidance. You're stating that it's at constant perimeter and FX. Can you just give us the FX sensitivity approximately on the EBITA for Canal+ division? And also, any -- is there any further impacts that you're aware of that we should be taking into account to adjust for changes in perimeter. Just thinking about Banijay, Zodiak potentially?

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [39]

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No, we have given a global figure for all Canal+, and we'll not provide a more detailed EBITA by division. Sorry, but it's at that level.

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Laurie Davison, Deutsche Bank AG, Research Division - Research Analyst [40]

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Sorry, I'm not asking for division. I'm just asking for the FX sensitivity on Canal+, on the EUR 350 million, and any further acquisition perimeter change impact over the rest of this year.

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Herve Philippe, Vivendi SA - Group CFO and Member of Management Board [41]

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If it is a question regarding the FX on Canal+, they are quite limited in fact because the most part of Canal+ is in euro or in currencies relative to the euro in Africa. So we don't expect any important FX effect. And there is no major change in scope at Canal+ in 2017.

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Operator [42]

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That will conclude today's Q&A session. I would now like to turn the call back to our host for any additional or closing remarks.

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Arnaud Roy de Puyfontaine, Vivendi SA - CEO and Chairman of Management Board [43]

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Thank you very much for all the -- those that attended the call, and I wish you a great evening.

And maybe a few comments, Laurent?

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Laurent Mairot, Vivendi SA - EVP of IR and Corporate Development [44]

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For those who are in the jurisdiction that are allowed, we will start in 3 minutes the call regarding the transaction that was announced earlier today. Thank you.

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Operator [45]

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Ladies and gentlemen, that will conclude today's conference call. Thank you very much for your participation. You may now disconnect.