Vivendi Announces Excellent 2006 Results

Vivendi Announces Excellent 2006 Results, Adjusted Net Income Up 18% to €2.6 Billion

Adjusted net income1: €2.6 billion, a 17.9% increase, representing an adjusted net income per share of €2.27
Earnings, attributable to equity holders of the parent: €4 billion, an increase of 27.9%
Adjusted earnings before interest and income taxes2 (EBITA): €4.4 billion, an increase of 9.6% on a comparable basis3, due to the good performance of all business units
Proposed dividend of €1.20 per share, up 20%, representing a distribution rate of 53% of adjusted net income
2007 Outlook: adjusted net income is expected to be at least €2.7 billion

PARIS–(BUSINESS WIRE)–Regulatory News:

Vivendi (Paris:VIV):

Note: This press release contains consolidated earnings established under IFRS. Vivendi has made changes, as of June 30 2006, to the presentation of its consolidated statement of earnings and its consolidated statement of cash flows as well as the operating performances of its business units and of the Group. Those changes are detailed in Appendix I.

Comments by Jean-Bernard Lévy, Chairman of Vivendi’s Management Board: “In 2006, we exceeded our objectives, and I am pleased to announce an adjusted net income of €2.6 billion. This is the best result ever achieved by Vivendi. It is all the more outstanding since almost half of the exceptional cost relating to the Canal+/TPS transaction was taken into account during the 2006 fiscal year. Our shareholders will benefit from these excellent results: we will propose at the Annual General Meeting of Shareholders that a dividend of €1.20 per share be paid. This represents an increase of 20% and a distribution rate of 53% of adjusted net income.

In accordance with our strategy, we have developed our business units and invested. The combination of Canal+ and TPS has resulted in the creation of the largest European pay-TV platform by number of subscribers. We intend to strengthen UMG with the planned acquisition of BMG’s music publishing business, thus creating the world leader in music publishing. Parallel to these two major transactions, all the Group’s business units have continued to strengthen their positions and to develop innovative products that meet the expectations of consumers.

Vivendi has formidable advantages: its teams’ unique know-how in innovation, technology and marketing, the trust of millions of subscribers worldwide and its exceptional position in the entertainment field, at the heart of the digital, mobile and broadband markets.

In 2007, we expect to exceed the records set in 2006, despite the exceptional charges associated with the creation of Canal+ France and French regulations in the mobile sector. I also confirm our target for 2011: adjusted net income of between €3.5 billion and €4 billion.”

2006 Dividend

At the shareholders meeting on April 19, 2007, the distribution of a dividend of €1.20 per share based on 2006 earnings (compared to a dividend of €1 per share in 2005) will be proposed, representing a distribution rate of 53% of adjusted net income.

This shareholder distribution will amount to approximately €1.4 billion and payable on April 26, 2007.

Comments on Vivendi’s Main 2006 Financial Indicators

Revenues increase to €20,044 million compared to €19,484 million in 2005, representing an increase of €560 million (2.9%). On a comparable basis, revenues amount to €20,007 million compared to €19,374 million in 2005, representing an increase of 3.3% (3.3% at constant currency).

EBITA totals €4,370 million compared to €3,985 million in 2005. On a comparable basis, EBITA increased by €381 million to €4,369 million, representing an increase of 9.6% (9.7% at constant currency), compared to €3,988 million in 2005. In 2006, with the exception of the Canal+ Group, each business unit achieved growth in its operations. Excluding the cost of the Canal+ Group and TPS combination (of which €177 million was accounted for in 2006) and on a comparable basis, the Canal+ Group would also have recorded positive growth of 21.8% over 2005. EBITA margin increased by 1 .3 percentage points, from 20.5% in 2005 to 21 .8% in 2006.

Income from equity affiliates totals €337 million compared to €326 million in 2005, representing an increase of €11 million. The fall in net income from NBC Universal (€301 million compared to €361 million in 2005) is more than offset by the increase in income from Neuf Cegetel (net income of €38 million compared to a net loss of €50 million in 2005).

Other financial charges and income generate net income of €311 million compared to €619 million in 2005, a decrease of €308 million. In 2006, this line item mainly includes the capital gain on the sale of Veolia Environnement shares (€832 million), offset by the capital loss incurred on the write-off of the PTC shares (€496 million). In 2005, it mainly included the capital gain realized on the exchange of Sogecable shares (€256 million) as part of the repayment of convertible bonds and the positive impact of the unwinding of IAC/InterActiveCorp’s investment in VUE (€194 million).

Income tax amounts to a net income of €547 million, compared to a net charge of €204 million in 2005. The income taxes recorded in 2006 include, in particular, the gain related to the settlement of the DuPont litigation (€1,082 million), as well as tax savings generated by the Consolidated Global Profit Tax System (€561 million compared to €595 million in 2005).

Earnings, attributable to equity holders of the parent, amount to €4,033 million (representing basic earnings per share of €3.50 and €3.47 on a diluted basis), compared to €3,154 million in 2005 (representing basic earnings per share of €2.74 and €2.72 on a diluted basis), an increase of 27.9%.

Adjusted net income amounts to €2,614 million (representing basic adjusted earnings per share of €2.27 and €2.25 on a diluted basis), compared to €2,218 million in 2005 (representing basic adjusted earnings per share of €1.93 and €1.91 on a diluted basis), an increase of 17.9%.

The difference between earnings, attributable to equity holders of the parent, and adjusted net income was €1,419 million, and mainly includes the gain resulting from the settlement of the dispute concerning the DuPont shares (€984 million which is comprised of the gain related to the settlement of the litigation, due to the net reversal of deferred tax liabilities in the amount of €1,082 million, partially offset by capital losses incurred on the sale of the DuPont shares in the amount of €98 million.) and the capital gain generated on the sale of Veolia Environnement shares (€832 million), offset by the capital loss incurred on PTC shares (€496 million).

Cash flow from operations (CFFO) before capital expenditures amounts to €6,111 million, versus €5,448 million in 2005, representing an increase of 12.2%.

Despite a strong growth of the capital expenditures net, increasing 27.4% to €1,645 million, CFFO generated by the business units amounts €4,466 million, compared to €4,157 million in 2005, representing a 7.4% increase.

Vivendi’s Business Units: Comments on 2006 EBITA

Universal Music Group

Universal Music Group’s (UMG’s) EBITA of €744 million is 9.3% higher than last year, up 10.2% on a constant currency basis. Improved margins on higher sales, legal settlements and the recovery of a previously expensed cash deposit in the TVT matter offset increased marketing, artist and repertoire (A&R) costs of local artists. Bestsellers for the year include new releases from U2, Andrea Bocelli, Snow Patrol, Nelly Furtado and The Killers in addition to strong carryover sales from The Pussycat Dolls.

Canal+ Group

Canal+ Group’s EBITA grew sharply to €251 million, excluding transition costs linked to the TPS merger. On a comparable basis4, EBITA is up 21.8% compared with 2005. After taking into account transition costs amounting to €177 million, EBITA totals €74 million.

On a comparable basis, pay-TV operations in France posted a 46% increase in EBITA year-on-year, excluding transition costs. This strong performance was achieved due to portfolio growth and increased revenue per subscriber, combined with reduced subscriber acquisition costs, and despite higher soccer costs (up €143 million versus 2005). The Group’s other operations were slightly down due to non-recurring items in Poland in 2005 and the switch of i>télé to free-to-air broadcasting, which was not completely offset by positive results at StudioCanal.

SFR

SFR’s EBITA rose 6.6% to € 2,583 million. EBITA margin was 29.8%. Excluding the impact of ADSL operations development costs, SFR’s EBITA growth reached 7.3%. Excluding non-recurring items5, SFR’s EBITA (excluding ADSL) growth would have been 2.4%.

This growth mainly reflects a 0.4% growth in network revenues, a 0.7 percentage point reduction in customer acquisition and retention costs to 10.9% of network revenues, as well as a strict control of other costs, and despite the increase of the GSM license cost (renewed in April 2006 with a new tax of 1% of revenues) and an increase in depreciation costs following several years of strong investments to increase coverage and capacity of SFR’s 2G and 3G/3G+ networks.

Maroc Telecom

Maroc Telecom’s EBITA amounts to €912 million, increasing by 16% (up 15.8% at constant currency).

This performance resulted from growth in revenue (10.2% at constant currency), control of acquisition costs in the context of steady growth of the mobile6 7and ADSL6 customer base, as well as control of operational expenses. This outcome also includes a €30 million provision for a new voluntary departure plan (comparable to the provision accrued in 2005).

Mobile EBITA amounts to €627 million in 2006 increasing by 28.3% (up 28.1% at constant currency).

Fixed telephony and internet EBITA totals €285 million in 2006 decreasing by 4.1% (down 4.4% at constant currency).

Vivendi Games

Vivendi Games’ EBITA of €115 million is 109% above the prior year (same increase on a constant currency basis). This significant improvement was driven by growth in revenues, with a large proportion relating to the higher margin of the World of Warcra ft’s exceptional worldwide success. EBITA is also impacted by expenses linked to the launches of the new Sierra Online and Vivendi Games Mobile divisions.

Vivendi Games’ performers in 2006 included World of Warcraft as well as new releases Scarface: The World is Yours, Ice Age 2, The Legend of Spyro: A New Beginning, Eragon , and F.E.A.R. (for Xbox 360).

Important disclaimer

This press release contains forward-looking statements with respect to the financial condition, results of operations, business, strategy and plans of Vivendi. Although Vivendi believes that such forward-looking statements are based on reasonable assumptions, such statements 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, including, but not limited to the risk that Vivendi will not be able to obtain the necessary regulatory approvals in connection with certain transactions as well as 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 our web site (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. The present forward-looking statements are made as of the date of the present 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.

1 Adjusted net income, is detailed in Appendix V.

2 Adjusted earnings before interest and income taxes (EBITA) are detailed in Appendix I.

3 Comparable basis is detailed in Appendix III.

4 The comparable basis mainly illustrates the effect of divestitures at Canal+ Group (mainly NC Numéricâble in 2005 and PSG in 2006), as if these transactions had occurred as of January 1, 2005.

5 2005 EBITA included the recording of €115 million of adverse non recurring items: the impact of the €220 million fine from French Antitrust Council being partly offset by the registering of favorable non recurring items amounting to €105 million.

6 Excluding Mauritel.

7 The mobile customer base, compliant with the ANRT definition and used by Maroc Telecom in 2006, includes prepaid customers leaving or receiving a voice call during the last 3 months and not cancelled postpaid customers.
PRESS CONFERENCE
Speakers:
Jean-Bernard Lévy
Chairman of the Management Board
Jacques Espinasse
Member of the Management Board and Chief Financial Officer

Date: Wednesday, March 7, 2007
10:30 AM Paris time – 9:30 AM London time –
4:30 AM New York time

Address: Vivendi Head Office, 42 Avenue de Friedland, 75008 Paris

Internet: The conference can be followed on the Internet at
http://www.vivendi.com

ANALYST CONFERENCE
Speakers:
Jean-Bernard Lévy
Chairman of the Management Board
Jacques Espinasse
Member of the Management Board and Chief Financial Officer

Date: Wednesday, March 7, 2007
2:30 PM Paris time – 1:30 PM London time -
8:30 AM New York time
Media invited on a listen-only basis

Numbers to dial:
Number in France: +33 (0)1 70 99 43 04
Number in UK: +44 (0)20 7806 1966
Number in US: +1 718 354 1390 and 888 935 4575 (toll-free)

Replay details (replay available for 14 days)
France: +33 (0) 1 71 23 02 48
UK: +44 (0) 20 7806 1970
US: +1 718 354 1112 and 1 866 239 0765 (toll-free)
Access code: 4283269#

Internet: The conference can be followed on the Internet at
http://www.vivendi.com/ir

The slides for the presentation will also be available online.

For more information regarding this press release (tables and appendix) please consult the below link: http://www.vivendi.com/corp/en/files/ 20070307_PR070307_Resultats2006.pdf (Due to its length, this URL may need to be copied/pasted into your Internet browser’s address field. Remove the extra space if one exists.)
Contacts

Vivendi
Media:
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Antoine Lefort, +33 (0) 1 71 71 11 80
Agnès Vétillart, +33 (0) 1 71 71 30 82
Alain Delrieu, +33 (0) 1 71 71 10 86
or
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Flavie Lemarchand-Wood, +(1) 212-572-1118
or
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